Ottawa’s ‘economic optimism’ means it is less likely to face recession, new report suggests


A new report from the Canadian Chamber of Commerce shows that more than 60 per cent of urban centres across Canada are likely facing recession — or “city-cession” — but Ottawa is one of the few major municipalities bucking the trend.

The chamber’s local spending tracker report analyzes consumer spending habits in local “economies of interest” and provides insights for 35 locations, including Ottawa. Nationally, the report showed that Canada started 2023 with a burst of activity in January, but real spending growth per person fell into negative territory in March and April. 

“Consumer spending is negative nationally in 13 out of 21 cities,” said Mahmoud Khairy, an economist at the chamber’s business data lab. “We have 62 per cent of cities across Canada that are actually facing or probably going to face a recession.”

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It’s a trend, he said, that can be attributed largely to inflation and rising interest rates. 

Western Canada has been hit hardest, with all the provinces from Manitoba to British Columbia recording spending growth below the national average. By contrast, Eastern Canadian provinces, including Ontario, remain steady. 

But real spending growth per person is falling in seven of the 10 largest cities in Canada, including Toronto, Vancouver, Edmonton, Calgary, as well as other key local economies, and is particularly struggling in the Kitchener-Cambridge-Waterloo region, where spending may be weighed down by a faltering outlook for tech sector jobs, the chamber suggested.

Of the top 10 cities, only Winnipeg, Hamilton and Ottawa showed positive real spending growth per person.

“The problem is, if the economy is bad, it hits your backyard before it impacts the national economy,” said Khairy. “We see that very clearly.”

Since the pandemic started in 2020, Ottawa’s nominal spending has increased 76.1 per cent, more than double the national increase of 30.8 per cent in the same time frame, the data show. As of April, real spending per person in Ottawa was up 3.1 per cent year-over-year, while national spending was down 1.2 per cent. 

So why is Ottawa performing so well compared to other regions? Khairy attributes it in part to the city’s economic optimism.

“In Ottawa, we know that the level of optimism about the economy across businesses is one of the highest in Canada,” he said. “This optimism has actually driven higher real spending per person in Ottawa.”

Another report from the chamber, the Canadian Survey on Business Conditions, found that, out of major cities, Ottawa was the most optimistic, with 80 per cent of firms surveyed reporting a positive business outlook. Toronto was lowest at only 58 per cent. Overall, businesses expected subdued sales in the near term, the report showed. 

Khairy added, “The large share of public servants across the labour market, it’s higher than the rest of the cities, and this has actually created some kind of optimism that has Ottawa performing better than others across Canada.”

Positive spending, Khairy said, is a good indicator that the impact of a slower economy is fairly low. 

“I don’t say that the economy is booming, but it means the impact of high interest rates and of slower growth is probably not as severe (in Ottawa) as in other cities,” he said. “It also means the local economy is a little more resilient to external shocks.” 

Despite the positive growth, Khairy anticipates a steady decline in spending nationwide in the coming months that will affect all cities, including Ottawa. 

“It’s going to decrease further as a result of higher interest rates,” he said. “We know from experience that higher interest rates take about four to eight quarters to work, so the weak economic growth is going to continue for the next few months.”

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