Our reports: Economic Impact

The latest financial news made simple. Here’s everything you need to know, thanks to our experts Stéfane Marion and Denis Girouard.

Back to square one for the Fed?

April 16th, 2024        Transcription

In this video:  Markets | Inflation | Energy | Housing

Market records against the backdrop of a weak economy

March 19, 2024        Transcription

In this video: Market performance | World economy | Employment | Productivity | Inflation

Canada caught in a population trap

February 14, 2024        Transcription

In this video: Market performance | Inflation | Housing | Demographics

Much good news expected in 2024

January 11, 2024        Transcription

In this edition: Earning expectations | Market conditions | Employment | Demography | Interest rates



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Little details that matter

Hello everyone and welcome to Economic Impact. Today is April 16, 2024, and as usual I am with Stéfane Marion, our Chief Economist. Stéfane, welcome again.

Good morning, Denis.

We have to come back to you know performance of stock market in this start of the quarter.,

Not that great. No, it's pretty much negative across every region, Denis. Still positive here to date, but there's some malaise in the market at this point in time to start the second quarter, Denis.

And, that malaise is probably linked to inflation once again.

Yeah, the big I world where the inflation numbers are not good, particularly in the US, it's been accelerating over the past three months. If you exclude the housing sector, you're running at roughly 8% annualized rate. The market was not happy to see this, Denis. And what that does is that if you recall back in November, Jerome Powell went on the record to say that I will have the ability to reduce rates aggressively in 2024. Well, with these inflation numbers, you know this, you know the bond market does not believe that anywhere. So, it's pretty much back to square one for the Fed with the bond market probably targeting, you know a level of 5% again just where we were last November.

Yeah, it's a nice comeback, but at the same time we have gold making new height.

Yeah, it's not just the bond market that's doubting the Fed's ability to cut rates, Denis. The price of bullion now is at an all-time high above $2200 an ounce. U.S. dollars by the way. But adjusted for inflation, the blue line was still 20% away from the all-time high that was reached in the 1980s, which was above $2600. Denis, I'm going to make a forecast, I think we will get closer to that record high in the coming quarters to reflect you know the global uncertainty related to inflation but also the geopolitical backdrop.

But talking about uncertainty, at the same time, you know we have a stock market going, going very well and the way you compared to Fed fund, there's a question that should come in the head of investors, right?

Well, the valuation question is a good one, Denis. And if you look at currently the return you get on the earnings yield on the SP500 versus the Fed funds, for the first time in over a generation, you get a higher return on just holding Fed funds as opposed to buying the stock market. You're just not compensated for the amount of risk that you're taking in the stock market unless you think that the Fed is able to cut rates aggressively in the not-too-distant future. So again, they need to see this type of stretch valuation, you have to go back to 1998. It's a type of stuff you don't see very often. So the Fed has to be able to cut rates quickly, if not, you have to reassess your valuation in the stock market. Hence our reason to be a little bit more prudent at this point in time.

Either or, rates will go down or stock market will go down.

Yeah, you're absolutely right.

But you cannot keep going like it is right now, that's unsustainable.


And at the same time, uncertainty about policy makers is not that great too.

Well, when you're trying to forecast your earnings guidance, you try to say what's my outlook in terms of economic policy. It's not very stable right now, Denis. Or if it's stable, it's very stable on the high end of risk and economic policy. The average of the past five years outside norm that we've seen since 2015. So from a stock market perspective, you know that's not that great to cope with both monetary policy uncertainty as well as economic policy uncertainty that reflects the more complicated geopolitical backdrop. We just saw what's happened with Iran and Israel right now. I mean this, this is complicated right now.

And all of that, you know, US small business index is still going down.

Well, yeah, you're right, like consumers, corporations don't like uncertainty. And small businesses in the US who account for 50% of job creation, they need are not very confident right now. It's actually the lowest level of confidence since the great financial crisis. So that argues for a more tepid job creation environment for the US in the months ahead, so yeah.

And there's one thing going up though, demand for electricity.

