In a recent web conference with Desjardins Group’s chief economist, Jimmy Jean talks about the impact rising interest rates are having on consumer’s behaviour, on housing and on markets. He discussed wage growth, the risk of recession, grocery price inflation and even China was included in the wide-ranging economic forecast presented by the cooperative financial group.
“Obviously we had the sense that 2023 was going to be an eventful year,” Jean told those gathered for the online presentation. “We haven’t been disappointed.”
In China, he says that economy’s reopening will have ramifications for global demand in commodities. Central banks are also signaling that they may soon pause rate hikes, but he notes that it takes between six and eight quarters for the full effect of rate hikes to be felt. “The very first rate hike of this cycle is not even one year old,” he says.
The epicenter of the interest rate shock, he says, is the housing market. Although falling sales and prices are more limited than they were in 2022, he says his group is not expecting a rebound until at least 2024, with the normalization of interest rates. He also warns about the likely coming increase in consumer insolvencies, which could in turn cause lenders to increase their standards, exacerbating things further. “It’s very early in the cycle to be witnessing those effects, but it is still a threat out there,” he says.
Finally, he also warns that investors are very bullish on the earnings outlook for companies. “That’s very inconsistent with the recession,” he adds. He also encourages investors to stay defensive, particularly in the first part of the year. “You have a lot of challenges this year, lots of risks.”
