On November 1, CHPTA members had the privilege to hear from economist Rishi Sondhi from TD Economics via Zoom as he provided participants with a pin-point understanding of where the Canadian and U.S. economies are headed over the next couple of years and what can be expected with key economic data such as inflation, interest rates, Canada – U.S. dollar exchange and home sales.
Before delving into the North American economies, Rishi started off with a review of key factors impacting Europe and the reasons why a recession is expected there in 2023. He then discussed China’s slowdown and outlook for exports.
Closer to home, the U.S. economy was examined next with an explanation on why with GDP contraction in the first two quarters of 2022, it is unlikely that a recession occurred after reviewing other economic data such as robust hiring and strong labor demand. Inflation certainly remains a major factor south of the border and its impact on consumer purchasing. Rishi pointed out that supply chain problems in the U.S. are easing and delivery times improving while retail inventories remain high. A period of stagnation is expected in the U.S. well into 2024.
Meanwhile in Canada, Rishi pointed out that the Canadian economy (GDP) has been more resilient during 2022 and the stand-out performer within the G7 over the past 12 months. However, saying that, again a period of stagnation (recession?) is expected in Canada over the next two years as well. Consumer spending has certainly weakened with household finances under pressure from inflation and eroding wealth. The Bank of Canada should continue to be aggressive with interest rate hikes, peaking with its key rate at 4.25% in early 2023 before starting to lower them at the end of 0223. High rates will continue to hamper consumption.
In regards to the housing market, home sales and prices will continue to cool but as Rishi also pointed out, that this is coming from historically high levels achieved earlier during the pandemic. He also explained factors that will guard against a steep housing downturn.
Canada’s job market remains strong which is fuelling wage increases although not at the rate of inflation. Government spending, in particular provincial infrastructure projects, will support growth over the coming months and years.
Global freight rates are falling, supply chain problems are fading, as is the commodity price shock, and finally, economic slack should open up – all factors which will contribute to inflation declining in Canada to around 2.6% by the end of 2023.
Rishi finished up with TD’s GDP outlook by province for 2022 & 2023 as well as a forecast on the Canadian dollar relative to the U.S. greenback. Some more depreciation can be expected into 2023.
About the Speaker
Rishi Sondhi has been with the TD Economics team since 2017, where he is responsible for analyzing and forecasting provincial economies and housing markets and is a contributor to a variety of TD publications.
Prior to TD Bank, he worked with a real estate consulting firm where he researched and forecasted housing markets across Canada, as well as provincial and municipal economic activity. His extensive forecasting experience includes work with the Bank of Canada, the Ontario Construction Secretariat, CMHC and another major financial institution. In the latter role, he forecasted the economic performance of both the U.S. and Canadian economies.
Rishi holds an Honours B.A. degree in Economics from The University of Western Ontario.
We would like to thank Rishi once again for his excellent presentation and for taking the time to speak to our members.