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Written By: Benjamin Pipicelli, Dorje Gyaltsen, & Gordon Huynh
Economics Newsletter – May 31, 2024
Canada’s Economy at a Glance
Author’s Commentary
Domestic Investment & Energy
Canada’s current account balance (on a seasonal adjusted basis) posted a $5.4 billion deficit in the first quarter, widening $0.9 billion from the previous quarter. Much of this deficit had to do with the investments the government has made into jobs including its $2.6 billion to domestic education in general, $1.3 billion to post-secondary institutions, and $734 million in grants to research institutions. Notably, included in the budget was a $2.4 billion package to fund companies in the AI sector, demonstrating Canada’s determination to get ahead in the AI race. Additionally, exports of energy products fell 4.7% to $44.3 billion, largely due to lower prices for crude oil, while metal product exports rose 9.7% to reach a record high of $24.5 billion where gold made a large majority; a byproduct of its usefulness in transistors. This global shift towards cleaner energy and electronics continues to put pressure on Albert, which still has more than 21% of its GDP in the oil & gas sector.
News and Noteworthy
Economists sound alarm over impact of Canada population growth on housing market
Canada’s working population has increased dramatically in the first four months of 2024, obliterating the unprecedented numbers recorded in 2023 and threatening to raise pressure on a housing market already strained by rapid population growth. Statistics Canada labour force data show the country’s working-age population grew by 411,400 people in the first four months of 2024, a 47 per cent increase over the same period in 2023 and nearly quadruple the average for those four months from 2007 to 2022. Read more.
More Canadian car buyers shunning EVs in 2024
More Canadian car buyers are shunning electric vehicles (EVs) due to tighter household budgets and higher borrowing costs, according to J.D. Power Canada. A new survey by the market research firm says nearly three-quarters are unlikely to consider one for their next purchase. Read more.
When interest rates drop, many Canadians are ready to spend big
Many Canadians plan to drop serious money on a major purchase if and when interest rates fall, but most of those will wait for more than a single Bank of Canada cut before they pull the trigger, a survey says. Forty-two per cent of respondents in a quarterly consumer sentiment survey by Dye & Durham (D&D), a legal software firm with headquarters in Toronto, say they are ready to splash cash on a “major purchase” in the wake of rate cuts, and 38 per cent say they’ve held back on a big-ticket item because rates are high. Read more.
Seeking affordability, young families flee Canada’s big cities
The record pandemic-era exodus from Canada’s biggest cities has barely slowed, with housing affordability magnifying other factors leading residents to move elsewhere in their provinces, an economist says. In a recent note, BMO senior economist Robert Kavcic wrote that demographics, infrastructure and changes in work culture are factors “magnified by challenging affordability conditions in the big-city cores, with many families choosing better affordability and more space elsewhere.” Read more.
Canada’s inflation rate cools to 2.7 per cent likely giving BoC ‘all clear’ for June rate cut
Canada’s annual inflation rate slowed to 2.7 per cent in April and measures of core inflation also eased, Statistics Canada said on Tuesday, increasing the odds that the Bank of Canada will start cutting interest rates in June. In its scheduled release of the Consumer Price Index (CPI) Tuesday, Statistics Canada said that the deceleration was driven by slower growth in prices for food, services and durable goods. Read more.
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