2022 Economic Outlook: What’s new with Joëlle Noreau, Desjardins Senior Economist.
What does 2022 hold economically for us? Forecasts are always a bit dangerous in many ways, including natural disasters and military friction. – You can change the course of the event.
However, it is possible to establish some parameters by studying long-term trends. This was done in mid-January in an interview with Joëlle Noreau, senior economist at Desjardins Group.
Inflation and interest rates
At the time of the interview, inflation was close to 5%, and generally speaking, in these situations, central banks tend to raise interest rates to prevent the economy from overheating. Financial institutions usually follow these rate hikes.
“As we’re talking, we’re expecting three quarter-point rises in interest rates in 2022,” she said of a decision planned by the Bank of Canada, Noro said. rice field.
She talks about the slow, gradual increase, with the first increase seen at the beginning of the second quarter of 2022.
However, a surge in inflation could change the situation.
“The mechanism for raising interest rates is, among other things, to calm inflation and slow down the economy somewhat. Data in the coming months could accelerate or delay this increase, but so far this year 3 The number of times is expected to increase, “said the economist.
Inflation is also an increase in the cost of raw materials and inputs. “In the industrial and heavy industries, this impact is still not negligible,” Noro emphasizes.
His colleague Mark Antoine Dumont, who is also a Dejardin economist, is particularly interested in metal prices, which appear to be on the decline after a very strong growth in 2021. Good news or bad news? It depends on whether you buy metal for your production or if you are a miner selling ore.
“The market is very volatile because we are in a very limited supply situation. But overall, we expect supply to be readjusted and demand at the same time. Is to be quietly relaxed, “says Dumont.
Inflation will also hurt manufacturing and heavy industry employees and put upward pressure on wages. According to Noreau, entrepreneurs need to be tightly controlled, especially as these increases cannot always be passed on to customers.
“Maybe there are some things that need to be reorganized, such as production and customer relationships, but it’s clear that the position is delicate and requires tact from industrial managers,” she said.
Oil and Canadian dollars
Oil prices affect industry. The industry uses it not only for heating, but also for transporting goods in and out.
According to Dejardan experts, the price of a barrel of oil has peaked. “It’s clear that it won’t be $ 50 a barrel, but most of the increase has already been monetized,” she said.
She recalls that the market for WTI in 2021 was about $ 68, so at the time of the interview 2022 started at a fairly high level of $ 77 to $ 78. But this should be stable, instead she predicts about US $ 73 WTI oil in 2022 thanks to increased supply.
Since Canada is an oil-producing country, its currency usually follows the price of black gold. What should manufacturers buy and sell in the US expect?
Noreau first pointed out that 2021 ended at about 77.5 cents in Canadian dollars. “Towards the end of 2022, we’ll be approaching 80 cents,” she said. US Federal Government, it could make our Canadian dollar more attractive to investors-only for a while-.Nevertheless, it keeps the Canadian dollar forecast of about 80 US cents
“This is as expected, and as we’ve seen for two years, we’re operating with old tools, but we can be contaminated with many dangers of operating in really new situations,” said the economist. increase.
Growth and investment in automation
Since 2021, when Quebec’s economy has grown (about 6.5%) higher than many analysts expected, Noreau believes it will continue to grow, albeit less busy than last year.
“Especially in Quebec, we’ve reached pre-pandemic GDP levels between March 2021 and February 2020, which is a catch-up effect,” she recalls.
This expected slight slowdown is not enough to make up for Quebec’s general labor shortage. Noreau predicts that it will take 10 years for trained young people and newcomers to the country to be fully productive.
But if interest rates are set to rise, is it really time to invest in robotization and / or automation of industrial and manufacturing activities?
“I don’t recommend it, but I know one thing: the problem of labor shortages doesn’t help in the short term,” said a Dejardan specialist. I will explain. Disadvantages of such an investment.
“Calculations should be done according to” Can you afford to wait? ” », Estimate Mr. Noro.
Due to the prevalence of uncertainty, people saved a lot during the first wave of the pandemic. Will they loosen the purse in 2022, thereby making the factory more functional?
“People are still accumulating totals. Now the savings rate is higher than before the pandemic,” the guest said at the beginning.
“At least for Quebec, what we feel is that we still have a fair level of spending, but it’s not that strong in terms of merchandise as people went looking for a lot to live in their homes. . Whether it’s a renovation or a leisure item. »»
“I think growth feels a bit faster for services that have been open / closed / open / closed over the past year,” says Noro about sectors such as catering and accommodation.
Still, humans are sometimes unpredictable creatures. “It’s unclear how many people will get burned during a pandemic and want to maintain a larger cushion than before the pandemic occurred,” she says.
For industries that rely on construction and real estate activities, Dejardan’s senior economists are projected to decline in 2022. Requirements. And now, housing costs mean fewer people are rushing to buy a property, new or used, “he said, and this decline could be beneficial in several ways. He added that there is.
“Maybe that will allow us to find a more livable production rhythm, as it was still so intense. Certainly, some companies have been forced to decline or postpone their contracts.” She says.
Another big unknown in 2022 is whether the global supply chain will stabilize after months of turmoil, such as ships mooring at sea due to lack of personnel and equipment to receive goods at the port. am. Noro is pretty optimistic about this.
“At the reception level, we’ve officially identified the issue, which has greatly improved,” she says, citing the example of the Port of Los Angeles, which has been coordinated to work 24 hours a day, 7 days a week.
Trucking has also adapted to the new situation, she says. “We are in the process of reducing these bottlenecks. »»
“We are not completely immune to disturbances, except that methods of resolving disturbances are beginning to become more sophisticated. We have learned,” the economist summarizes.
Noro believes that we must expect the fact that people continue to talk and adapt to each other. “No one will benefit from having the big problems we had in the past,” she says. Economy, or part of the economy. »»
“Ultimately, we’ll get out of Omicron,” concludes the guest. Guests foresee the gradual lifting of health restrictions that may contribute to a new economic breath.
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