The bigger picture will not be as rosy for households as economists might try to paint it
Even a so-called “soft landing” will have a significant impact on most Canadian households, according to Manulife economist Frances Donald.
While an outright recession will likely be averted, Canadians will continue to labour under volatile economic conditions, Donald predicted.
“In that type of environment, we don't get rate cuts, maybe we get fewer rate cuts,” Donald told BNN Bloomberg. And yet growth is still not strong enough to support increases in jobs, better wages, and better economic outcomes for everyone.”
Defining a “soft landing” as a situation where at least two quarters of static GDP take place, Donald said that the bigger picture will not be as rosy for households as economists might try to paint it.
“I’m not sure that we should be cheering 0.1% GDP growth either and doing victory laps over ‘Oh, there was no recession,’” Donald said. “This is still not a very good economic outcome for Canadians and Americans.”
In a just-released report co-authored by Donald, Manulife said that policy should have a greater focus on maintaining growth momentum.
“In our view, lending, consumer activity, capital investment, and, among other things, earnings will weaken in the coming six months,” Manulife said. “These developments are likely to be far more relevant to investors than the mathematical computation of a lagging economic indicator.”
Canada's inflation rate showed a slight decrease in September, dropping to 3.8% from the previous month's 4%.
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 17, 2023
Read more: https://t.co/xIvEEN6il6#breakingnews #mortgageindustry #inflation #economy
BoC rate helped steer the economy clear of a possible recession
The Bank of Canada’s benchmark rate, which is currently at a 22-year high of 5%, helped make a “soft landing” more likely, according to the institution’s former deputy governor Paul Beaudry.
“I think it’s a plausible scenario [to get a soft landing], it’s the most likely one,” he said in a recent interview with BNN Bloomberg.
However, Beaudry also stressed the need for continued caution to “not oversell” the value of avoiding a recession, noting that sticky inflation and lagging economic indicators will continue to determine the central bank’s next steps.
“I would only say there’s a 60% to 70% chance of a soft landing, but there’s still 30% of it going the other way,” Beaudry said.
