Everything indicates that Quebec’s economy will continue to deteriorate in the first half of 2023, according to Desjardins economists, who updated their Desjardins Leading Index (DPI) on Wednesday.
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“With the DPI still pointing down with a sharp 2.2% decline in November, the first half of 2023 promises to be particularly challenging for Quebec’s economy,” said Hélène Bégin, senior economist at Desjardins .
This index “allows to capture the trend changes in Québec’s economy that are likely to herald the arrival of a slowdown, recession or recovery about six months in advance,” he explains in Desjardins’ latest economic study.
households, consumers and businesses
In particular, the economist highlights the “housing component” of the IPD, which continues to weaken. In December, housing starts hit the lowest level since August 2018 at 33,400 units, while home sales remain weak.
“The deterioration in the housing market is far from over as the full effect of the rise in interest rates has not yet been felt,” Ms Bégin said.
Not surprisingly, the “budget component” shows that spending on goods “is beginning to be impacted by successive rate hikes.”
“Even though the labor market has held up well so far and the unemployment rate remains close to the historic low of 3.8%, it is likely to increase in the coming months and approach 6% by the end of 2023.”
Finally, the economist notes that the “corporate component” continues its downtrend.
recession on the horizon
“Perhaps even a recession has already begun, as real GDP contracted by an annualized 1.4% in the third quarter of 2022,” Ms Bégin said.
However, she reminds us that we still have to wait a few months “before making an official diagnosis regarding the onset of the recession” as the duration must be at least two consecutive quarters.