Well, that's surprising because if you're a small business, you're coping with, you know, monetary policy uncertainty, geopolitical uncertainty and now energy price uncertainty because for the first time in a generation, US electricity demand is on the upswing. That was not supposed to happen. No one was forecasting this, Denis. And the reason for that is we all knew that the US was planning to reshore manufacturing activity, but no one guessed that IA, artificial intelligence, AI was going to be deployed so quickly and that is so energy intensive, Denis. Now you have to increase your energy production or electricity production. And in the US, it mostly comes from natural gas and coal for 60% of electricity generation. So, what that means is for everybody that was saying, well, all these governments have these plans to decarbonize over you know, X many years, all of a sudden with surging demand on electricity, you have to push that back. So again, the uncertainty is even at the decarbonization level, what can government do under these circumstances? What it says to me, Denis, I think those targets will have to be pushed back, unfortunately, because you can't reshore and do AI with no electricity consumption.

Yeah. And you cannot build those dams at the speed that we need to achieve those goals.

Alternative energy cannot be deployed as quickly as demand is rising right now. So, yes, it means more uncertainty on that front too.

And more to come on that front. But at the same time this morning we had a Canada inflation. Any surprises?

OK, I'm here to provide some good news, right. So yes, the good news was that the Canadian inflation was actually lower than expected. Denis, having said that headline inflation is at 2.9%, which is a ball well above the 2% range by the Bank Canada having said this, it's mostly driven by shelter, which is at six points, you know close to 7% right now as you can see on the slide excluding shelter however, you're at 1.4%. So, Denis, to me, clearly those inflation numbers open the door for rate cuts in Canada before the US So we're going to get them here before the US for sure this year.

That's why the Canadian dollar is at 1.38 right now or so?

Again, everything correlates with something else. And yes, under the circumstances you're going to get a weaker Canadian dollar, which has been our forecast for quite some time. So, we're probably looking at another three to four cents depreciation of the currency. It's had a significant depreciation over the past few weeks. Expect a little bit more because now the markets have to reassess the fact that yes, the Bank Canada is able to cut rates before the Fed. So, there's a new currency impact on that.

Then to bring down that inflation due to shelter, we need to build houses... And a lot.

Yes. So finally in Ottawa they've concluded that the only way to bring down shelter inflation is to increase the supply of shelter. So, they have deployed a very ambitious plan to build formula and homes in the next seven years. So that would be doubling the number of homes starts versus what we have right now. It's very ambitious, Denis, and at the same time, it comes against a backdrop where we already have a record number of share of the workforce employed in the construction sector. So, it's we don't, we don't just need people to build homes, right. We, at the same time, need more schools, more hospitals, more roads, more sewers etcetera, etcetera. So that means that if there's one sector that's going to be busy and for the foreseeable future, it's the construction industry which is not bad news because it will limit the downside to the economy, but clearly something that might be supportive of the economy. But it's a very big challenge to meet the goals that were presented on April 12th by the federal government. Doubling home starts at this point in the cycle is a tall order, but at least we're going in the right direction.

On that note, thank you, Stéfane. Thank you everyone, for being with us. I will see you next month.

Hello, everyone and welcome to Economic Impact. Today is March 19, 2024 and as usual, I am with our Chief Economist, Stéfane Marion. Hello, Stéfane.

Morning, Denis.

Good morning.

Well, another month, same story. Equity is still doing very, very well, but not only in the US right now. Yeah, another month, another record. And you can see it's not solely driven by the US right now. The blue line is the overall equity markets global. The red line is excluding the US. So it seems like people are interested in buying something cheaper elsewhere. So therefore they're buying other country stocks and it's moving the needle higher for equity markets.

Well, good for them, but at the same time not all the economy are going in the right direction.

You're buying on hope, Denis, because economic data is not very constructive right now. It's mostly PE expansion, so price earning expansion, as you see on the slide, we only have 3 countries in the G7 economies that are contracting and 3 others that are stagnating. So really, it's the US that stands apart from other countries. But I assure you any monetary policy is restrictive in every country.

