Weekend listen: Economists struggling to forecast in uncertain times
Mar 9, 2025
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Avery Shenfeld, Chief Economist at CIBC, shares his insights on the volatile economic landscape shaped by unpredictable trade policies. He discusses the challenges economists face forecasting in today's market, emphasizing how fluctuating tariffs impact Canadian exports and labor. The conversation highlights concerns about the automotive supply chain and the limitations of rapid manufacturing changes. Shenfeld also addresses inflation dynamics and the cautious role of the Bank of Canada amid these economic uncertainties.
The ongoing uncertainty from fluctuating trade tariffs has led economists to struggle with providing reliable economic forecasts, impacting businesses and consumers alike.
Recent employment statistics indicate that despite seasonal hiring influences, the anticipation of tariffs has spurred exporters to respond proactively amidst ongoing economic uncertainties.
Deep dives
Impact of Trade Tariffs on Economic Forecasts
The current fluctuation of trade tariffs has made it increasingly challenging for economists to provide reliable forecasts about the economy. With President Trump's unpredictable decisions regarding tariffs, businesses and consumers remain in a state of uncertainty, which complicates the ability to assess economic stability. A critical factor in this situation is the lack of clarity about how long tariffs will remain in place and the magnitude of their impact on the economy. The evolving nature of these tariffs has forced economists to continually adjust their expectations, which has contributed to a cautious business environment.
Signs of Economic Caution in Employment Trends
Recent employment statistics suggest that businesses may be exhibiting a sense of caution due to trade uncertainties. Although the job creation numbers for February were lackluster, they were influenced more by seasonal factors rather than indicating a longer-term trend. In fact, the anticipation of tariff implementation has prompted a rush among exporters to push goods out before potential penalties, highlighting an active response to trade fears. Despite a temporary slowdown in hiring, a three-month average still reflects consistent job growth, suggesting that uncertainty has yet to fully dampen economic activities.
Inflation and Monetary Policy Adjustments
The ongoing trade war has raised concerns about inflationary pressures within the economy, particularly in the U.S. There is a potential risk that prolonged tariffs may lead to price increases that could affect consumers, thus compromising their purchasing power. As a result, central banks are contemplating interest rate cuts to stimulate the economy, creating a balancing act between controlling inflation and fostering growth. Although immediate fiscal responses may take time to implement, proactive measures from central banks are anticipated to mitigate the impacts of these economic disruptions.
It's been another week of uncertainty for the financial markets. With back and forth announcements on tariffs happening this week, it's been next to impossible to gauge what will happen next.
Host Mike Eppel is trying to make sense of it with Avery Shenfeld, Chief Economist at C-I-B-C.
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