MENAFN– Caribbean News Global by BDC
MONTREAL, Canada – As the year ends, Canada’s economy faces challenges with high interest rates affecting households and businesses. After a weak third quarter, we expect a stagnant economy in the months ahead.
In July, the economy saw a minor growth of +0.2% in real GDP, largely driven by a significant rise in retail sales (+1.0%). Statistics Canada forecasts another month of neutral growth for August, which would be a positive sign amidst the economic slowdown.
Households Paying Down Debt
Household debt relative to disposable income has fallen, reaching the lowest level since early 2021 at 175.5. Despite ongoing high borrowing costs, this suggests people are relying less on debt.
Inflation Targets
In September, Canadian inflation was 1.6%, below the targeted 2.0%. This decline may prompt further interest rate cuts from the Bank of Canada, which may opt for a 25 basis point reduction at its next meeting.
Lower Unemployment Rates
Canada’s unemployment rate fell to 6.5% in September, with 47,000 jobs created, mainly in the private sector. Job creation has increased significantly, although the overall unemployment rate has risen due to more people entering the workforce.
Business Impact:
- Consumers are cautious, often delaying big purchases. Businesses should enhance product value and manage inventories wisely.
- As interest rates decrease, this is a good time to plan for future growth.
- Amid the economic slowdown, businesses should adapt financial practices accordingly.
US Economy Maintains Course
The US economy remains stable, with healthy indicators suggesting a soft landing. Despite a recent interest rate cut by the Federal Reserve, consumer and business spending stays strong.
Job creation rebounded in September, with 254,000 new jobs added. The US economy grew by 3.0% in the second quarter, driven by consumer spending and investment.
Spending Trends:
Americans continue to spend, with personal consumption growing despite high rates. Savings rates have dipped to their lowest for the year at 4.8%.
Job Market Resilience:
Unemployment in the US is low at 4.1%, and job vacancies exceed unemployed individuals. This stability in the job market affects hiring trends.
Core Inflation Insights:
Core inflation in the US remains above target, suggesting the Federal Reserve may temper the pace of interest rate cuts moving forward.
Business Implications:
- Lower US interest rates will impact Canada, potentially benefitting Canadian borrowers.
- The US job market rebound could boost Canadian exports.
- The Canadian dollar may weaken against the US dollar, affecting import costs for Canadian businesses.
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