The recession isn’t here yet... Canadian economic growth was down slightly in December but still up year-over-year. Compared to lockdowns in December 2021, there was predictably huge growth in hotels, restaurants, and entertainment. But focusing in on a few industries, you can see a split between those still growing rapidly, and those harmed by the new rate environment.
Nothing can stop the warehousing sector for now, and on the office side the professional services market continues to be hot (accounting, law firms, consulting, engineering –bright spots for office leasing right now). Construction and retail were in the +2-3% range, in line with the economy overall. Then there’s real estate... one of the few industries down from Dec 2021. I was surprised by how small that negative number was; sometimes it feels like it should be a lot larger.
We’re seeing a split between the ”financial” economy hurting from high borrowing costs and the still strong ”household economy.” There’s growth in hospitality, retail, and the public sector (Canada’s single largest employer isn’t Loblaws or TD or Telus, it’s the federal government).
I’m not sure this split can continue, but for now we’re only seeing pain in real estate and a few other sectors (oil and gas, the media industry). Despite rate hikes and a negative year for the TSX, I haven’t seen stories about huge layoffs, home foreclosures or outmigration from Canada. Perhaps we can weather this storm without a dramatic across-the-board downturn.
The Canadian economy grew >2% year over year, but real estate and finance declined as rate hikes weighed on the economy.