Quebec households will feel the effects of successive increases in interest rates even more, say Desjardins economists who updated their Desjardins Precursor Index (DPI) on Wednesday.
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“The first half of the year promises to be particularly difficult for the Quebec economy,” said Hélène Bégin, senior economist at Desjardins, noting that the IPD posted a decline of 1.8% in December.
“The game is far from over,” she added.
This index “makes it possible to grasp, in the economy of Quebec, the changes in trends likely to announce the arrival of a slowdown, a recession or a recovery approximately six months in advance”.
The next few months will be “challenging”
The economist highlights in particular interest rates which have continued to rise, the residential sector which remains strongly shaken and household confidence which remains at a low level.
“Households will also feel the effects of successive interest rate hikes harder in 2023,” the economist believes.
Purchases of durable goods should weaken, while the rise in other types of spending should slow.
Even if the labor market is holding up well so far and the unemployment rate remains at the historic low of 3.9%, “it should rise once more soon”.
Also, the deterioration of the housing market “is far from over since the rise in mortgage rates has not yet produced its full effect”. Sales and property prices continue to slide.
“On the business side, deteriorating SME confidence and signs of a slowdown in global trade might soon lead to a decline in investment and exports,” said Mr.me Begin.
“The next few months will be more trying,” said the economist, recalling a recent Statistics Canada survey, which shows that one-third of Canadian companies expect their profitability to decline over the next three months.