Deloitte released economic outlook for Canada

[00:00:00] Speaker 1: welcome back as you saw earlier in the newscast New Brunswick is forecasting a deficit for the fiscal year to the tune of 105 million dollars Deloitte Canada has released its economic outlook the fall outlook for the country it gauges the fiscal health of the country and the regions included of course Atlanta Canada Don Desjardins chief economist at Deloitte Canada and our guest this evening nice to see you nice to see you okay right off the top I I love this I'm going to get you to explain this the title it's complicated the conditions required for Canada's economic [00:00:38] Don Desjardins: comeback why is it complicated well it's complicated because we're living in an extraordinary period with respect to uncertainty and with governments I guess outside of Canada that are having a material impact on our outlook and how we navigate and work our way through this period is not straightforward so in [00:01:03] Speaker 1: other words it's complicated so do you build that into your forecasting I mean here you have an American president who just today announced 100 tariffs on the film industry we had kitchen cabinets last week pharma last week who knows what it could be next week what we've done is we are maintaining an assumption [00:01:22] Don Desjardins: that any goods that Canada sells our exports to the United States as long as they are compliant with the Canada US Mexico free trade agreement that they will continue to go across that border relatively tariff free now we know that certain industries are being impacted by different types of tariffs and those the other countries remain in place and so we have to add that to the mix again part of this complicated story add that to the mix as well but when we've calculated it what we've discovered is that on average the effective terror rate for Canada is a little below three percent so compared to other countries it's not that bad but again that's a pretty big assumption we're making with this projection [00:02:16] Speaker 1: there's been much speculation in fact many have said it's almost certain that Canada is going to go into recession [00:02:22] Don Desjardins: you think we could avoid it may not happen yeah we do now and I mean we had a recession call um three months ago uh since that time I think we've seen a few things that suggest to us that we may avoid recession now we're not calling for strong growth by any means but we do think we might avoid another contraction and there's quite a few factors involved in that one is that we are seeing interest rates move down again the Bank of Canada cut the policy rate in September we think they probably will do so again uh in October so getting that rate to two and a quarter percent so just a little bit more support uh for Canadian households who may be refinancing their mortgages uh for example or for Canadian businesses who are are looking to borrow again we have those carve outs and that to us keeps Canada's export market it's not going to be soaring by any stretch but it will hopefully recover some of that enormous loss that we suffered in the second quarter additionally what we're hearing from governments and as you said earlier New Brunswick reporting a deficit governments are very much trying to put in place programs that will be supportive of the economy ranging from the reduction and interprovincial trade barriers which our analysis suggests over time so again not immediately but over time could be a big lift uh to GDP as well as what we're hearing from the federal government which we won't know for sure or the details until November's the fourth budget but nonetheless talk about infrastructure spending so these are the factors we think that that we're going to do is we have to tilt the scales towards avoiding recession less concerned about those [00:04:16] Speaker ?: deficits um [00:04:16] Don Desjardins: well yeah I mean you know we look at it in a global context uh even though our deficits are are growing uh our biggest trading partner has an extremely big deficit that that is continuing to grow so you know yes we have to be mindful we don't want to go back to any mid-90s type of situation where we were really having to pay up to a to attract capital uh to finance our deficits and I think you know all of the ground we've made over the past uh few decades puts us in a better spot but having said that yes of course we'll have to be mindful of how just how big these deficits get and when the return on all of these investments start to flow in I know that you've you've looked at each region in the country so let's look at Atlantic Canada in terms of growth there's a little bit of good news and bad depending on what province you're in yes for sure and so when we're looking at on a provincial basis where we are seeing some pressure is in in Brunswick actually that we're looking at that we're looking at it's a little bit of good news and bad depending on what province you're in [00:04:58] Speaker 1: yes for sure and so when we're looking at on a provincial basis where we are seeing some pressure is in in Brunswick actually there's a little bit of good news and bad depending on what province you're in [00:05:09] Don Desjardins: yes for sure and so when we're looking at on a provincial basis where we are seeing some pressure is in in Brunswick actually you know we have lumber tariffs there that are being impacting that economy they send a lot of their exports to the US when we look at Nova Scotia though you know we seeing lots of public sector stimulus that is going to be we think supportive for the economy so when we look at 2026 for example Nova Scotia coming in at about 2% PEI 19 Newfoundland 2 and then again when we look at New Brunswick it's going to be stronger than 2025 we have at 1.6% but still of the four provinces a little bit on the slower [00:05:57] Speaker ?: side [00:05:57] Speaker 1: all right before I let you go if I'm sitting at home and I'm worried about my own budget and I'm looking at the price of groceries and power bills whatnot but I'm hearing what sounds like rather encouraging news from you how do how do I how do I reconcile that [00:06:12] Don Desjardins: well I mean I think what we're seeing now is there are pressures on inflation but when we look overall um the inflation rate running about 2% now the thing about the economy is even though we are projecting the inflation rate growth in 2026 that is firmer than this year we still have a lot of spare capacity in the system and to our minds that means that we will see price pressures ease now when I say that to be completely clear it means they'll grow more slowly it doesn't mean we're going to see big declines in prices but more on average price gains will be limited to that about 2% rate [00:06:54] Speaker 1: don Deloitte or Don Desjardins of Deloitte thank you very much for that it's a it's an interesting the fall outlook interesting people can find it at your website and we appreciate you explaining that to us tonight thank you we'll take a break much more of your show on the other side