Monetary policy easing will ultimately translate into lower borrowing costs for mortgages, auto loans, and other forms of consumer debt, according to The Conference Board of Canada’s latest provincial outlook.
“This easing will contribute to swifter spending growth in turn. But it took time for monetary policy to reach consumers as rates went up and it will take time for its effects to ease after rates have come down,” said the report.
“In the near term, many of the adjustments that consumers have made to their spending habits will remain. Households are cutting back where they can, driving less to save on fuel costs, and forgoing costlier restaurant bills.
“Uncertainty over the timing of further interest rate cuts and the upward movement of the unemployment rate will compel many consumers to remain cautious. Consumer price growth will continue to ease in 2024 and 2025. The CPI (Consumer Price Index) will grow by 2.6 per cent in 2024 and 2.1 per cent in 2025. Inflation’s descent will be held up largely by strong price growth for rent and other shelter costs.”
The report said in the near term, gasoline price fluctuations will also play a role in keeping headline inflation higher than the Bank of Canada’s 2.0 per cent target mid-point.
The report said strong population growth will continue to lift overall spending.
“Strong disposable income growth in most provinces in 2024 will give way to an easing back of gains in 2025 as labour markets loosen off. As conditions normalize later through 2028, however, we are expecting to see strongest per capita income performance in British Columbia, Ontario and Manitoba, with annual growth rates of more than 2.5 per cent,” it said.
Key report findings:
• Back online from maintenance shutdowns last year, renewed offshore oil production will vault Newfoundland and Labrador’s real GDP growth to 1.8 per cent in 2024, fastest of the provinces.
• Nova Scotia is seeing a growth push this year, led by population gains, healthy export performance and strong public infrastructure spending.
• Alberta will once again exceed the national average growth rate in 2024, but the gap will narrow. Positive conditions for population and income growth will continue through the forecast period.
• The completion of a trio of major energy projects in British Columbia will cool investment flows this year, but relatively healthy labour markets help power the overall economy later in the forecast period.
• A reining back of immigration inflows will soften Ontario’s economic growth prospects, but ease housing pressures as well. Major public investments in the auto sector will have notable reverberations, but net economic gains are not assured.
• Easing population growth in Prince Edward Island and New Brunswick will depower those economies somewhat in 2024, and investment growth prospects through the next few years are not expected to fill the gap.
• As a prairie economy, Manitoba is benefiting from a balanced economic structure and it should recover well through 2024. Growth fundamentals for later years will be among the best in the country.
• Quebec has some positive investment prospects, but overall growth is held back by slow immigration gains and an aging population.
• Saskatchewan’s economy got off on the wrong foot in early 2024, dragging down the growth forecast for this year, but fundamentals in potash and uranium mining will help yield strong performance in later years.