OK. But at the same time in the US we are seeing and keep seeing a very, very big deficit.

Yeah. So if you're asking me why the US is doing so much better than other countries, because I had not forecast unprecedented government deficits in the US, Denis, running at roughly 6% of GDP right now. It's unprecedented to see this type of fiscal stimulus at this at, at this point in the cycle. So were it not for the government, I assure you the US economy would be much weaker than it is right now.

Yeah, and we are in an election year. That means that they may stay like that for a while.

Yes. But it depends on what the impact will be. Also on interest rates down the road. If you de anchor inflation expectations because of massive deficits in the US. Yeah.

And at the same time we're seeing a contraction in employment, which is kind of unusual because you know we are having such a big deficit, we should create more jobs. But even if the jobless rate is at 4% or so, we're creating less and less jobs.

The impact on the private sector coming from restrictive monetary policies, particularly small businesses, Denis. So if you look at full time employment in the US, it's been stagnation for the past 12 months. So corporations, in order to salvage their guidance on profit margin expansion, are forced to reassess their needs on the labour market and therefore they have opted to hire people part-time nowadays as opposed to a hiring them full time. And that speaks to me to a potential deceleration in the US economy in the months ahead. And we're going back in history and you're bringing back the bank, you know, problem that we had in the regional banks last year and the next slide I think showing that we should be concerned now.

There is stress in the private sector. If you don't hire people full time, should you be surprised that we're seeing delinquency rates on the rise for consumer loans and credit card loans, which by the way, are higher than they were at the height of the global financial crisis in 2008, 2009. So that speaks to me, Denis, in saying that you know what, yes, the consensus is expecting a soft landing for the US economy. Perhaps that will happen, but that's not our baseline scenario because we view this stress as symptomatic of significant deceleration to come in the US not withstanding massive government support. At this point in time, I still think we're going to see significant economic slowdown and therefore you'll be forced to reassess your profit expectations.

OK. Then maybe on a better note or not, if we are coming back in Canada on the employment sector. How does it look now?

Denis, no but I want inflation to come down! But if you want inflation to come down, you gotta slow the private sector. So it's slowing in the US, so let's not be surprised, but let's be prudent on equity exposures at this point in the cycle. So in Canada, not much better than any restrictive monetary policy is impacting the private sector. And you can see on this slide that it's been stagnating for the past six months. So were it not for public sector employment, labour markets would be much weaker than what we've seen so far in Canada.

At the same time, we're not investing enough in the Canadian economy.

No, we're not. And two things, private sector slows in terms of employment. We've seen a resurgence in business insolvencies which are back to where they were in 2008. So Denis, that's not great for productivity down the road such as the private sectors being negatively impacted by restrictive monetary policy.

And you know if we're coming back to the GDP versus the US in term of PPP, how do we look?

Well, first of all, on productivity, we're not doing well at all. So that's a reflection of what you said. We need to attract investment in this country. And what we've seen is that the most recent data speaks to 3 consecutive years of declining productivity. So what that says, Denis, is that in order to get the economy to do better in the months ahead, we need to attract investments.

And that's kind of new. Three years in a row and we are accelerating right now compared to last year. Yeah, it's a big concern.

It's unprecedented and if you don't have good productivity, it will be reflected in earnings expectations and will be reflected in the relative performance of equity markets around the world. So we're definitely not doing well. And it's a reflection also of what you see, this discount of the S&P TSX relative to the S&P 500, is investors, whether they are Canadian or foreign, are shunning the Canadian market right now. So as the data on productivity was published, Statistics Canada also showed that for the first time since 2007, both foreign and domestic investors were taking some of their marbles out of the Canadian market. So therefore, yeah, that explains the relative underperformance of the Canadian economy. So basically, it's really important in the next federal budget, Denis, that the federal government comes up and with a more business friendly environment to encourage institutional investors to bring back investment to this country. We need a more business friendly environment in this country.

