Recent forecasts from TD Economics indicate that Canada may be grappling with rising prices and a potential shallow recession this year. The latest consumer price index revealed a jump in the annual inflation rate to 2.6%, primarily influenced by the cessation of temporary GST and HST tax breaks on certain goods. Economist James Orlando noted, “everyone knew inflation was going to rise” after these tax holidays concluded, signalling a shift from a period of relative price stability.
Orlando expressed concerns about ongoing inflation pressures extending beyond March, indicating potential rates could surpass 3% by the following month. The country is also embroiled in a trade war with the U.S., with President Trump planning to impose both broad reciprocal tariffs and specific sector tariffs. This situation is expected to significantly impact Canada’s trade dynamics, with TD Economics suggesting they have faced considerable repercussions from the Trump administration despite their strong trade relationship.
The economic forecast outlines that Canada will likely experience a shallow recession partially cushioned by government support. TD Economics expects that U.S. tariffs will diminish somewhat over the next six months through negotiation, yet the long-term impact remains uncertain. Orlando highlighted that without tariffs, Canada was showing resilience in its consumer and business sectors, which suggests confidence was building prior to these trade tensions.
However, the unpredictability around tariffs suggests Canada might encounter two consecutive quarters of mild negative growth, constituting a technical recession. Orlando noted that these declines, while not steep, reflect the loss of consumer and business confidence driven by tariff-related uncertainties.
TD Economics forecasts a rise in Canada’s inflation rate to 2.6% and predicts a shallow recession this year due to the end of GST and HST tax breaks. Economists warn of a technical recession with two quarters of negative growth, largely influenced by U.S. tariffs and their ongoing impact on trade. While government support may mitigate effects, consumer and business confidence are being tested.
In conclusion, Canada finds itself on the brink of rising inflation and a shallow recession, primarily due to the expiration of tax relief measures and ongoing trade tensions with the U.S. While consumer confidence had been rebounding, the unpredictable nature of tariffs threatens economic stability moving forward. As forecasts suggest, the country may soon face mild negative growth impacting both consumer attitudes and business operations.
Original Source: www.bnnbloomberg.ca
