Population growth slowdown will have minimal impact on stocks: Report

Canada’s population growth is likely to decline in the coming years due to lower immigration rates, but a report by TD Cowen suggests this would have only minimal impact on various sectors of the economy. This downward trend in population growth could potentially be attributed to record numbers of non-permanent residents flowing into the country post-pandemic.

The recent surge in immigrants, particularly non-permanent workers, made up over half of annual population growth following the pandemic, according to data from National Bank. Recent Statistics Canada predictions anticipated Canadian population growth in 2024 being equivalent to what they saw in 2028, based on observations made in 2022, pointing to an accelerated progression.

This demographic development has contributed to widespread issues with housing affordability and resulting policies from the government focused on limiting the inflow of temporary residents. National Bank posits that a “population hangover” will occur over the following 3 years as population growth in Canada eases significantly.

Even given these factors, many companies have heralded the population growth increase to bolster their business success across different industries. However, according to the TD Cowen report, those that have benefited most probably will not experience substantial adverse consequences from the slowing or declining population growth. This determination results from a sensitivity analysis carried out on diverse industries to assess the repercussions of immigration policy shifts along with Canadian population trends, keeping a focus on TD Economics’ calculated projections for Canadian population trends in 2024 to 2027.

Not surprisingly, the telecommunications industry stands amongst those least likely to suffer critical disruptions, although profit margins may witness modifications dependent on varying population growth intensities. For instance, Rogers earnings before interest, taxes, depreciation, and amortization (EBITDA) development in the 2026 business year may be anticipated to expand gradually in the base-case scenario from 3.4% to 3.1%, while in the more pronounced decay situation, it could descend towards 3.1%.

Additional findings from the report revealed steady and robust real estate market standards and perspectives, with potential prospects persisting even when reduced population growth is considered. Real Estate Investment Trusts (REITs) are anticipated to endure continued benefits from powerful market factors, as TD Economics predicts apartment building fundamentals to remain strong, not necessarily relying on population expansion data alone.

Regarding the consumer discretionary sector, notable corporations such as Dollarama and Sleep Country might conceivably experience fluctuated income per share ratios relying on the situation arising from varying degrees in population expansion. In the event population growth eases, Dollarama may see its income share lower by 2% approximately compared to the baseline situation in contrast to a 2 – 2.5% surge over the ideal scenario. For Sleep Country, it could see income increases or decreases between around 3.25%, shifting towards either the more pronounced diminish or expand circumstance based on the population trend conditions. In both cases, TD projects profit growth compared to the initial circumstances, with the baseline outgrowing the 2024 progressions.

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