Inflation will continue to rise, but will the recession continue? Experts say "defeat the hatch"

Bank of Canada's efforts to curb sustainedinflationincrease the likelihood of pushing the economy into arecessionnext year. .. Some economists.

Experts say the threat of layoffs and lean days is imminent, and consumers need to start preparing for a reduction right now.

Economist and Fellow of the Atkinson Institute, Armine Yalnizyan, told Global News that the likelihood of a recession "is approaching more than 50% in the next 6-12 months."

Canada's economic output has shown little signs of growth so far this year. However, Yalnizyan has applied for unemployment benefits south of the border as a sign that the US's shrinking economyin the first quarter of 2022 and the economic chill may sooner or later come north. It points out that it is increasing.

"If the United States shows a quarter shrink, Canada can avoid a recession I think it's very difficult, "she says.

TD Bank's Senior economist James Orlando, along with agreeing Yalnizyan, said there was an "incredible level of synchronization" between North American neighbors.

He believes that, like many major bank economists, the Bank of Canada will lead the US Federal Reserve to raise rates by 75 basis points in the next announcement on July 13.

Statistics Canada Report Orlando said the May annual ratesurged to 7.7%and the central bank acted swiftly to curb inflation for Canadians. Is pressured to show that they will take the necessary steps.

Read more: 72% of families with children are worried about the surge in food inflation, according to an Ipsos survey

TD Bank's economic forecast released last week shows significant consumer spending from late 2022 to early next year. Indicates that it has slowed down.

TD believes the slowdown will slightly avoid negative growth, but Orlando has a "very thin margin of error" as the Bank of Canada raises interest rates to avoid a recession. I point out that. It is called "soft landing".

"We are effectively drastically reducing demand to a level where we expect inflation to turn around and return to our goals. We need to ensure that the economy does not collapse as we go through that process. There is, "he says.

However, Orlando states that the recession usually follows a rate hike cycle.

"Designed to slow demand," he says.

What does recession mean?

The beginning of the recession is usually characterized by negative growth in the country's gross domestic product for the second consecutive quarter.

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Already displayed Signs of slowdowns and falling prices in some markets of the housing sector are particularly vulnerable to rising interest rates used to curb inflation.

"Overall This (rising inflation) is where IA Private Wealth's senior investment adviser Allan Small said in an interview with the Canadian press earlier this week that interest rates are affected by housing and growth is generally affected. If you raise it to, the recession will be even higher. "

Observers say the threat of a recession has already affected the market and TSX's energy stocks were hit last week. Although

Russia'sUkraineinvasion and the consequent global energy supply turmoil caused Canada's oil and gas inventories to be very strong in most of 2022. , Small said this week that some investors are starting. Worry that even if a widespread recession occurs, it will eat a bite of the surge in demand.

"If there is a recession or fear of a recession, it basically slows everything down, so the equation The demand side begins to decline, "he said. "If people don't travel or move that much, you don't have that much imbalance, you're more balanced."

Continue Read: One in four homeowners states that rising mortgage rates could drive them to sell. In addition to damaging consumer demand, higher interest rates will put more companies under pressure. That could lead to a layoff, says Yalnizyan.

"The bigger question about central banks raising interest rates is whether they will be more expensive for companies that are highly leveraged in borrowing. That is the rate they hire. And some over-leveraged companies may start firing people, and that's the part we're worried about, "she says.

"Whether enough problems occur is a chapter that hasn't been written yet ... but the best hedge against household inflation is a good job."

"Time to defeat the hatch"

If Canada is actually heading into recession, Orlando says positive news is the past. The years have been good for the average consumer.

Job growth is plentiful and the average household can save a lot of money during a pandemic. rice field. The housing market has seen their stocks grow rapidly.

Orlando points out that these factors may help protect Canadians from rising interest rates and high inflation.

"If you can withstand some of these headwinds that almost everyone is facing, then you have a buffer that is a stockpile of Canadian savings," he says.

Read more:There is a growing fear of recession. Here's how young Canadians can prepare

But Professor Ian Lee of the Sprott School of Business recently told Global News whether it was a recession or not. As with “great uncertainty”

grocery, invoices such as mortgage payments and hydropower invoices need to be prioritized in the coming months. Everything else should be ready for discussion to completely reduce or eliminate, he says.

"That means reducing unnecessary and insignificant spending," he says.

"Save that money for rainy days and thunderstorms."

— Using Global News' Anne Gaviola and The Canadian Press files

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