Despite the difficulties households and businesses are currently experiencing, an economic crisis or housing collapse is not on the agenda for 2024.
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The question on everyone's lips: How deep will Quebec's recession be? Opinions differ. But if some fear the apocalypse, that is not the case for Sébastien McMahon, chief strategist and senior economist at iA Financial Group.
“We will probably have a recession in 2024, but a recession with a small “r.” “The labor market remains so tight that it will be difficult to experience a recession with mass layoffs,” he said.
“What we are seeing now is an economy that is stagnating because interest rates are weighing on the economy and household purchasing power,” he continues. We have to digest all of this to the end.
“We will probably have a mild recession that will last a year and then we will start again on new fundamentals. I would be very surprised if there were mass layoffs. Companies can’t afford it.”
Sticky inflation
Will we finally have an end to this inflation devouring our portfolio in 2024?
“Inflation is rising rapidly due to international factors, households are spending heavily due to pandemic controls – all of this is behind us.” However, it will be difficult to bring inflation back to the usual 2% target. It was easier to reduce it from 8% to 3% than to increase it from 3% to 2%. Because we are entering the phase in which wage pressure remains strong,” explains the economist.
“To think that inflation is back at 2% and we don’t talk about it anymore, maybe that will be the story of 2025 or 2026. At the end of 2024 I have the impression that we will still be around 3%.”
Will the “mortgage bomb” explode?
The massive renewal of mortgage loans taken during the pandemic will lead to the possible sale of properties, says Philippe Lecoq, president of the Proprio Direct banner.
According to RBC, 60% of mortgage loans in the country will need to be renewed in the next three years. In 2024, around 20 percent of mortgages will have to be renewed, and in 2025 this proportion will rise to 40 percent, he emphasizes. “We can therefore expect a return to an active market that will offset the current serious imbalance between supply and demand.”
But one factor plays a role in the real estate market in Quebec: the savings rate. Despite inflation and the significant rise in interest rates this year, the savings rate of Canadians, and especially Quebecers, remains high. Quebec's savings rate is estimated at 8.6%, compared to 5.7% in Canada, he said.
“Even if these savings habits are being undermined by the current economic situation, they are the funds that are holding back many savers to buy properties once interest rates are cheaper, which will probably be the case next year,” concludes Philippe Lecoq.
5 topics to consider
After a difficult 2023 for consumers and homeowners, 2024 will mark a transition. While it remains difficult to predict the extent of the looming recession, job seekers will continue to lose out and employers will continue to compete for the best talent. The end of pandemic-related relief programs – and the difficulty for many SMEs to repay them – will contribute to a rise in the number of business bankruptcies in the province. Food in the supermarket continues to become more and more expensive. However, there is a respite coming: interest rates will finally fall, giving holders of mortgages and other debt a well-deserved reprieve, and the price of gasoline will continue to fall.
The demand for employees remains high
“More than 40% of people who change jobs will do so to achieve a better work-life balance,” predicts Marie-Pier Bédard, Executive Vice President of Randstad Canada. In her opinion, candidates will prioritize this balance over money. Even though there were 175,600 job vacancies in the third quarter (a decrease of almost 70,600 or 28.7%), according to Marie-Pier Bedard, job seekers will continue to be left behind. “We are still competing for the best employees in the market. We also have more and more employers asking themselves whether their current employees still have the necessary automation skills,” she summarizes.
Many bankruptcies are still to be expected
Juliette et chocolat, Agatha Boutique, Tero, BBQ Québec, Airmedic, Stornoway, Tergeo, Mamzells, Transbroue, Duvaltex, Pharmalab, Forex… The rise in interest rates and the end of aid programs related to the pandemic have hit hard. In the 12-month period ended October 31, more than 2,600 Quebec companies were in a bankruptcy situation, up 40% from the same period last year. Most experts in the field expect this trend to continue until 2024.
No breaks in the supermarket…
According to a report, we will continue to look for discounts in 2024 while food prices will increase by 2.5% to 4.5%. You also need to pay attention to payment plans of all kinds: even Walmart now offers Klarna for online purchases. This is a service that splits purchases into four interest-free payments over a six-week period. The Federal Travelers Charter will be amended to require airlines to take care of their customers if the flight does not take off.
…But a break from the pump
Gasoline prices surprised everyone a little in 2023 by falling. This trend is expected to continue into 2024, according to Dan Mc Teague, president of Canadians for Affordable Energy. “Prices will continue to fall by 3 to 4 cents per liter until New Year's Day and this will continue in the first half of 2024. Investors and speculators ignore fundamental data such as the geopolitical situation, OPEC reducing production or the still high demand. It's a little irrational, but it will stay that way for a few more months. “In the second half of 2024, however, I expect prices to rise again and the market to become a little more rational again,” says the man known for his gasoline price forecasts.
Finally a rate cut in 2024
The question on everyone's lips is: When will the Bank of Canada (BoC) start cutting interest rates? Most economists expect an easing of tensions to begin in 2024. Progress on the inflation front and a difficult economic environment throughout the year support such a scenario. While Desjardins expects a rate cut around the middle of the year, the National Bank (BNC) is more optimistic with a rate cut from April. It remains to be seen how quickly BoC Governor Tiff Macklem will ease the pressure on mortgage holders. Will this decline be as fast as rate growth? BMO economist Robert Kavcic predicts a 100 basis point (bps) decline in 2024. For his part, BNC economist Matthieu Arsenault expects a faster decline, which could total 175 bps in 2024. As for our neighbors to the south, the company ING Economics predicts that the Federal Reserve will cut its interest rates six times in 2024…
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