Impacts of Housing and Commodities on Provinces in Anticipated Recession

The economic fallout of an impending recession may vary across provinces, and experts suggest that their vulnerability to housing and commodity market shifts will be the differentiating factor. According to Marc Desormeaux, principal economist at Desjardins Group, provinces more intertwined with the housing market, such as Ontario and British Columbia, may experience heightened challenges due to the downturn in the real estate sector caused by rising interest rates.

Housing Market Vulnerabilities

With real estate comprising a significant portion of gross domestic product, specifically around 20% in British Columbia and 13% in Ontario, these provinces are expected to face economic contractions. Desormeaux predicts a 0.1% contraction for both provinces in 2024, fueled by a decline in home sales and waning real estate activities.

Commodity Markets as Economic Shields

On the flip side, Alberta, Saskatchewan, and Newfoundland and Labrador may have a softer landing, thanks to their stronger ties to the commodity sector, including oil, potash, and uranium production. With forecasted growth rates ranging from 0.7% to 1.7%, these provinces might not only withstand the recessionary pressures but potentially see economic expansion.

Amidst various economic concerns such as falling housing starts, reduced household consumption, and a declining savings rate, Desormeaux expresses particular concern for British Columbia, where high levels of household debt and a struggling labor market may amplify the adverse effects of rising interest rates.

However, there is a silver lining, as rate cuts expected later in the year could enable economic recovery. This respite may align with a strengthening global appetite for commodities, which could bolster the economies of the commodity-rich provinces.

Despite some regions performing better than others, a nationwide economic slowdown is anticipated. Yet with projected rate cuts on the horizon, provinces hit hard by the housing downturn might see a rebound, softening the overall impact of the recession.

recession, housing, commodities