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To help you set course for the year, take a look at this snapshot of the economic forecast from the CIBC Capital Markets teams, including our chief economist, Avery Shenfeld, and deputy chief economist, Benjamin Tal. Learn how these trends may impact you, and get a clear perspective on the shifts, challenges and opportunities that could shape the Canadian economy and your own financial decisions this year.
Investment winds are changing
The year has started on a sluggish note, not just in Canada but in most of the world outside the US. Economic growth has hit a rough patch – mostly due to interest rate increases by central banks to combat inflation – but there’s light at the end of the tunnel as rate cuts could give markets a boost as the year progresses. “That should not only see growth improving towards year end, but could make winners out of both stocks and bonds, as markets look ahead to lower policy rates and better earnings prospects in 2025,” Shenfeld says.
The inflation balancing act
Inflation has been a hot topic, but it has eased up. “The scourge of inflation isn’t yet behind us, but looks much more manageable than it did a year ago,” Shenfeld says. “The worst of that should be over by the fall of 2024.” However, wage inflation – how fast salaries are rising – is still something to keep an eye on. It’s running a bit too high, which can make it hard to keep overall inflation stable. The goal is to find that sweet spot where prices and wages rise at a healthy, manageable pace.
Rate cuts on the horizon
A potential shift in interest rates could significantly impact the economic climate. “With the first cut on tap as early as June, we see the overnight rate in Canada tumbling 125 [basis points] by the end of the year,” Shenfeld says. Lower interest rates should ease borrowing costs for Canadians, making mortgages more accessible and potentially stimulating business investments and economic activity.
The employment shuffle
Looking at the job market, two important metrics stand out: the job-vacancy-to-unemployment ratio (the number of jobs available compared to the number of people seeking work) and the quits ratio (how often people voluntarily leave their jobs). In Canada, both are easing off sharply. This trend suggests that wage inflation should slow down and there might be a slight increase in the unemployment rate due to some market slack.
Housing market downs and ups
The Canadian housing market is in a significant slump, with sales plummeting by 45 per cent since early 2021, pushing markets like Toronto and Vancouver towards buyer-friendly conditions. House prices are still 38 per cent above pre-pandemic levels, though there is possibility of a further decline. “We expect the market will remain soft in the near term before it gets better,” Tal says.
The condo segment is expected to soften most. This is due to increased supply from new construction, as well as more listings from investors who are leaving the market because high mortgage costs are making their rental units less profitable. With anticipated interest rate cuts, an increase in demand and prices is expected in the second half of 2024; however, Tal says “we do not expect a repeat of the speedy recovery seen immediately following the pause in rate hikes announced in January [2023].”
Navigating the year ahead with expert advice
The economic forecast for 2024 presents a mix of challenges and opportunities. Connecting with a financial advisor is a strategic move that can help you make informed decisions that align with your goals and the evolving economic environment, ensuring you’re well-prepared to navigate the year’s potential fluctuations.
Advertising feature provided by CIBC. The Globe and Mail’s editorial department was not involved.