Let’s start with economic growth, which rebounded in the first quarter of 2023 to 3.1%. Consumption growth, in particular, was very strong at 5.8%, with household spending on both goods and services sharply higher. This surprised us. We had expected growth in demand for services to start to ease off, but Canadians continue to catch up on travel, entertainment and restaurant spending.
Interconnectedness – be that through direct exposures or indirectly via common or correlated asset holdings – is a natural feature of an integrated financial system. But during times of financial stress, interconnectedness transmits and potentially amplifies shocks, and can lead to contagion. Full visibility is of the essence here.