The other shoe
Economic stories to watch in 2024, part 2 of 2
By Rob Roach, ATB Economics 9 January 2024 2 min read
With 2024 underway, it’s a good time to take a look at some of the top economic stories to watch over the next 12 months. In part one, we highlighted events on the global stage. In part two, we turn to what is happening, or might happen, here in Canada and Alberta.
Weak growth - If the first economic shoe to drop was the Bank of Canada’s aggressive series of interest rate hikes that began almost two years ago, we are now waiting for the inevitable other shoe in the form of the full impact of higher borrowing costs on the economy. The slowdown began last year and we expect national GDP growth to be anemic well into 2024 before things start to bounce back later in the year. We might avoid slipping into recession, but relatively high debt levels, the cumulative impact of elevated inflation, and looming mortgage renewals spell trouble for a lot of Canadian households. Alberta can’t escape the negative consequences of tight monetary policy, but as our recent Alberta Economic Outlook shows, our economy is expected to do relatively well compared to the country as a whole.
Inflation and interest rates - Even though the national inflation rate was still well above the 2% target as of the most recent reading in November, it is expected to get close enough over the course of 2024 that the Bank of Canada will start to lower its trendsetting policy interest rate. There are different opinions on when interest rates will start to come down (our call is for an initial cut in June). Whenever rates start to come down, they are likely to remain much higher than the 0.25% level seen during the pandemic.
Increased pipeline capacity - Alberta has an abundance of oil but limited options for getting it to key markets. With the cancellation of the Northern Gateway, Keystone XL, and Energy East pipeline projects, the twinning of The Trans Mountain Pipeline will provide much needed takeaway capacity for Canada’s rising oil production. Despite the potential for another delay, construction is slated for completion in the first half of this year. When it does come online, the expansion will nearly triple the pipeline’s current 300,000 barrels per day capacity to move crude oil from Alberta to B.C. for export to customers in Asia or along the U.S. West Coast.
Dry weather - As we highlighted in part one of this series, 2024 might be a challenging year for growing conditions around the world. Alberta is no exception with Alberta Environment and Protected Areas reporting that we are currently experiencing drought in many parts of the province.
Housing market - Astonishingly high prices in markets such as Toronto and Vancouver, record rental rates, increased borrowing costs and inadequate supply have led to a deterioration in housing affordability in Canada. Average home prices in Alberta are lower than in Ontario and B.C., but have increased significantly over the last few years as has the average cost of renting. Affordability will remain a key theme in 2024.
Answer to the previous trivia question: About 23.9 million people live in Taiwan.
Today’s trivia question: Of the 35 Canadian cities tracked by Rentals.ca, which had the highest average asking rent for a one bedroom apartment in December 2023?