Demographics surprise economists, central bank

By James Langton | December 20, 2023 | Last updated on December 20, 2023
2 min read

The Bank of Canada’s rate hikes should already have brought inflation to heel, if it wasn’t for a fast-growing population that’s boosting demand and fueling price pressures, particularly in the housing sector.

In a new report, National Bank Financial Inc. (NBF) said that Statistics Canada’s population data releases are usually overlooked by economists, particularly when they come alongside a major data point, such as inflation readings.

Now however, population data is grabbing its fair share of analysts’ attention.

“Demographics are probably the biggest surprise for economists in 2023, as the population has risen dramatically due to strong immigration,” it said — adding that this trend remained intact in the third quarter.

“The country just recorded a second consecutive record by adding 431,000 new residents that brought population growth to a record 1.25 million over the past year,” NBF noted.

“In percentage terms, the annual increase is the highest since 1958 at 3.2%, more than double the pre-pandemic rate when Canada was already leading the G7,” it added.

These numbers also feed directly into the economy, particularly the inflation picture.

Notably, shelter costs are rising at a 5.9% annual rate, it said — as a strong population growth is driving rental prices up — providing an unwelcome support to headline inflation.

“Inflation has fallen in 2023, but the situation would be even more favourable if it were not for the increase in the shelter component,” the report said, “Excluding this component, inflation is already back to the Bank of Canada’s 2% target.”

At the same time, amid strong population growth, GDP per capita contracted by 4.4% in the third quarter, NBF also reported.

“A rate of decline only seen in recessions in this country, and a demonstration of the negative impact of interest rate hikes on the economy,” it said.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.