Podcast Summary
Government spending driving economic growth: Recent economic growth was largely due to government spending, specifically on retroactive wages, which may limit private sector's contribution to economic momentum going forward. Additionally, Canadians are spending less.
While the recent GDP growth rate of 2.1% may seem impressive, it's essential to look beyond the headline numbers. A significant portion of this growth was driven by government spending, specifically on retroactive wages. This means that the private sector's contribution to economic momentum going into the third quarter may be limited. Additionally, there are indications that Canadians are spending less. While discussing the economy, Patty Lovett Reed, chief financial commentator for Home Equity Bank and former chief finance correspondent at CTV, highlighted these points during her appearance on the Andrew Carter Morning Show on CJAD 800. This Tuesday, known as "telephone Tuesday," saw an increase in call volume as people got back to work after the weekend. The show also touched upon the upcoming rate announcement by the Bank of Canada.
Canadian Consumer Saving Trends: Canadian consumers are saving 7.2% of disposable income, potentially due to economic uncertainty, and the Bank of Canada is expected to make further interest rate cuts, bringing the rate down to 3.75% by year-end.
Canadian consumers are currently holding onto their cash instead of spending it, with 7.2% of disposable income being saved. The reasons for this could be due to economic uncertainty, such as potential recession fears or pent-up demand. Regardless, the trend is clear. The Bank of Canada is expected to make further interest rate cuts, with 0.25% already factored in for tomorrow and another 0.25% likely in October and possibly December. This would bring the interest rate down to 3.75% by the end of the year. However, there are always unpredictable factors that could influence the economy, so it's essential to stay informed and adapt accordingly.