Economic Backdrop and Financial Performance Objectives
2024 Economic Outlook
Projected Economic Indicators for 2024(1)
GDP Growth
Inflation
Unemployment
Rate
Interest Rate
(3 mth T-bills)
Current Account
Balance/GDP (2)
Budget
Surplus/GDP (3)
Canada
0.7%
2.4%
6.5%
3.85%
(1.0)%
(0.6)%
U.S.
1.8%
2.6%
4.2%
3.98%
(3.0)%
(7.4)%
Euro Area
0.2%
2.4%
7.5%
N.A.
1.2%
(2.7)%
Canada
U.S.
Canadian headline inflation increased to 3.4% in December (from 3.1% in November) on rising energy inflation, but the
scope of inflation pressures continues to narrow, suggesting on balance that price pressures were still gradually easing.
We expect the BoC to start gradually lowering the policy rate by middle of calendar year 2024, contingent on further slowing
in inflation and a weakening economic backdrop.
GDP is expected to tick up 0.5% and 0.3% in Q4 of 2023 and Q1 of 2024, respectively, following a negative growth of 1.1%
in the third quarter of 2023. But that implies further declines on a per-capita basis with population still growing rapidly.
The U.S. unemployment rate held steady at 3.7% in January, unchanged since November last year. Inflation remains above
the Federal Reserve's 2% objective but is expected to slow further as lower job openings bring labour markets into better
balance. We continue to expect higher interest rates will slow labour demand, pushing unemployment rate moderately
higher this year.
We anticipate growth in the U.S. economy will slow into the first half of 2024, and gradually bounce back during the second
half. We expect the Federal Reserve to pivot to interest rate cuts by the middle of calendar year 2024, contingent on
inflation pressures continuing to subside.
Euro Area
GDP in the Euro area is expected to grow but at a slow pace in calendar 2024 with higher interest rates adding to growth
headwinds from inflation and disruptions from the war in Ukraine. We expect GDP to increase 0.2% in calendar 2024. The
European Central Bank left the deposit rate unchanged at 4% at its January meeting and we expect the ECB to pivot to
interest rate cuts by the middle of calendar year 2024.
(1) RBC Economics as of February 13, 2024 and reflects forecasts for calendar 2024. (2) RBC Economics Research, IMF WEO (October 2023). (3) IMF Fiscal Monitor (October 2023).
42 | ECONOMIC BACKDROP
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