And it's even worse when you compared to the US. Oh, if you don't want to do that, Denis, then we're just going to get, if you don't do anything, we're going to get this continued deterioration on the relative standard of living between us and the US. So per capita GDP in Canada, which used to be 82% of the US, right now is down to 76%. So we're earning, you know, 1/4 less than what the Americans are earning right now just because of this, this deterioration in productivity, which is symptomatic of lack of business investment in this country. And this is why we need this next federal budget to be more business friendly to attract investment to the country.

Last but not least, one of our favorite subject, inflation, and we have a very fresh number this morning. How does it look?

It just came out, Denis, so CPI was very, very low for this month. So you're down below 3%. But then if you exclude the shelter component on which the bank had is has no control, you're at 1.3%. So that to me opens the door for potential rate cuts in Canada this summer. You know you can't justify keeping monetary policy as restrictive given what's happening in the private sector, which we've been talking to for the past few minutes. The Bank of Canada has to change its forecast and open the door for rate cuts as soon as its next monetary policy. Meaning, they may not cut rates in April, but I think they will open the door for rate cuts this summer.

OK, is it too late?

They waited too long in my opinion, but it is what it is. Their models are calibrated. It's hard to calibrate models for this type of economy. But yes, that argues for rate cut, but it also argues for a weaker Canadian dollar, Denis.

Well, thank you, Stéfane, and thank you everyone for joining us today. We'll see you next month. Goodbye.

Hello everyone and welcome to Economic Impact. Today we are a February Fourteen 2024 and as usual. I am with our Chief Economist, Stéfane Marion. Hello, Stéfane.

Denis, February 14th. Thanks for being my Valentine.

Oh my God. OK, let's start. OK. Today I think we need to talk about the equity market once again because we had new high.

Yeah, it's it's been staggering since last November, and the US Federal Reserve opened the door for potential rate cuts in 2024.

Yeah, new high early in February. We are actually surpassing the previous record that was established at the very end of 2021. So it's been a

it's been an unusually strong performance since November. And it's not across the planet, though. It's more North America and a lot more US.

So, two months into the year almost, you know global markets up 3%, mostly driven by US 4%, Japan up almost 12%. But look at the rest of the world, Denis. I mean the impact of previous rate hikes is starting to impact maybe not the US so far because there's been tremendous fiscal policy or, you know, momentum in the US with the IRA. But elsewhere around the world you can feel that there's, there's slowing growth there. So yes, it's new record, but mainly on the back of the US and Japan. Yeah, good. And one of our favorite, favorite subject inflation. Once again, we had the US number yesterday was a bit surprising. So there you go. The market is up since November because the Fed opened the door for potential rate cuts in 2024. But all of that is very much dependent on what happens on inflation. So expectations or rate cuts may need to be reassessed given the latest number on inflation. Yes, overall inflation is at 3.1% and we're way down from the 9% that was observed in 2022. But core inflation which excludes food and energy is at 3.9%. It's actually accelerating on a month-to-month basis right now. So, I think there will be rate cuts this year to you. But we actually in our current forecast, we pushed them back to the third quarter of this year and the market was expecting not too long ago potential rate cuts as soon as March of this year. So from a stock market perspective, you may need to reassess your expectations because the longer the Fed delays its rate cuts, the more there's a potential for a deleveraging episode in financial markets.

Remember, not that long ago, you know, we were expecting rate cuts late in 2024. We changed our mind because we saw big deceleration inflation. Now we're back to square one almost.

It's hard if you're central bank or to calibrate models incurring contacts. And don't forget any commercial real estate is yet again becoming a concern and for regional banks in the US and under these circumstances, again, the longer the Fed delays its rate cuts, then the more you're likely to see collateral damage and some parts of financial markets. That's why we say they've never been ever before a monetary tightening cycle without one episode of deleveraging, and we have yet to see it.

If we're back in Canada, we'll look at inflation once again. You know, not same number, but same direction, but for different reasons.

