from Deloitte argues that the recession will be relatively short and mild, dubbing it “a recession with an asterisk.”
High unemployment rates are typical during a recession, but with Canada in the midst of widespread labour shortages, the report predicts that unemployment will not rise as much as it normally would. In fact, Deloitte is forecasting an unemployment rate of no higher than 6%, peaking in the third quarter of 2023. This is just slightly above the 5.4% unemployment rate seen in August of this year.“That’s due to a few key factors,” the report reads.
Despite high inflation eating away at household purchasing power, the report notes that increased savings seen during the pandemic will help Canadians weather the recession. With that said, consumption spending is expected to weaken in the coming months, especially when it comes to the purchase of goods. Spending on services, which has boomed in recent months due to pent up demand for travel and social outings, is expected to continue growing but at a slower rate until the end of the year.
Falling home prices came as the Bank of Canada began its series of aggressive rate hikes in an attempt to get inflation under control. The five rate hikes seen since March have brought the bank’s overnight lending rate up to 3.25%. Although inflation has dipped in recent months, another hike is still expected next month.
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