A major element that will determine the Bank of Canada’s trajectory over the next few months will be the inflation reading, which remains markedly higher than the central bank’s 2% target but is set to moderate further.
“There are growing signs that the Canadian economy is buckling under the weight of higher interest rates and prices,” RBC said. “The US dollar held on to broadly based appreciation over the last month, while CAD underperformed as the economic backdrop softens ahead of the other economies.”
RBC Economics study shows Canadian spending slowing due to debt pressures. While spending is steady, early signs of weakness coincide with a slight unemployment rate increase.https://t.co/r5amlMW8vO#mortgagenws #mortgageindustry #householddebt #economy
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 11, 2023
Excess demand in Canadian economy is dissipating, RBC says
Statistics Canada is anticipating a small decline in the third quarter, mainly due to lethargy in sectors like retail and restaurant sales, coupled with lower manufacturing output.
“Taking into account surging population growth, GDP per-capita looks on track to decline a similar amount in Q3 as the 3.5% annualized drop in Q2, marking a fifth straight quarterly drop,” RBC said.
And while employment numbers remain on the rise, the growth rate has not proven fast enough to counteract a 0.7% increase in the unemployment rate, which reached 5.7% in October.