Yeah, the bank account, unlike the US hasn't been as aggressive in guiding towards potential rate cuts and for good reason. Unlike the US, the Bank of Canada is struggling to see through shelter cost inflation, which is running at 6%, which is unprecedented at this point in the monetary tightening cycle. It should be coming down, but it's stuck at 6%, Denis.  And the Bank of Canada last week actually acknowledged that yes, we know it's shelter costs. We don't control it, but we can't ignore it. So therefore at this point in time, they're not promising imminent rate cuts. So, in Canada also, I think we push back our rate cut expectations to the second-half of this year.

Yeah. And we thought that the housing affordability was getting in the right direction. But once again, numbers show that no, not exactly. Especially it's the same across Canada, but at different level. It's not good, Denis. So yeah, you're right. Shelter costs inflation reflects the fact that home affordability is deteriorating quite significantly.

You know, in Vancouver or Greater Toronto Area, you know, households have to devote 90 to 100% of median income to purchase a home. Not going to happen, right? It's the worst affordability in in over 2 generations. You got to go back to the 1980s and it's across the board, not so much in Alberta at this point in time, but the rest of the country clearly struggling with and affordability crisis. I would depict it that way.

And once again another in fact landmark working age population surge once again in January which is a huge number. 

So, I can't bring down affordability. People are saying it's going to come down if rates come down, Denis, it can't come down if you're population continues to search because that's higher demand for housing. So we spoke to what happened in 2023, population growth of 1.2 million people were starting the year with 125,000 in a single month, the month of January, Denis. It's a new historical record for Canada on a monthly basis. In the Greater Toronto Area, for example, the largest metropolitan area in Canada, it's 32,000 people per month right now. That's a, that's 25% of Canada's population growth is happening in the Greater Toronto Area, which is putting tremendous pressure on the public finances of the, you know, the fiscal House of municipalities across Canada, but particularly in the Greater Toronto Area. So, I can't bring improve affordability with this type of population search.

And once again it's because rates are still high not to help building permits are going down which is creating more problem.

And Denis, everyone knows you have to calibrate your immigration policy given where rates are and then if rates are high property builders are just not building right now. So, the government says we need more supply, yes but the rate structure is not conducive to more supply. So we have surging population with building permits plummeting across most metropolitan areas. Look at the GTA, Vancouver, Montreal, only Calgary is trending up right now, but if not it's multi year lows. So you have population and multi year high with building permits at a multi year low. So that's not going to improve affordability anytime soon.

No, no, and at the same time we are trapped in what we call a population trap which is an economic kind of subject.

You know, we wrote a piece on that and the idea doesn't come. We didn't invent the term, Denis. It was invented by Robert Solow - Nobel Prize in economy who argued one day that you know you can grow your GDP, your economy through population up to a certain extent. There comes a point that if you don't have enough investment in the country, while your population increase can no longer lead to improving living standards. So the population trap that we're seeing in Canada is historical. It's unprecedented. Normally, it's the preserve of emerging markets with, you know, high natality rates, fertility rates, not the case in Canada, which is written by immigration. So again, we're very much for immigration as long as the government is able to calibrate for where we are in the cycle. Notice on this slide that the US has experienced a brief population trap after the 2008, 2009 financial crisis when banks stopped lending collapse in banking sector, but they rebounded. But look at the extent of the population trap in Canada at this point. Is, what, five? Yeah, and five times greater than us during the great financial crisis. So hard to get out of that. So all I'm saying here is we, we know immigration. We have to welcome people with dignity in this country. And right now, given the capacity, the first 3 to 500 people get access to certain services and the balance all the way up to 1.2 million. While they're not welcome to the country with dignity because we don't have the capital or the services to go along with that.

That's why we have to recalibrate on that front. Because if you don't improve the population trap, the living standards are not going to get better anytime.

Yeah, we need to do it sooner than later. And you just mentioned it's the standard of living is going down in Canada because of all of that.

