Economic outlook | June 2022
Rising interest rates and inflation to slow growth
The economic outlook continues to change at a rapid pace. In the span of two years, we have gone from facing the deepest recession since the Great Depression to an overheating economy and now to fears of renewed recession. While Canada is not expected to re-enter a recession, a steep decrease in growth is predicted to begin next year which will affect business and consumers alike.
Inflation is at the forefront of this economic outlook. In business, companies are working to determine the best way to navigate the challenges presented by ongoing supply chain issues as a result of the impacts of COVID-19, Russia’s invasion of Ukraine, as well as the tightening labour market. In the world of the consumer, higher costs and interest rates will have a negative impact on consumer confidence and result in significantly lower residential activity.
This economic outlook examines causes and effects of what inflation will mean for all Canadians, both consumer and businesses alike. Ultimately, we expect that policymakers will indeed be able to cool inflation but as a result, there will be weaker growth ahead. It also means that the period of record-low interest rates enjoyed over the last decade and a half has come to an end. While this will create some short-term pain for interest-rate sensitive sectors such as housing and consumer durables, in the longer-term, the rebalancing away from a housing and consumer spending driven economy will pay dividends in the form of better productivity growth.
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Craig Alexander is the first Chief Economist at Deloitte Canada. He has over twenty years of experience in the private sector as a senior executive and leading economist in applied economics and forecasting. He performed macroeconomic research, regional and sector analysis, and fiscal market forecasting and modelling. Craig is a passionate public speaker and holds a graduate degree in Economics from the University of Toronto.