Recession in store for Canadian economy: Deloitte outlook

Canada is recession-bound, Deloitte Canada says, and when the economy dips, people are likely to stop discretionary spending on restaurants and booze.

According to Deloitte Canada’s latest economic outlook, the Canadian economy is headed for a recession later this year.

The new report, released Wednesday morning, presents a mixed bag with the economy slowing over the next six to eight months.

Deloitte is forecasting negative GDP growth for Canada in Q2 and Q3, and by definition, a recession is two straight quarters of negative GDP growth.

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When looking at the year as a whole, Canada’s GDP is still expected to make a modest gain of 1.2 per cent annually, thanks in part to a strong start to the year and potential rebound at the end of it.

All of the provinces’ GDPs are also expected to grow this year, with Alberta the highest at a 1.7 per cent increase.

On the jobs front, things are slowing.

The report predicts employment growth will to dip to just one per cent, and the unemployment rate is likely to climb above seven per cent as job losses increase.

Consumer confidence has also taken a nosedive, with Canadians increasingly worried about their financial health.

Home sales have now hit their lowest level since 2009, likely driven by the fact that buying a home becomes a lot less appealing when people are worried about their jobs.

With rising economic uncertainty and weak demand, businesses are also pulling back, slashing investment plans and bracing for a slow stretch ahead.

The report isn’t all doom and gloom, with inflation set to hold near the Bank of Canada’s targeted two per cent rate.

The outlook also notes there could also be some longer-term upside for Canadian companies.

As U.S. and Chinese firms face rising costs from tariffs, Canadian industries may find opportunities to step in and grow their exports.