Accelerated housing spending will slow as rising prices, interest rates and unemployment hit households as Covid-19 pandemic lockdowns end, the Royal Bank report adds. (Photo: The Canadian Press)
Canada is headed for a recession in 2023, but it will be short-lived and no more damaging than past recessions, says a new Royal Bank report.
Rising food and fuel prices, rising interest rates and persistent labor shortages will push the economy into a ‘moderate contraction’ next year, the bank’s economists say.
Royal Bank said it expects the unemployment rate to reach 6.6% next year, but does not expect it to take long to overcome those weaknesses from 2024.
Accelerated housing spending will slow as rising prices, interest rates and unemployment hit households as Covid-19 pandemic-related lockdowns end, the report adds.
Royal predicts that home prices will fall by 10% in the coming year, which will shave more than $800 billion from household net worth.
The bank said there will be a three-quarter percentage point increase in interest rates next week and sees the Bank of Canada raising its benchmark rate to 3.25% by the end of the year. The central bank raised its policy rate by half a percentage point to 1.50% in June in an attempt to control rising inflation.
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