Economy Resilient Amidst Continued Challenges

Consumers and organizations face continued challenges from rising inflation and interest rates, geopolitical risks, and supply chain distributions to commodity price fluctuations, but the economy continues to show resiliency, says the ‘BMO Blue Book’ by BMO's Economics Department and its Canadian Commercial Banking Business. This resiliency is demonstrated by strong balance sheets, high household savings, inventory re-stocking, and an interest rate environment that remains relatively low. "The Canadian economy is growing at a strong pace, with most industries and segments of the job market fully recovered from the pandemic, and the Bank of Canada now tightening policy," says Doug Porter, chief economist, BMO Financial Group. "Real GDP is likely to expand 3.5 per cent this year, cooling from the 4.6 per cent pace in 2021, but still running well above potential growth. In the meantime, with inflation proving to be persistent and meaningfully above the Bank of Canada's target, look for a further steady stream of interest rate hikes into 2023." The Blue Book says supply chains are still catching up after two years of serious disruption due to the pandemic. As the world emerges from lockdown, demand for virtually everything has surged and the cost to move goods is extremely high.