So this is, this is the concept that what leads the clear indication that you're in a population trap is when you look at your capital labour ratio and then you compare that to your per capita GDP. And right now living standards in Canada have been eroding. They've been at a standstill for almost six years and they've been eroding in six consecutive orders, which is almost unprecedented for the country. So again, it's just a question of recalibrating, given where you are in the cycle. That's why we're advocating for Ottawa to put in place a special committee of experts that could actually advise the government on what the country can absorb in terms of population at any point in time, given where you are in the cycle. I think we have to depoliticize this whole thing and we get, we have to get the overall number of what the country can absorb. Again, it's a question of welcoming people with dignity. If not, we're going to have a reputational risk internationally if we can't welcome foreign talent with dignity. You're very right on that.

Well, once again, it's very interesting. Stéfane. Thank you very much for being with us. And thank you also all of you for watching.

Hopefully we'll see you once again there in the beginning of March.

Thank you.

Hello everyone and welcome to Economic Impact. Today is January 9th, 2024, and I am with our Chief Economist Stéfane Marion. Hello Stéfane, how are you?

Happy New Year Denis.

Happy New Year to you.

Stéfane, we had a spectacular year on hand in terms of you know, financial results once again and it was good when we had our last Economic Impact discussion. But the last two weeks were spectacular.

Yeah, Denis, there's a lot of hope in the system, right. It's all the stock market increased quite substantially but it was all due to price earnings expansion. So PE expansion means it's hope that the economy will turn around soon and deliver better earnings in 2024 versus what we had in 2023. But at the same time, you know we saw that global manufacturing is kind of a slowdown, it keeps going on.

Yeah. So "hope" doesn't mean that it is what you're observing right now in the market and what you're observing in the market, the most recent data shows that as of December we've had 16 consecutive months of contraction or let's call it stagnation, Denis if you want, but even stagnation is not very conducive to a rebound in earnings in 2024. So that's the challenge for the markets expecting potential rate cuts to happen to help. But at this point in time, it's not a great picture for the global economy.

You said it at the opening, but the expectation of the earnings for 2024 are, I would say, spectacular when you compare 2023.

Yeah. So you want me to put numbers on that right now?

Of course.

OK, fine. So in 2023, there was no earnings growth, Denis, it was 0.1%. So the stock market did very well, as I said before, it was PE expansion on the expectations that 2024 would do better. And the expectations for this year is that earnings will rebound 10% globally. But notice, Denis, in that column all regions are expected to show a - deliver - a rebound. So quite aggressive when you consider the state of the global economy that I showed on the previous slide.

OK. Is it because you know people are expecting that the inflation will go down faster and lower than what was anticipated in 2023?

For rate cuts, perhaps. So inflation is coming down because growth is slowing down. But in terms of pricing power, which you know is a key driver of profitability for corporations, the red line is what consumers are paying, Denis, the blue line is what producers are receiving. So the pricing power that was observed in 2022, where you can raise prices by 10%, it's no longer there. Prices are not, you can't raise prices more than 2% at this point in time. So from a producer standpoint, that is quite challenging to expand your profit margins under these considerations.

OK. Then if the market is expecting more earnings and their ability of pricing is lower, is it because salaries will go down?

One would hope so. And I think eventually that is the transmission of monetary policy, it works with the lag. It will happen eventually. But right now Denis, what you're seeing is that salaries, average hourly earnings, are still stuck at around 4%. So you're dealing with less pricing power, but wages that are still at 4%. So quite challenging for profit margins.

Yeah, not easy for those companies, but we have also the newcomers in terms of data that are coming in the economic environment. It's once again cost of shipping. We had that in the COVID period. And now it's back.

Yeah, Denis, geopolitics is not going away in 2024 and we have to keep that in mind, right. And given what's happening in the Middle East right now and the Strait of Hormuz is being challenged as well as Canama - Panama Canal - shipping costs have increased. Have more than doubled, have almost tripled in recent weeks. So that will add to the dilemma faced by producers as they're now facing less pricing power, higher shipping costs and perhaps a compression of profit margins.

Again then that means that once again expectation of those earnings seems to be a bit high in the context. It's aggressive. I'm just giving you the backdrop on which these are these expectations are based. Things have changed quite rapidly in recent months on that front, or recent weeks, just on the geopolitical front. So that's a big deal in my opinion.

