Economic Outlook June 2022

In our newest economic outlook, we foresee a sharp slowdown in growth in the second half of this year as rapid inflation and rising interest rates act as a powerful headwind on the economy. This moderates consumer spending and triggers a correction in Canadian real estate. The US economy is also expected to weaken as the US Federal Reserve rapidly increases interest rates, leading to weaker Canadian export growth. The Deloitte base case outlook is for Canadian real GDP to grow by 3.3% this year (reflecting the strength in the first half of the year) before averaging 1.7% next year and 1.5% in 2024. This assumes the Bank of Canada raises the overnight rate to 3.00% and inflationary pressures from supply chain pressures abate over the coming year. Inflation is expected to peak in this summer and not reach double digits. However, this soft-landing scenario is fraught with downside risks. A recession is likely if inflation proves persistent and/or central banks are too heavy handed in raising interest rates. At the time of writing, I would put the odds of recession as high as 40 per cent. Businesses should definitely be thinking about recession contingencies. I encourage you to read more in our latest #EconomicOutlook

Categories: Canadian Economic Outlook, Economics, Quarterly Forecast

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