Recent survey: Two-thirds of Canadians believe the country is in, or will soon enter, a recession.
Cost of living in Canada continues to rise sharply; feeling more like survival than living comfortably.
Signs of Recession
Decreased Consumer Spending:
People are cutting back, spending less because money is tighter.
Rising Unemployment:
Current unemployment rate: 6.4% (not high but rising from a low base).
1.6% increase in unemployment since 2022, which is consistent with prior recessions.
Business Struggles:
Investment in multiple sectors is slowing.
Increase in Corporate Bankruptcies: Highest since the 2008 recession.
Labor market is experiencing a correction from the high employment following the pandemic.
Economic Indicators
Despite high perceptions of a recession, Canada has not met the official recession criteria:
GDP needs to decline for two consecutive quarters.
Recent GDP trends:
One negative quarter followed by flat growth.
Current GDP growth is steady, prevents the label of a recession from being applied.
Contradictory Indicators
Retail Spending:
Overall retail spending increasing despite consumers feeling financially strapped on an individual level.
Population growth (95% due to immigration) drives total spending up.
Individual per capita spending is down.
The Concept of a “Per Capita Recession”
This term describes the phenomenon where:
Top-line GDP is increasing.
Individual economic conditions, or GDP per capita, is declining.
Effects of Population Growth on Economy
Significant increase in population due to immigration is contributing to overall economic activity.
More consumers result in inflation, particularly in housing, leading to increased costs of living.
Outlook and Actions
The Bank of Canada is responding to these challenges:
Acknowledges struggles on an individual level.
Interest rates were cut in July to promote economic recovery.
Economists predict further rate cuts may occur.
Conclusion
The situation in Canada is complex, with indicators showing recession-like symptoms, but insufficient evidence to declare an official recession. The concept of a "per capita recession" highlights the struggles faced by individuals despite an increasing GDP overall.
Key Takeaway
High cost of living, raising unemployment, and increased consumer challenges represent significant pressures on the Canadian economy, while immigration serves as a double-edged sword by inflating demand.