In the past, we discussed about the impact of interest rates on manufacturing sector and now we see the impact going up again.

That's how it works, Denis, right. We've said it before, you raise interest rates quite aggressively. You're going to get some impact on economy at some point in time. And what we've seen in recent quarters, there's a pickup in the number of bankruptcies. So corporations again have phased by all these factors that I mentioned previously, plus they need to cope with the impact of previous interest rates as they need to refinance the corporate bonds at a much higher level. So that is an impact also on, on corporations.

Yeah. And as usual you know we saw the employment number last Friday. It was not a good number when you look at it you know, in deeper.

Well they're a bit confusing. So given all the factors we mentioned, if you're going to trying to protect profit margins then what you have left at this point in time is maybe you want to streamline your head counts. And whereas jobs were up in December in the US, headcount overall in the US economy were up roughly 200,000, there was a big contraction in full time job. So again, this is the adjustment that corporations are doing to protect their profit margins and, Denis, outside the COVID recession that was the biggest decline in full time employment in over a generation in the US. So clearly there's something happening with past - you know - impact of previous rate hikes is leading to a reaction function from US corporations to streamline their headcounts. That could have an impact on consumption and therefore earnings growth in 2024 again.

But about Canada and in Canada, you know we had a number also and I think Ontario was really impacted by you know the payroll.

Yeah, corporate profits have been down for a few quarters in Canada. So you would expect that at some point in time also to impacting employment data. So what we saw in Canada similar to the US. Total jobs relatively flat on the month, but the big adjustment downwards to full time jobs. And in terms of, from a regional perspective, Ontario, we know the impact of interest rates will bite more in provinces where home prices are higher and higher indebtedness at the consumer level. So the employment-to-population ratio, the adjustment we're seeing right now in Ontario is quite large, because we fall, we fall into below 61% outside the COVID recession, you have to go back to 2008. So clearly the impact of previous rate hikes is also biting on the Canadian labour market.

And lastly, one of our favorite subject, demography I would say, and once again you have numbers that prove that there's a lot of new immigrants in Canada.

Yeah, so just after we did our last show, you know, a couple days later there were Statistics Canada published new population growth number which exacerbates the, you know, the down trending in the employment population ratio and I'm showing to Ontario. It was just spectacular. It was the biggest increase, more than 400,000 population growth in the entire quarter. That even exceeds the quarter when Newfoundland joined Canada in 1949. So it was, I think it was close to 430,000 people. Denis, at this point in time, I know the policymakers are saying we need to grow our population to, you know, compensate for an aging in a population. But right now Denis, Canada's growing 6 times faster than the OECD average. I don't think we're aging that fast and all provinces are showing at least twice the growth of the OECD. So what that says Denis, to me, is that you know housing will be an issue again in 2024. Home prices will not be collapsing just because of this population surge. But rent inflation will be higher and the endpoint Denis means that a component of inflation will be higher limiting the ability for the central bank to cut rate. They will be cutting rates, Denis, but housing, due to strong population growth will limit the downside on interest rates.

You showed us in the last year I think it's December that without the component of household the inflation is already around 2 or even below 2%.

Without housing we're at 2%.

But because those numbers, you know we're going to be still above 2% no matter what.

We're close to 3% at this point in time. So rate cuts are coming in Canada, that's good news for households, for homeowners, etc. But they won't be as aggressive as in the past due to this surging population.

But with all of that rate cuts more at the end of the year or you know middle of the year or where do you see that? I take starting your second quarter of this year, which we'll see the beginning of rate cuts. So I think globally, so that's good news for the global economy, but the banks, central banks will be cutting rates because the global economy won't do, won't be doing so great. So I know everyone is positioned for great news rebounding earnings. I still think that the economy might disappoint in 2024, hence her view that I know we've been saying that for a few months, but we're still in that window where there could be more volatility on the economy than people expect for the next few quarters.

Well, thank you Stefan for all those forecasts for 2024. Once again, thank you. Thank you everyone for being with us. We'll see you next month with more data and more news.

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