Since August of last year, the share of forecasters calling for a recession crossed 50%, but someone forgot to tell the economy which keeps churning out jobs at an above-average pace. The data is still trying to get to a stage of "normalization", before there can be a risk of eventually entering a recessionary stage. So when U.S. regional bank failures took center stage, one the most asked question from clients was whether this would finally produce that recession, or offer no path to a soft landing?
In this client presentation, I address this and other questions.
For Canada, this cycle is uniquely complicated by surging population growth that is altering how we identify risks, the degree of labour market slack, and even the end-point on the neutral interest rate. A persistent large population influx would keep tension on housing demand and prices. We estimate that Canada could fall short of supplying almost a quarter-million housing units by 2025. The solution is not solely a function of building faster, since supply responds with a lag to demand flows. Although the Bank of Canada does not control this demand influx, it must respond to the economic and financial risks it creates. The consumer is king in the economy, and a persistence in stronger housing demand would feed into retail sales, renovation activity, wealth and can even maintain a higher floor under inflation expectations.
Disclaimer
This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.