Canadian Recession?

By Generational Equity


A few weeks ago, we examined the prospects of a recession in the U.S. sometime in mid-to-late 2023. Since the U.S. and Canadian economies are closely intertwined, we wondered if one might be looming north of the border as well. A recent article in the Financial Post, entitled “Posthaste: Canada Is Headed for a Recession, Economists Say” confirmed our suspicions.

Here is what the Financial Post summarized in their piece:

Brace yourself, Canadians. As if soaring inflation, rising interest rates, a pandemic and a war in Ukraine weren't enough, pretty soon we could be adding a recession to our list of troubles.

A majority of economists surveyed by Finder say Canada is headed for a recession, and can expect it to hit anywhere between 2023 and the first part of 2024. Most believe it will happen during the first six months of 2023, and another quarter think it will take a year to manifest.

Many economists told Finder they expect "aggressive" rate hikes in the year ahead. Of those surveyed, a majority believe we will see at least four more interest rate increases this year.

Those rising rates, coupled with inflation, will lead Canada into a downturn starting in the last six months of 2023, Philip Cross, senior fellow at MacDonald Laurier Institute, said.

Technically and historically, a recession has been defined as two consecutive quarters of declining GDP (although there are other definitions out now).  No matter how you define a recession, it hurts! 

Of course, the U.S. and Canadian economies have survived through multiple recessions over the years, so we don’t want to go “doom and gloom, the world as we know it is ending” on you here. As we learned from Deutsche Bank in our insight post on 5.9.22, most economists expect this pending recession to be both short-lived and not very painful. 

Which is good news indeed post-pandemic!

However, what this does imply for business owners in North America is that the optimal window for finding an ideal buyer for your business may be ending in late 2023. That’s the bad news. The really good news is that we are only in May of 2022, with lots of time for both good (and bad) economic/political challenges to arrive!

As we all found out in 2020, there are all kinds of issues we have very little control over as business owners. Entrepreneurs like to think that they are invincible (you really need to believe that in order to even start a business!). But the sad reality is that no matter how good you are at planning, forecasting, budgeting, and praying, stuff, as they say in Bulgaria, happens.

What you do control is your timing of an eventual exit from your business. Trust me, you will eventually exit. You can do it either horizontally (bad) or vertically (good), with cash in the bank and time to spend with family and friends. The question is:

Which will be true of you?

So, we wish our neighbors to the North the best as they navigate the next 2-3 years economically. But what we hope for most of all, is that business owners in North America take the time to create and implement strategic and tactical growth plans well in advance of any exit.

To learn more about how to do that, please attend a Generational Growth and Exit Strategy Conference near you by clicking here. We hold these meetings throughout Canada and the U.S. and odds are good one we will be near you soon. Take advantage of one to learn more about optimal exit planning and timing.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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