June 5, 2023
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Five things to consider as recession looms in BC

Wednesday’s Bank of Canada interest rate announcement, Statistics BC’s gross domestic product data and the Real Estate Board’s monthly reports are key to tracking the changing economic times.

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On Wednesday, the Bank of Canada is expected to raise its overnight rate again in an attempt to curb the rise in the cost of living, or inflation.

The logic is that prices rise because the demand for goods and services exceeds the supply. So a rise in interest rates makes money more expensive and then people borrow less to buy goods and thus reduce demand. The spillover effect, which the government does not oppose, is the fall in real estate prices.

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The tricky part for the Bank of Canada – and other banking offices around the world – is getting rate hikes right, bearing in mind that it’s a very dull financial instrument.

Go too slow, and inflation gets out of hand. Go too fast and a sudden drop in demand will lead to a recession.

Even Jeff Bezos – one of the richest men in the world – is warning people right now to “shut down the hatches”.

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Here are five economic indicators to keep an eye on in BC over the next few months:


According to Coast Capital Savings Credit Union, central banks around the world have raised interest rates over the past six months — although rate hikes have been faster and more common in the United States and Canada.

In September, the Bank of Canada raised its overnight rate for the fifth time since March (up from 0.5% to 3.25%).

September’s increase was 0.75 percent, and economists also predicted Wednesday’s increase to be 0.75 percent.

Every year, about 20 percent of mortgages mature. That means over the next year, tens of thousands of BC homeowners will have to re-borrow at an interest rate likely higher than when they signed up. So the monthly payments go up, and if the homeowner is on a fixed income, something has to give.

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Coast Capital predicts that interest rates will continue to rise over the next 16 months. Bank of Canada statements can be viewed here. After Wednesday’s interest rate announcement, the Bank of Canada’s next rate adjustment date is Dec. 7.


Statistics BC continuously publishes data related to BC’s economic strength, including gross domestic product, inflation and housing starts.

According to Chartered Professional Accountants Canada, a recession is defined as two three-month periods of declining economic activity, and the organization believes that Canada could fall into recession in 2023 (but not with the high unemployment that usually accompanies a recession).

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The BC Real Estate Association also publishes a GDP tracking tool called “Nowcast” which is released at the end of each month. Its most recent publication estimates regional GDP growth for July 2022 at 4.9 percent.

The CD Howe Institute’s Business Cycle Council meets when economic conditions present the possibility of Canada entering a recession. It has published nine reports since October 2012. The council’s most recent report was released in August 2021 amid the ravages of COVID-19, when Canada’s economy had slipped into a brief recession. In that report, the council declared the recession over.

The business council and University of Toronto economics professor Michelle Alexopoulos told Postmedia News they expect to convene a meeting early next year.

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“Of course, decisions are data-driven, so there is still considerable uncertainty around the timing of the next meeting,” Alexopoulos said.

UBC economics professor Giovanni Gallipoli said defining an economic recession involves more than just looking at consecutive quarters of GDP growth.

“Using employment and unemployment data is a good way to refine that data,” he said. “Furthermore, information on asset prices and the development of households’ financial and other wealth/debt could be utilized.”

Gallipoli said Canadian economists fully expect a recession in the new year.


BC released its latest inflation numbers on Oct. 19, and it was 7.7 percent higher than September 2021 and 0.5 percent higher than August 2022. Excluding gas and food, inflation was 6.5 percent.

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The price of food is up almost 10 per cent in BC since this time last year – with store-bought food prices rising more than restaurant-bought meals. The price of coffee and tea jumped by 20 percent.

Canada’s unadjusted inflation was 6.9 percent in September, so BC’s inflation position is slightly worse.

Tiff Macklen, Governor of the Bank of Canada, gave a speech to the Halifax Chamber of Commerce on October 6, “What’s Happening to Inflation and Why It Matters.”

He said that inflation is considered to be manageable at two to three percent – ​​which is how it was before the COVID-19 pandemic.

In the first six months of 2020, Canada experienced a few months without inflation, but then it started to accelerate. Inflation was 3.5 percent in July 2021 and 4.5 percent by mid-2021.

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Inflation in Canada peaked at 8.1% in June and has since slowed.

Macklen said the nature of inflation has changed over the past year, moving from global to domestic and from goods to services.

“We need to slow down spending in the economy so that supply can catch up with demand,” he said.


This is something that is mostly out of Canada’s control, but it plays a huge role in inflation. For example, from September 2021 to September 2022, the consumer price of energy in BC increased by 40 percent.

So the cost of running a car goes up, while the cost of transportation (road, train and air) also jumps and this is passed on to the buyers of goods.

When the COVID-19 pandemic hit BC in March 2020, the economy went into a short and sharp recession and suddenly a liter of gas cost 88 cents. When the central banks lowered the cost of money, people started spending a lot more, real estate skyrocketed, and sure enough, the price of gas went up as well – peaking two weeks ago at $2.39 a liter in Vancouver.

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Gas prices are now falling and this may be a sign of a decrease in demand.


Each month the Real Estate Board of Greater Vancouver publishes a market report. According to the September report, sales fell by almost half compared to the same time last year – and 36 percent less than the 10-year September average. The number of apartments for sale also decreased by almost 20 percent compared to the corresponding period in 2021.

Prices are also starting to drop. The average house price (in all categories) fell by 8.5 percent in the last six months.

UBC real estate expert Tsur Somerville said the local real estate board’s monthly reports are a good resource for seeing volume and price changes, but they don’t reflect how long properties have been on the market. He said the BC Real Estate Association’s monthly market reports are also very informative.

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He said his concern about declining gross domestic product in BC would be if it comes from low employment growth.

“The recession is weakening the real estate market,” Somerville said.

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