Recession on the horizon

Recession on the horizon


Quebec is in serious danger of falling into recession shortly.  

This is what the recent sharp drop in the Desjardins Leading Index (DPI) suggests. 

It should be noted that this composite index “makes it possible to grasp, in the Quebec economy, the changes in trends likely to herald the arrival of a slowdown, a recession or a recovery approximately six months later. ahead,” according to Desjardins' Economic Studies Department. 

At the turn of 2023

Desjardins senior economist Hélène Bégin believes that the fifth straight decline of the IPD, last July, with a decrease of 2.5%, sends a clear signal.  

“The IPD is now in a critical zone that usually precedes a period of recession,” she said. In the past, when the DPI suffered a monthly decline of more than 2%, after a downward trend that started a few months earlier, a period of contraction in economic activity was quick to set in. » 

Based on the deterioration of the Desjardins Leading Index during the period from September 2007 to the spring of 2008, Ms. Bégin believes that the recession in Quebec could begin at the turn of 2023. 

Obviously, it is too early to assess the extent of the contraction in Quebec's domestic product (GDP) if a recession takes effect next year. 

Written in the sky

Certainly, it was written in the sky that the major impact of the rise in interest rates would have the major impact of seriously slowing the growth of consumer spending. &nbsp ;

Not only have consumers been hit by the rising cost of living, but it is now costing them significantly more to borrow. Many households have literally become impoverished since the start of the year. 

Added to this is a possible marked drop in the residential real estate market, of the order of 15 to 20% in 2023, and a slowdown in the new construction and renovation industry.

Faced with a big increase in borrowing costs and a significant increase in wages, corporate profitability will suffer. And of course, the shortage of labor is in itself an obstacle for companies in full development and growth.  

Due to the economic slowdown and the possible entry into recession in other Canadian provinces, in the United States, in Europe, etc., exports of Quebec products are also at risk of going through an economic twist.  

Bonbons d'avant recession

As promised during the election campaign by François Legault, millions of Quebec households will share one-time assistance of $3.5 billion ($3.5 billion) next December.  

The government caquiste will pay out a “cheque” for $600 to Quebecers earning less than $50,000 and a “cheque” for $400 to those whose income varies from $50,000 to $100,000.  

< p>And one million seniors aged 70 and over will benefit from an increase in the amount of assistance for the least fortunate seniors, from $411 to $2,000. This enhancement represents an annual cost of $1.6 billion.  

  • Listen to Michel Girard on the show of Philippe-Vincent Foisy, every day at 7 a.m. 30, live or on podcast, at QUB radio:

Weakened financial framework

As we know, François Legault has sown electoral gifts for a net worth of around $26 billion. 

In addition to having burned the $13.7 billion budget surplus (before transferring money to the Generations Fund) that was projected in the pre-election report of his Minister of Finance for the fiscal years from the current to that of 2026 -2027, the CAQ leader will drag the government into the $11 billion hole.  

And this, after having:  

  • Cut economic risk provisions by $1 billion for each of the years 2025-2026 and 2026-2027; 
  • Cut $4 billion in government programs;&nbsp ; 
  • Increased government revenue by $3.3 billion by revising Québec's economic growth upwards during the three fiscal years from 2024-2025 to 2026-2027. 

According to the magnitude of the recession or economic slowdown that will grip us, the forecasts of François Legault's Electoral Financial Framework risk becoming obsolete despite its annual provisions for the risk of recession. 

The Caquists' Financial Framework is based on a growth rate of our nominal GDP of 3.8% in 2023; 3.6% in 2024; and 3.5% in 2025. 

Each downward variation of 1 percentage point in nominal GDP will reduce the Québec government's tax revenues by $1.1 billion over one year.&nbsp ;

For each of the years 2023-2024 and 2024-2025, the provisions for recession risks of the “new” CAQ government are $2 billion, and for 2025-2026 and 2026-2027, they are $1 billion. 

The recession in horizon