Lessons of past can help us improve future economy

Canada’s economy made a significant shift last month when the Bank of Canada dropped its interest rate for the first time in four years. Now the Bank’s governor is saying he and his central bank peers are navigating a new world.

“We’ve also learned some lessons from the post-pandemic inflation, and we will take these to heart,” Tiff Macklem told the International Economic Forum of the Americas on June 12. “But the challenges of the future are rarely the same as those of the past. Supply shocks are more likely in the future. New technologies not only have the potential to increase prosperity but also to disrupt. Interest rates may be easing in many economies, but global interest rates are unlikely to return to pre-pandemic levels. The new normal won’t be the old normal. And if we’re not going back, we’ll all need to adjust.”

Macklem said supply-side economics, inflation as a common enemy and public trust in the banking system are the biggest lessons learned from the past four years.

The Bank’s next interest rate announcement is set for July 24.

Canadian business optimism improving, survey finds

The Business Expectations Index has moved into positive territory for the first time in a year. The index rose 2.7 points in the second quarter of 2024 from the first quarter, led by an improved outlook for sales.

Some of the key findings include:

  • Businesses expect employment to grow as labour market conditions continue to find a balance between supply and demand.
  • Eleven of 16 sectors are improving with finance and insurance leading the pack, followed by construction.
  • However, agriculture, information and culture, and transportation are contracting.
  • Firms with 1 to 4 employees say they are are stabilizing, though medium- and large-sized firms (100 or more employees) continue to be much more optimistic.
  • Among underrepresented groups, visible minorities are the most optimistic, while LGBTQ2+ and women business owners are more pessimistic.