Real Estate Blog

Canadian Economy in 2024: A Turn for the Better?

After enduring a challenging phase marked by a cost of living crisis and economic slowdown, Canada's economic landscape shows signs of hope as we head into 2024. Notably, inflation has significantly decreased, and the feared recession has been averted. Douglas Porter from BMO Capital Markets highlights the remarkable drop in inflation without a full-blown recession, a rare economic feat.

2023 was tough, with high interest rates and inflation rates. However, the Bank of Canada has been working towards stabilizing inflation within a 1-3% range, and projections indicate success in the early months of 2024. Bank of Canada Governor Tiff Macklem cautiously notes that the economy is rebalancing, with the excessive demand driving up prices now subdued.

Yet, challenges remain. The economy has stagnated, with no growth in the last two quarters of 2023, and the threat of a recession looms. Tiff Macklem warns of tough quarters ahead, with living costs still high and economic growth subdued.

One key factor impacting the economy is the population growth and its effect on per capita GDP, which has been declining. Additionally, the full impact of the rate hikes from 2022 is yet to be felt fully, and experts like Royce Mendes from Desjardins Capital anticipate more economic strain, especially with a surge in mortgage renewals.

On a positive note, interest rates might decrease. The Canada Mortgage and Housing Corporation reports that while only a fraction of homeowners have renewed mortgages at higher rates, millions more will face this challenge in the next two years. Mendes predicts that this situation will prompt the Bank of Canada to start reducing interest rates in 2024, and possibly further in 2025.

Experts from the C.D. Howe Institute suggest rate cuts starting as early as mid-2024, aiming to bring rates down to 4% by year-end. This should ease some pressure on Canadian households and businesses.

Despite these improvements, the Canadian consumer remains cautious, a sentiment echoed by CIBC economists Andrew Grantham and Katherine Judge. They note that while consumer spending and financial behavior are showing cracks, a major economic collapse is unlikely due to adjustments already made by households.

In summary, 2024 appears to be a year of cautious optimism for the Canadian economy. With a mix of challenges and hopeful signs, the economy is expected to gradually find its footing, particularly in the latter half of the year.

If you have any questions on how these economic factors can benefit you in your home selling or buying, contact us for a chat today! 905.335.4102 | info@roccasisters.ca