To close out the year, we’ve asked our contributors and staff to make a prediction about 2023. You would think, after last year, that we’d have learned our lesson about making predictions, but we couldn’t resist. Feel free to save these if you want to embarrass us with them later.
Yes, we’re making the inflation prediction again
By Trevor Tombe
It is said that the definition of insanity is doing the same thing over and over again and expecting different results.
Well, for my 2023 prediction, I’m going to do just that.
Last year, I predicted that “by late 2022, Canada’s inflation rate will ease back into a normal range of between 1 to 3 percent.” Obviously, I missed the mark by a very wide margin. By late 2022, inflation was close to 7 percent—more than triple Canada’s target.
Despite this miss, I predict that by the end of 2023 inflation will fall close to normal.
How can I say this after being so wrong last year? There are several reasons.
First, energy prices have fallen. Oil prices in mid-December were roughly $75 per barrel, down from well over $110 per barrel in the summer. This matters. Roughly speaking, each $10 per barrel change leads to a 0.3 to 0.4 percentage point change in Canada’s inflation rate.
Second, many goods are sensitive to energy prices. Lower energy prices will lower production costs and therefore prices throughout the economy. The World Bank, for example, expects agricultural and fertilizer prices to fall in 2023.
Third, supply chain bottlenecks have eased. A lot. Global freight rates were by November down roughly 80 percent from their Fall 2021 peak. This lowers shipping costs, product prices, and should also help address many critical shortages.
Fourth, monetary policy has tightened significantly. The Bank of Canada’s target rate was 4.25 percent in December, up sharply from 0.25 percent last year. This increase will lower consumer spending, easing demand and therefore prices. This also lowers home prices, as we’re seeing in many markets.
Finally, and most encouragingly, inflation pressures have already eased. Two core measures of inflation, for example, have averaged less than 3.5 percent since August. If this encouraging trend continues, the headline inflation rate will gradually begin to fall.
How confident am I in this prediction? I’d bet $20 on it. But probably no more.
Economists in general (and myself in particular) are exceptionally bad at predicting future economic developments. This is especially so today. Whether you agree with my outlook or not, hopefully the reasons behind my prediction will help make sense of whatever 2023 has in store.
Crime will rise in 2023
By Karen Restoule
Canadians continue to face challenges due to poor economic, health, and social conditions caused in part by government policy response to the COVID-19 pandemic and in part by significant increases in cost of living. This has, in turn, increased pressure on Canadian families to meet the expenses of everyday life. Those living in low socioeconomic circumstances have especially been put to the test and are increasingly turning to high-risk means to make ends meet. And with the impending recession, financial pressures will mount giving way to a rise in crime throughout 2023.
Throughout 2022, media continued to report on the steady increase in shoplifting in grocery stores across Canada. While lower-end crime like in-store theft doesn’t always get reported to police, retailers across Canada confirmed they are struggling with a spike in retail crime and they’ve confirmed that shoplifting tends to rise during economic downturns.
While the final 2022 statistics won’t be officially reported until late 2023, media reports throughout the past year have also been telling of a slight upward trend in violent crimes like break-ins, armed robberies, and violent crimes. This would align with crime data trends released by Statistics Canada in November 2022 showing the national crime rate increasing through 2021 with more than two million police-reported criminal incidents. This is 25,500 more incidents than were reported in 2020. Crimes of a violent nature increased by 5 percent in 2021, with homicide rates up by 3 percent from 2020 and marking the highest rate of homicides in Canada since 2005.
While violent crime remains relatively low in Canada, especially in comparison to our friends south of the border, its harmful impacts on society should not be ignored. A citizen determines their sense of safety based on the incidence of crime and violent crime in their community.
Canadians deserve to live in a country that prioritizes prosperity, safety, and well-being. It’s up to government to lead and create the circumstances for that. In the absence of thoughtful and serious interventions on fiscal and monetary policies, labour and employment, mental health and addictions, and public safety and justice, crime rates are likely to continue on an upward trend throughout the next year.
