Canadian Economy – Recent trends and prospects ahead

The Canadian economy seems to be doing well at the moment because it has managed to control growth and inflation. With the rate cuts being made in June by 25 basis points, the central bank governor, Tiff Macklem is looking forward to meeting its two percent target inflation in the coming months of this year.

The economy still faces problems from the times of the pandemic, and those effects seem to be lingering- giving the impression that the fight for a stable economy is not over yet.

The housing market of Canada continues to be very costly for the new home buyers- considering the millennials who are said to be the major chunk of the purchasers. With the higher mortgages and high prices, many are facing the heat of fulfilling their dreams of owning their new homes in the country. Many economists think that the more the rate cuts, the chances of overheating the housing market, which in the long run would be difficult to tackle.

Because there is some glimmer of hope of better days since the rate cuts in June, the question remains, if there would be more cuts announced in July and the months ahead.

The trend of growth

The economy is said to be growing at a negligible pace. The pace of growth of 0.1 for May was mostly contributed by a moderately strong performance by the manufacturing and real estate sectors. The flip side is worsening performance by the retail and wholesale indicators, which is one of the main accelerating agents for inflation. It could be one of the major determinants for the rate cut prospects in the coming months.

Employment trends

The unemployment rate is said to be treading at 6.3 percent as per sources it is continuing to be high due to higher population growth. With few job openings in the market, wage negotiations remain very difficult for job seekers in the Canadian market. The only hope for the employment situation to improve is to continue with the rate-cut cycle and keep a close eye on the inflation indicator. It would probably improve the sentiments of the business owners and tech giants to better the economy.

Future ahead...

With the economy showing signs of growth for the second quarter of this year, the Central Bank of Canada must maintain a strong stance to prevent the economy from a recession. The rise in unemployment in recent times is mainly driven by the non-residents of Canada and the tightening labor market. This is mostly driven by the young fresh graduates looking for a job opportunity. Going forward in the coming months, we can only hope this trend will improve and the economy will be back on the right track.