BMO Economics outlines areas of particular financial risk for Canadians
While inflation might now be easing, surging employment and rising wages across North America will likely keep price pressures elevated for the foreseeable future, according to Priscilla Thiagamoorthy of BMO Economics.
This is despite Canada’s annual wage growth easing further from 4.8% to 4.5% in January, although this provides the central bank some much-needed breathing room amid a robust labour market. The Canadian economy saw the addition of more than 150,000 jobs last month.
At the same time, “the BoC’s Q4 Senior Loan Officer Survey showed household lending conditions improved in Q4 despite BoC tightening,” Thiagamoorthy said.
Meanwhile, inflation in the United States “just got a tad hotter” than previously anticipated, in the wake of seasonal adjustment updates to its consumer price index.
“Prices rose 0.1% in December instead of falling 0.1%, as initially reported,” Thiagamoorthy said. “Core was revised up 0.1 ppts on average in the last three months of 2022, lifting the three-month annualized rate to 4.3% from 3.1% previously.”
The growing risk of a US recession this year — with CIBC Capital Markets recently pegging the likelihood of such an outcome within six months at around 31% — suggests that Canada is “clearly not out of the woods” at the moment, according to Avery Shenfeld of CIBC.
“A US recession in most cases is sufficient to generate a Canadian downturn,” Shenfeld warned.
