Trends and outlook

Changing Demographics

In 2022, Canada witnessed record population growth, reaching an estimated 39.6 million by end of year, fueled largely by international migration. Looking ahead, the population is expected to increase by more than 2.5 million by 2036. Canada is by far leading the G7 countries for population growth, as has been the case for many years. As major urban centres absorb the bulk of that growth, the United Nations, through its World Urbanization Prospect, projects that urbanization in Canada will reach 88% in 2050, up from 83% today, increasing demand for urban travel and the risks of congestion. Higher urban congestion could also raise demand for public transit. According to the TomTom 2021 Traffic Index, which ranks urban congestion worldwide across 404 cities worldwide, Vancouver ranks as the most congested city in Canada, followed by Montreal and Toronto with extra overall travel time between 24% and 33%.

The growing population of Canadian seniors will also affect the nature of passenger transportation in the future by increasing the need for more flexible and accessible transportation. In 2036, Statistics Canada expects the population aged 65 and over to reach 24% of the population, up from 18.5% in 2022.

The demographic outlook highlighted above will also impact the human resource availability of transportation activities and operations. As the population ages and an increased portion of today's workers retire, there will be a smaller supply of skilled professionals to take their place.

Green Transportation

In 2022, the Government of Canada continued to take action to advance zero-emission vehicle (ZEV) adoption across the country and committed to implementing ZEV regulations in both the light-duty vehicle sector and the medium- and heavy-duty vehicle sector. These regulations will set annually increasing requirements towards achieving 100% light-duty vehicle ZEV sales by 2035 and medium- and heavy-duty ZEV sales by 2040 where feasible. The light-duty regulations include interim targets of at least 20% by 2026 and at least 60% by 2030, while interim targets for the medium- and heavy-duty regulations will be explored for different vehicle segments based on feasibility.

Technological Advance

Canada needs to position itself for a future characterized by emerging and disruptive technologies and new approaches. Connectivity and automation will have far-reaching impacts on the transportation sector, and the economy. Adapting to the exponential growth in the rate of change of technological advancement and applying the benefits of these advancements to improve the efficiency and safety of the transportation sector is key in maintaining a world class transportation network.

Significant advances in information, communication, and other technologies have taken place over the past two decades. These technologies have brought major change to nearly every sector of the economy, including transportation.

New technologies are being used for transportation infrastructure, equipment, and supply chain management to make them smarter and more efficient. Changes like ride sharing and “last-mile” delivery services have changed both how and where transportation occurs and will continue to disrupt transportation.

This trend shows no sign of slowing down, and in fact, is likely to speed up as the public and private sector adjust to new ways of working. Changes in technology and innovation will impact both demand and supply of transportation. Major upcoming disruptions include:

• recent technology (cloud logistics, internet of things),
• emerging technology (artificial intelligence, advanced analytics, blockchain), and
• advanced technology (automated vehicles, robotics).

These innovations could improve corridor flows, reduce costs, help with collaboration, reduce safety and environmental impacts, change the origin and destination of shipments, and the nature of transportation services.

Additionally, digitalization is playing a key role in Transport Canada's technological advance, highlighted in the Government of Canada's announcement to launch a new digital infrastructure initiative to strengthen Canada's Supply Chains. This initiative, which would form a key part of Canada's National Supply Chain Strategy, would improve the efficiency and resiliency of Canada's supply chain by:

• Making it easier to plan and coordinate transportation activities to alleviate bottlenecks, reduce congestion and be more resilient to disruptions by collecting and sharing data and analytics in real time;
• Supporting industry-driven approaches to digital solutions, especially in the areas of data collection, coordination, and improving the visibility of the transportation network for carriers, shippers and governments;
• Supporting evidence-based decision-making to further optimize existing networks and better plan infrastructure investments.

Air Passenger Recovery

Recovery in air transportation activity in Canada has been strong in 2022, with traffic to some of the regions fully recovered, but uncertainties remain influenced mainly by economic and transportation specific considerations. In 2022, traffic recovery for the domestic sector was 83% of 2019 levels, with December 2022 at 89%, while international traffic was 68% of 2019 levels, with December 2022 also at 89%. Recovery by the last quarter of the year was below that of the United States and above Australia and the European Union plus United Kingdom. Average airfares have been consistently above pre-pandemic levels in 2022.

A return to full pre-pandemic levels is expected by mid-2024. Both positive and negative risks remain in terms of pent-up demand with strong leisure travel rebound, higher use of communication technology leading to weaker business travel, potential economic growth slowdown, and increased fares.

Freight Recovery

The freight sector continued to grow in 2022 due to post-pandemic pent-up consumer demand, some supply-chain improvements, the war in Ukraine, and increased harvests.

Shipments of domestic manufactured goods, especially automotive, realized growth as consumer demand increased and microchip supply shortages were alleviated. The Russia-Ukraine conflict affected many industries, especially natural resources, which experienced both disruption and opportunities. This was especially notable with increased coal and potash volumes in response to a global supply short-fall due to sanctions against Russia and Belarus. Grain exerted the greatest demand pressure, due to an improved harvest in addition to increased demand from the war in Ukraine.

In the first half of 2022, post pandemic pent-up demand for consumer goods and producers seeking greater buffer stocks to manage risk resulted in a shortage of warehouse capacity. Lack of warehouse capacity had a limiting effect on imports of containerized goods and domestic shipment of manufactured products. Also mitigating the upside demand forces, the freight sector experienced challenges owing to persistent supply-chain issues and monetary policy tightening. In the second half of 2022, consumption and imports of containerized goods slowed as monetary tightening weighed on debt sensitive households and as governments reduced COVID stimulus.

Over the coming year, demand for freight transportation is still expected to be challenged by economic headwinds resulting from global monetary policy tightening. In the long run, freight transportation is expected to return to growth. Long-term growth will be characterized by demographic shifts and global economic prospects. Climate change and mitigation efforts will likely alter the types of goods being transported.