RBC is warning that a “bumpy landing” may be in store for Canada, as it looks like inflation has peaked — now, a recession and a rise in unemployment are on the horizon.
In a new macroeconomics report released Monday, RBC specialists noted that while unemployment stands at a historically low rate right now, it could rise by 1.7% over the next year and a half.
“A truly ‘soft’ landing for the economy is one where labour markets and broader economic conditions settle to sustainable levels — without a contraction in GDP or unemployment rates rising above ‘full-employment’ levels,” states the report. “This scenario, while ideal, looks increasingly unlikely for the Canadian economy.”
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The Bank of Canada has raised interest rates repeatedly in the recent past in order to cool down the market and lift inflation pressures. However, RBC predicts that this will continue to happen even while supply chain disruptions ease and housing markets correct.
As per RBC’s findings and speculation from other independent economists, a recession awaits Canada, the US, and the UK.
The downturn from it all will, however, be “moderate by historical standards” and depend primarily on softening consumer demands. The bank also noted that consumers are exercising their pent-up desire to eat out and travel after being unable to do so due to the COVID-19 pandemic and its restrictions.
That said, Canada’s hospitality sector will enjoy much better days than it did during the peak of the pandemic, due to demand crossing pre-pandemic levels.
Read the full report here.
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