News organizations in the U.S. have been obsessing as of late on whether the country will slip into a period of recession – the technical definition of which is two consecutive quarters of negative GDP growth. Q1 saw a 1.6% drop (that’s one) and the Q2 results are expected to be released by the end of the month once the Bureau of Economic Advisors completes their assessment. No matter what the news is, experts in the U.S. remain divided on whether a recessionary period is upon us.
As it turns out, things in Canada aren’t much different. Here are some updates to provide you with the latest outlook from some of the country’s industry experts.
Trouble Ahead?
Much like America, Canada too, has experienced the economic pain associated with high levels of inflation. And much like the U.S. Federal Reserve, the Bank of Canada has issued a series of interest rate hikes to counter this problem. Over the past five months, the rate has climbed from .25% in March, to 2.5% in July. But, as some experts point out, the runaway inflation rate isn’t just a Canadian problem, it’s a global one. We have the war in Ukraine, supply chain disruptions, and the nagging rounds of Covid variants to blame. All told, the Royal Bank of Canada predicts a rate of 3.25% by October.
Bright Spots
According to the Conference Board of Canada, higher commodity prices have bolstered the economy, assisting many of the country’s primary producers with higher profit margins. And the interest hikes may have had the unintended consequences of cooling down a red-hot housing market, bringing prices back into a realistic range. This issue has been described as a “correction” and a recent report from the Royal Bank of Canada is predicting home prices could fall as much as 12% through early 2023.
Resilient Optimism
A recent Harris Poll survey, commissioned by Express Employment Professionals, queried Canadian business executives on their thoughts about a looming recession. A little less than half (48%) see a recession as inevitable, however, almost two-thirds (62%) are confident that it won’t be severe or long-lasting. In fact, most believe it will be akin to an economic slowdown rather than a sustained event with severe consequences.
In light of these conflicting opinions, most economic experts agree that it appears as if the country has adopted a “wait and see” approach. In any environment with increased interest rate hikes, credit and lending may tighten up for entrepreneurs looking to fund a franchise opportunity. However, companies that downsize their workforces may also be responsible for an increasing interest in entrepreneurship – especially if history is any judge. Regardless of where the chips may fall, Canada still has the second-largest global franchise industry. There are approximately 76,000 franchise establishments in Canada, with as many as 4,000 entering the marketplace each year. Only time will tell if this vibrant sector of the economy will rise or fall.
We’re now halfway through the 2022 year, and if you’re ready to begin your entrepreneurial journey, FranNet of Canada can help you get started. With consultants serving every Canadian province, you can set up a no-cost, no-obligation appointment with one of our qualified representatives. To find your local province consultant, simply follow this link and select “Canada” on the FranNet Franchise Consultant Directory page of our website. Getting started is easy – reach out and talk with one of our franchise experts today!