Canada could enter a recession in the first quarter of 2023: David Doyle
Canada's economy showed a slight improvement in July, but it wasn't enough for a prominent Bay Street economist to hold back on his expectation of a recession.
"Our baseline is that Canada will enter a recession in the first quarter of 2023," David Doyle, the head of economics at Macquarie Group, said in a TV interview Thursday.
Canadian gross domestic product (GPD) rose 0.1 per cent in July, the latest data from Statistics Canada showed on Thursday. The bureau also released its August flash estimate, which pointed to an economic stall.
Doyle foresees a three per cent contraction in Canada's GDP, coupled with a five per cent drop in the unemployment rate. He cautioned that the economy remains vulnerable to the ebbs and flows of the commodity market and expects much of the future weakness to come from the housing sector.
Thursday's economic data showed output from real estate agents and brokers sank 3.4 per cent.
"We actually think it (a recession) will be pretty severe in Canada," he stated.
Despite the expected economic contraction, Doyle does not believe the Bank of Canada (BoC) will deter from rising interest rates.
He explained that the bank is committed to taming inflation, and backing down now might result in a more significant problem later. Sticking to hiking rates now, rather than later, is the "lesser of two evils," he said.
Most Bay Street economists anticipate an interest rate rise at the BoC's next interest rate decision on October 26.
"It will likely be six, nine,12 months before we start to see the bank cutting rates again, and that's because they'll want to be certain that they brought inflation under control," he stated.