Tamara Tkachuk

From Scotiabank All Canadian provinces are poised for better growth in 2025, despite anticipating stronger policy headwinds in late 2025 and 2026 from both domestic and international fronts. Consumption is expected to accelerate over the next few quarters, driven by the Bank of Canadas rate cuts, which will alleviate household financial pressures, further supported by excess savings and fiscal stimulus. Residential investment is set to surge, fueled by lower financing costs and robust demand in an under-supplied market, driving economic expansion as we enter the new year. The rebound in interest rate-sensitive sectors, while beneficial for all provinces, is particularly promising for Ontario and British Columbia (B.C.), which have experienced notable contractions in housing activities. Policy uncertainty from the new U.S. administration poses a significant risk. Despite the lack of clarity on the path ahead, we have made some attempt to incorporate potential policy changes in our current forecast. Household spending is set to accelerate in 2025, driven by the Bank of Canadas rate cuts, elevated savings, and fiscal stimulus. Consumption held up solidly over the course of this year and has shown signs of picking up in the third quarter, surpassing expectations. Posting strong headline gains in the second half of this year, retail sales data highlights exceptional strength in the Atlantic provinces, although B.C. and Ontario experienced some soft patches. Despite the continued drag from ongoing mortgage resets, households should be able to manage higher mortgage payments by adapting saving and spending habits. As interest rates decline, this impact will also ease, paving the way for increased consumption. We anticipate a broad-based surge in household spending, fueled by stimulus cheques from Ontario and eventually B.C., as well as the federal government, GST/HST cuts, and mortgage rule changes as we move into 2025. This combination of factors sets the stage for a rebound in growth, with consumer confidence and spending power on the rise. Strong labour market conditions support consumption growth. After a period of cooling since the latter half of last year, employment growth stabilized and remained steady throughout 2024. However, employment gains have consistently lagged behind the rapid expansion of the labour force, driving up unemployment rates nationwide. This cooling trend is particularly evident in Quebec and Ontario, where employment growth slowed sharply, though recent signs of stabilization and recovery have begun to emerge. In Alberta, job gains have shown signs of weakening despite rapid population growth, following strong outperformance up until early this year. The Atlantic provinces have bucked the trend, with robust job gains outpacing strong labour force growth, indicating remarkable economic momentum. We anticipate that the worst of the unemployment rate deterioration is behind us and expect unemployment rates to stabilize around levels just above the non-accelerating inflation rate of unemployment (NAIRU) over the next few quarters. https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.the-provinces.scotiabank-s-provincial-outlook--december-17--2024-.html

Canadians increasingly aware of FHSA features and benefits. Homebuyers divided over how mortgage rate changes will affect their ability to buy a home in the next two years. 23% of parents are expected to use the FHSA to help their children save for a home. BMOs 15th annual Investment Survey reveals more than half (56%) of potential first-time homebuyers are planning to use the First Home Savings Account (FHSA) to help purchase their first home, up from 52% from 2023. The annual survey also finds the understanding of FHSAs is increasing and that parents are finding the FHSA an effective way to help their adult children save for a home. Mind The Knowledge Gap The FHSA knowledge gap is narrowing, with two fifths (40%) of Canadians indicating they have at least some knowledge of the account, up from 31% from last year. Nearly half (48%) of Gen Z are knowledgeable about the FHSAs features and benefits the highest among any age group. A (Tax-Free) Gift That Keeps on Giving The BMO Investment Survey also explores how families across generations may be using the FHSA as a financial gift for their children. Nearly a quarter (23%) of parents will likely use the FHSA to help their adult children save for their first home. Younger parents are also more likely to use the FHSA to help their adult children save for a home, according to the surveys findings: Millennial Parents: 42% Gen Z Parents: 21% Boomer Parents: 7% It is encouraging to see that over half of prospective buyers plan to use the First Home Savings Account to save, and we want to see that number grow because the FHSA is such a powerful tool. Benefits including the ability to make tax-deducible contributions, tax-free growth of the investments and the ability to hold various investment types make this plan the most advantageous way to save for a home. It is like an RRSP and TFSA rolled into one for first-time homebuyers, said Nicole Ow, Vice President and Head, Retail Investments, BMO. For most, buying their first home will be part of a multi-year plan, involving several savings vehicles like the FHSA, RRSP withdrawals through the Home Buyers Plan, and may also involve multiple generations, with parents and grandparents contributing financially. https://newsroom.bmo.com/2024-12-18-BMO-Investment-Survey-Over-Half-of-First-Time-Homebuyers-Plan-to-Use-First-Home-Savings-Account-FHSA-to-Buy-a-Home