The Bank of Canada’s (BOC’s) Business Outlook Survey for the fourth quarter of 2023 found that 40% of Canadian companies were experiencing a slowdown in sales. Indicators of future sales – including order books, advance bookings, and sales inquiries – remain subdued. See: Bank of Canada surveys show weak business environment, lower inflation expectations. The dour outlook for demand is feeding into weaker investment intentions and hiring plans, and most firms no longer feel the need to add staff.

Canadian consumer spending contracted 4% year over year in 2023, even with unemployment still sub-6% and the bulk of mortgages yet to renew at higher interest rates in 2024-2026. A separate BOC survey of consumers found that households are growing more pessimistic about the economy and pulling back on spending. See 2024 in charts.

Spending from 2020 to 2023 was enabled by unsustainable government support for households and businesses and record debt addition in the public and private sector.

The Bank of Canada will soon have to acknowledge that the economy has weakened far more rapidly than it expected. The third-quarter 2023 GDP growth was negative, and the first half of 2024 is looking to follow suit. Already, the unemployment rate has increased by a percentage point since June 2022, and home prices are falling again. According to the Canadian Federation of Independent Business, the proportion of businesses suffering from insufficient demand has rocketed to its highest level since early in the pandemic.

After a period of unprecedented rate hikes, this year will be a story of wage growth slowing as unemployment goes up. That’s according to David Rosenberg, Founder and President of Rosenberg Research. Here is a direct video link.