“2022 was the year of the sharp run-up in rates, 2023 will be the year where the policy lags from those rising rates hit home,” said economist David Rosenberg.
Highly-respected Canadian economist David Rosenberg says next year will be a tough one for Canada, as the full impact of 2022 interest interest rate hikes will be felt.
Speaking to BNN Bloomberg, Rosenberg – chief economist & strategist at Rosenberg Research and Associates Inc. – said 2023 would be “the payback”:
“Next year is the payback.”
“2022 was the year of the sharp run-up in rates, 2023 will be the year where the policy lags from those rising rates hit home.”
Rosenberg said he expects inflation to come down in 2023, but that will be accompanied by a recession. This could lead to interest rate cuts in the second half of next year:
“Rosenberg predicted a “severe recession” for Canada next year based on the rate hike cycle, calling for a “triple whammy” with economic impacts compounded by high levels of household debt, a housing bubble and ripples in the global economy.
Possible spillover effects from the interest rate cycle could be felt, Rosenberg said, as banks may constrain the availability of credit and spending drops across various sectors.
Based on the latest rate increase, Rosenberg said he predicts at potentially one more rate hike from the bank before a pause. Once inflation starts to come down, Rosenberg said he thinks the central bank may start to cut rates, possibly in the second half of 2023.
“The next stage is going to be waiting for the inflation to come down, which I think it will, and the recession is going to catch a lot of people by surprise.””
While expecting a recession in the U.S. as well, Rosenberg said Canadians are more exposed to short-term consumer loans and variable-rate mortgages:
“A similar pattern may play out in the U.S., but Rosenberg said Canadians are more exposed to higher interest rates through variable-rate mortgages and because more consumer credit is tied to short-term interest rates.
“As bad as it’s going to be in the U.S., and believe me, it’s not going to be a pretty picture there, I think the Canadian situation in the next year is going to be clouded at best,” he said.”
A key advantage the U.S. has is that their government is less hostile – though still not overly friendly – to oil & gas development.
The U.S. also doesn’t have a carbon tax, and has lower tax rates overall.
As a result, the cost-of-energy is lower in the U.S., and per capita income is much higher than in Canada.
In a recent column, I wrote about how the Liberals & NDP voted against removing the carbon tax from food production costs, and they had previously voted against removing the carbon tax from home heating costs.
So, struggling Canadians are forced to fight against both severe economic headwinds, and our own national government when it comes to trying to prosper and achieve financial freedom & independence.
Spencer Fernando
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