What 2023 holds for us: An economic slowdown, the price of lower inflation

What 2023 holds for us: An economic slowdown, the price of lower inflation

As a result of the fight against inflation, Québec’s economy, like that of many countries, will head towards a recession in 2023. The economists at iA Financial Group put the odds at least 75%.

The increases in the key Bank of Canada rate in 2022, which sent interest rates soaring, are the remedy for runaway inflation, and it is especially in 2023 that we will feel the blow.

“Economics is quite clear on this: it takes 18 months to 2 years before you experience the full effects of such a decision by the central bank,” explains Sébastien McMahon, chief strategist and senior economist at iA.

Some homeowners will be suffocated by rising interest rates and will have to put their houses up for sale, so the supply on the market will increase, while there will be fewer buyers, so home prices will fall.

“Between the peak of April 2022 and April 2023, the drop is expected to be 17%. It will be higher in sectors where there has been overheating,” says Hélène Bégin, senior economist at Desjardins.

The Quebec and Central Quebec regions, less affected by rising prices, will see a more stable real estate market.

The worst moments of the 2nd half of the year

“The labor market will be the last piece of the economy to fall, so it may be more in the second half of 2023 when we can see the worst of the recession,” predicts Sébastien McMahon.

From a record low of 3.8% in November, Desjardins anticipates the unemployment rate could fall to 6% over the year, which remains low in a recessionary context. This is partly why economists expect the economy to pick up from the bottom fairly quickly.

They also expect inflation to drop to around 3% by the end of the year. To do this, the Bank of Canada would need to keep its key rate close to the current level.

“Oil prices and supply chain difficulties, two things that were driving inflation in 2022 and over which the Bank of Canada has no control, are declining. It will help”, explains Hélène Bégin.

In financial markets, volatility is still expected in 2023.

– With David Descôteaux, Sylvain Larocque, Hélène Schaff, Julien McEvoy, Francis Halin and Martin Jolicoeur


six numbers to follow

After the shocks of 2022, the economy will pay for the broken pots. Politicians, businesses and workers will need to use their imaginations to minimize the impacts of an anticipated recession. Food inflation will continue. To avoid a decrease in their purchasing power, workers will demand wage increases. Everyone expects interest rate hikes to stop. But it will always be difficult for young families to become owners. Businesses will still not escape labor shortage problems. Stock returns will remain anemic, which is not good news for retirees. Against this backdrop, interest in the green economy is likely to suffer.

Happy New Year… anyway!

Yves Daoust. silver director

There’s probably no respite at the grocery store


Private label products, in a Montreal Loblaw.  New consumption habits, more focused on finding bargains, will continue to be part of the panorama in 2023.

File photo, Julien McEvoy

Private label products, in a Montreal Loblaw. New consumption habits, more focused on finding bargains, will continue to be part of the panorama in 2023.

No one had forecast 7% inflation in 2022, so forecasters are humbled at the end of the year. In BMO, inflation is forecast to average 4% in 2023, with a final increase in the interest rate.
4.25% to 4.50%.

There will be no cut in the key rate in the second half of the year, predicts Doug Porter, chief economist at this bank. Inflation in the supermarket is likely to continue for quite some time, he adds.

Salary negotiations that could be difficult


A demonstration by strikers on the south coast of Quebec last month.  In a context of high inflation, it is likely that labor disputes, such as this one, at the Société de transport de Lévis, will multiply in 2023, in Quebec.

Photo provided by Louis Deschenes

A demonstration by strikers on the south coast of Quebec last month. In a context of high inflation, it is likely that labor disputes, such as this one, at the Société de transport de Lévis, will multiply in 2023, in Quebec.

Information technology workers will be in demand in 2023, predicts Pascale Brochu, v.-p. from recruitment company Anywr Canada. “In cybersecurity, someone making $150,000 can easily expect another 10%,” she illustrates. According to the Quebec Employers Council, increases will be 4.1%, excluding freezes, in 2023. For its part, Quebec offers its 600,000 civil servants 9% for 5 years with a lump sum of $1,000. Up to 4,216 collective agreements could be negotiated in 2023 (2,093 finalized since 2019 and 2,123 expired in 2023), according to the Ministry of Labor.

The repercussions of going green


Quebec Prime Minister François Legault presented his government's Blueprint for a Green Economy last April.  This plan and the myriad other government guidance of the same type will, in 2023, have a major impact on the economy.

Photo taken from Twitter, @francoislegault

Quebec Prime Minister François Legault presented his government’s Blueprint for a Green Economy last April. This plan and the myriad other government guidance of the same type will, in 2023, have a major impact on the economy.

Updating of the sustainable development strategy, conservation of the natural environments in southern Quebec, energy sobriety, necessary acceleration of GHG reduction… The year 2023 promises to be rich in government guidelines that will have an impact on the economy, predicts Alain Webster, Chairman of the Climate Change Advisory Committee.

For businesses, the green transition is underway, willingly or by force. 2023 marks the end of free pollution rights. And the financial community is organizing to better factor environmental concerns into business decisions. New accounting rules should be introduced this year to this effect. Finance Montréal will launch its new mandate: to make the city and Québec a recognized center for sustainable finance.

The stock markets will stop their fall


Brokers, on the floor of the Stock Exchange, in New York, a few days ago.  Most analysts expect the S&P 500, Wall Street's most important stock index, to experience modest growth over the next twelve months.

Photo: AFP

Brokers, on the floor of the Stock Exchange, in New York, a few days ago. Most analysts expect the S&P 500, Wall Street’s most important stock index, to experience modest growth over the next twelve months.

The year 2022 was very bleak for global stock markets, but if the forecasters are to be believed, the slide will stop in 2023. For the Toronto Stock Exchange (S&P/TSX) Composite Index, the Bank of Montreal forecasts growth of 7% while Desjardins foresees an increase of just 2.4%. For the US S&P 500, Desjardins is betting on a slight rally of 1.4%, while BMO predicts that the index will simply stall.

No drop in sight in residential real estate


Photo Agency QMI, Joêl Lemay

After years of record growth, are you dreaming of crashing home prices? Unfortunately, there is a high chance that you will be disappointed. In fact, despite a slowing economy, a drop in the number of transactions (-9%), and an increase in inventory, all indications are that the residential real estate market will remain in favor of sellers in 2023. It is true that Economists predict that the Bank of Canada’s continuation of anti-inflationary measures—successive increases in its key rate—will continue to cool the market.

But not enough to trigger a real risk of price collapse. At most, the Association professionnelle des courtiers immobiliers du Québec expects the median price of single-family homes to decline by only 5% in 2023 compared to 2022.

Labor shortage… the nightmare of employers


A recruiting poster aimed at retirees, in the window of a pharmacy, in Montreal, last summer.  Keeping people over the age of 65 on the job is an important weapon in the fight against staff shortages.

File photo, Francis Halin

A recruiting poster aimed at retirees, in the window of a pharmacy, in Montreal, last summer. Keeping people over the age of 65 on the job is an important weapon in the fight against staff shortages.

In general, the labor shortage should continue in Quebec. The number of job openings in Quebec was 244,000 in December, according to the Statistics Institute, particularly in healthcare and catering. The Quebec government anticipates that there will be another 150,000 jobs available in 2023, which could worsen the situation and keep the unemployment rate at a very low level, even if the risk of recession becomes increasingly likely. The unemployment rate was 3.8% in November in Quebec.


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