Montreal recession – Canada has a 94% chance of entering a recession within the next year, recent data from the Conference Board of Canada reveals. Specifically, Montreal’s economic growth is likely to decrease by 0.6% down from 3.7% in 2022, with rising interest rates, labour shortages, and increased pressure on household budgets all collectively playing a role. “We haven’t seen the full effect of interest rate hikes, which we expect to start seeing floating through the economy fairly soon,” said Liam Daly, a Conference Board economist. “This will have an impact on both consumption and investment. Typically it can take up to 18 months after interest rate increases are made for those effects to show up.”
Tech industry slowdown
In particular, significant slowdowns are expected to occur across tech industries including artificial intelligence, software development, and information technology – these sectors are set to experience a paltry 0.1% growth in 2023. “Investors in tech are becoming slightly more guarded”, Daly added. “The era of low-cost capital has come to an end, which has really driven this tech pullback. Even so, tech will remain an essential pillar of strength for Montreal, given that the city has four universities and a highly educated workforce. That continues to attract investment.”
Increasing consumer borrowing
Retail sales are also expected to increase by 3% – in contrast to 15% in 2021, and 9% in 2022. This drop is largely due to rising debt and shrinking customer savings. As such, Canadians are increasingly relying on credit cards to borrow money at attractive rates. The RBC ION+ Visa Credit Card, for example, is one of RBCs newest credit cards; this card offers a low annual fee of $48, as well as a 20.99% interest rate on purchases, and 22.99% interest rate on cash advances.
Immigration and labour market challenges
Immigration to Montreal is also expected to drop by 50% in 2023 due to “the province’s strict language laws”, along with a general clampdown. Moreover, the ageing population will also further result in labour market challenges. “The demographic profiles of Montreal and Quebec are such that there are more acute labour market challenges than elsewhere in Canada,” said Daly. “Labour shortages are a problem across the country, but the remedy of higher immigration is not coming to Quebec to the same extent that it’s coming to other jurisdictions. Immigration controls are going to limit the number of permanent residents arriving to alleviate some of those shortages.” Slowing economic output across numerous industries will likely see unemployment in Montreal increase to 5.2% in 2023, up from 4.8% in 2022. Job opportunities in hospitality, on the other hand, are expected to increase by 20%, and by 18% in arts and entertainment. That said, rising unemployment may also be tempered by certain businesses opting to “hoard” employees.
“When the economy reopened from the pandemic in 2022, competition for labour really skyrocketed,” Daly said. “Labour hoarding is a temporary strategy by firms to hold on to workers through tumultuous times, which lets them avoid the costs associated with hiring and training new workers. If you have a workforce in place, it may be preferable to take a short-term hit to profit but have your people in place for when times improve.”
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