A gloomy year of…economic growth!
The economic pain associated with the negative economic stories of 2022 will be felt more acutely next year
By Rob Roach, ATB Economics 15 December 2022 2 min read
Looking back at the big economic stories of 2022 (see below), they are all negative.
But, while elevated inflation has been making life more difficult for households and businesses, the overall economy in Alberta and Canada will still post strong numbers this year.
Unemployment has been low and GDP is forecast to expand by about 3.5% nationally and by 5.0% in Alberta.
The economic pain associated with the negative economic stories of 2022 will, however, be felt more acutely next year as the full impact of higher interest rates works its way through the economy.
On a less gloomy note, if the interest rate increases successfully tame the inflation dragon, the economy should improve later next year and we will go into 2024 on better footing than we are on going into 2023.
The top five economic stories of 2022 (unless something dramatic happens in the next two weeks) were:
The Russian invasion of Ukraine: The Russian invasion of Ukraine has been a drag on the global economy since it began on February 24. Commodity producers such as Alberta have benefited from higher prices, but the overall impact is negative.
Price pressure: U.S. inflation hit 9.1% in June—the biggest 12-month increase since 1981. Inflation in Canada peaked at 8.1% in June—its highest level since 1983. Inflation has come down from these peaks, but remains well above the 2% target.
The end of cheap money: The answer to elevated inflation is higher borrowing costs. As a result, central banks around the world reversed course in 2022 and began hiking interest rates. The Bank of Canada was no exception, taking its policy rate from 0.25% to 4.25%.
Loonie loses steam: The value of the Canadian dollar vis-à-vis the U.S. dollar has been on a downward trend in 2022. The loonie was worth around 79 cents U.S. to start the year, but is currently around 73 cents. A lower loonie helps Canadian exporters and tourist operators, but makes things more expensive for consumers, travellers and importers.
Crypto crash: Illustrating the old investment adage that what goes up can come down, cryptocurrencies had a rough year in 2022. A Bitcoin token, for example, was selling for over US$67,000 at one point in November 2021 compared to under US$18,000 today.
Tomorrow's Owl will outline the top economic stories to watch in 2023.
Answer to the previous trivia question: A typical car has about 30,000 parts.
Today’s trivia question: In what year did Apple Computer, Inc. go public?