Perception is not everything.
"I know the perception is that the economy is really slow and we are in recession," Business Development Bank of Canada chief economist Pierre Cleroux told a Kelowna Chamber of Commerce breakfast crowd Thursday.
"But we are not in recession and aren't going into recession. Growth is slow, for sure, and will continue flat until the end of 2024 and into 2025 when we get back to a low-inflation-low-interest-rate economy."
To put this snail-pace progress into numbers, the Cleroux said BC's economic growth is expected to be 0.7% this year and is forecasted to be even more sluggish at 0.4% next year.
It's not until 2025, when interest rates have come down and inflation is in check at 2%, that economic growth will pick up to a more-normal 2.6%.
The economist predicted the Bank of Canada will keep interest rates high for now in an effort to wrangle inflation down to the 2% target.
But, the central bank isn't expected to raise rates any more because Canadians are already squeezed financially.
Interest rates are expected to start coming down in mid-2024, setting the scene for a spurt in the economy in late-2024 and into 2025 as inflation settles around 2%.
"Actually, the outlook is a lot more positive than we thought we were going to hear today," said Kelowna chamber past-president Pamela Pearson when she thanked Cleroux after his presentation.
Meantime, Cleroux said Canadians are tightening their belts in order to pay bigger mortgages because of higher interest rates.
"If you have a job, and most do because the unemployment rate is historically low, then you are able to absorb higher mortgage payments," explained the economist.
"But, it's not easy. In order to do it you have to cut spending in other areas like retail, restaurants and vacations."
The housing market is a prime example of how the economy is bad and not-so-bad at the same time.
During the pandemic when the real estate market boomed as people moved around to score their dream home, prices shot up 40%.
Since that frenzy, home buying activity has fallen off sharply, but prices are only down 8% from their peak in BC.
"That shows the housing market in BC is resilient. In Toronto, prices dropped 20%," pointed out Cleroux.
"The housing sector will recover and prices will start to go up again when interest rates and inflation start to come down next year."
The economist also said the housing market will grow because all three levels of government are pushing for more housing inventory and more affordability and the 3% annual population growth in BC means more people need more housing of all types.
Two of the biggest challenges facing BC are labour shortage and productivity lags.
Baby boomers are retiring in droves and there's now enough young workers to replace them.
Immigration helps, but the rate of immigration can't keep up, either.
"The labour shortage is limiting growth for many businesses," said Cleroux.
When the economy is slow -- as it is now -- salary increases are usually hard to come by for workers.
However, with the labour shortage, wages are actually climbing rather briskly.
Another way to offset the labour shortage and increase productivity is for businesses of all sizes to invest in technology and automation.
"Software and automation can't replace people completely, but they can do many tasks," said Cleroux.
"If you aren't as efficient as you could be, you're leaving money on the table."
