FCC predicts another year of weak growth

Farm Credit Canada’s (FCC’s) economic team presents the top economic charts to monitor in 2024 to help make sense of the economic environment.

FCC’s economists expect a second consecutive year of weak growth as the impacts of earlier interest rate increases are felt more acutely throughout the Canadian economy in 2024. They estimate consumption spending, which accounts for nearly 60 per cent of GDP, will see a marked deceleration as households struggle under the weight of record high debt servicing, elevated shelter costs and a more challenging labour market.

“The economic slowdown will reinforce the downtrend in inflation, causing long bond yields, and ultimately longer-term rates on fixed rate loans, to drop further in 2024. In contrast, short yields should be anchored by the Bank of Canada’s decision to keep its overnight rate unchanged for another few months. But once the central bank is convinced the inflation downtrend is sustainable, which we’re expecting to happen around mid-year, look for it to start cutting its overnight rate to boost a flagging economy,” said the report.

The report also touched upon hog production. The USDA is expecting Canadian pork production to decline a further -1.2 per cent in 2024 as the world faces a current oversupply of pork. According to FCC, Canadian producers are going to face tight margins until at least the summer although there has been increased demand for pork domestically as consumers are shifting consumption patterns to lower priced protein options.

With input costs stabilizing, dairy margins in 2024 are expected to improve. However, feed availability and pricing, “which have been extremely volatile in the last three years, will be the ultimate determinant of profitability.”

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