Today's robust reading on Canada's economy boosts expectations of more rate hikes to come this year - Canadanewsmedia
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Today's robust reading on Canada's economy boosts expectations of more rate hikes to come this year

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Canada’s economy is proving increasingly robust in the second quarter, with inflation and retail sales coming in ahead of economists’ expectations.

The consumer price index recorded an annual pace of 2.5 per cent in June, the fastest year-over-year acceleration since 2012, Statistics Canada said Friday from Ottawa. Economists in a Bloomberg survey anticipated a 2.3 per cent increase. In a separate report, the agency said the nation’s retailers recorded a 2 per cent increase in sales in May, double the median forecast from economists.

The reports, a reverse of last month’s disappointing sales and inflation data, will bolster expectations for continued interest rate increases this year from the Bank of Canada. The retail sales report in particular, which indicates consumer spending is ticking along, will be taken as a positive signal for the underlying strength of the country’s economy.

Earlier Friday, investors had been pricing in about a 50 per cent chance of a quarter-point rate increase at the central bank’s October meeting.

The inflation numbers will be less of a surprise, given the Bank of Canada had indicated it expects CPI to spike before falling back later this year. The annual increase reflects higher gasoline prices and food purchased from restaurants, the agency said. On the month, consumer prices rose 0.1 per cent in June, versus an expectation for a flat reading.

Core measures of inflation — seen by officials as a better gauge of underlying inflation trends — ticked up slightly to an average of 1.97 per cent, from 1.93 per cent in May.

The retail sales numbers largely reflected an increase in receipts at vehicle dealerships and gas stations, but even excluding autos, the numbers came in well ahead of what economists were expecting. Sales excluding car dealers were up 1.4 per cent, versus economist expectations for a 0.5 per cent gain.

The strength was volume related, with sales up 2 per cent once price changes were factored out.

Other CPI Highlights

The average of the Bank of Canada’s three key core inflation measures rose to 1.97 per cent in June from 1.93 per cent in May.
The “common” and “median” core rates were unchanged at 1.9 per cent and 2 per cent, while the “trim” rate rose to 2 per cent from 1.9 per cent
Inflation for services in June was 2.2 per cent. Goods inflation was 2.7 per cent
Energy prices climbed 12.4 per cent in June, and gasoline, 25 per cent higher, was the biggest upward contributor during the month

Other Retail Highlights

Sales climbed in 8 of 11 subsectors tracked by Statistics Canada Ontario (up 2.6 per cent) and Quebec (up 3 per cent) saw the biggest gains in retail sales in May

With assistance from Kevin Varley

Bloomberg.com

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IMF warns storms clouds gathering for global economy – The Globe and Mail

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One of the International Monetary Fund’s top officials warned on Tuesday that storm clouds were gathering over the global economy and that governments and central banks might not be well- equipped to cope.

The fund had been urging governments to “fix the roof” during a sunny last two years for the world economy, IMF First Deputy Managing Director David Lipton said.

“But like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete,” he said at a banking conference hosted by Bloomberg.

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He also warned that strains could leave policymakers under pressure and in uncharted waters.

“Central banks would likely end up exploring ever-more unconventional measures. But with their effectiveness uncertain, we ought to be concerned about the potency of monetary policy.”

Many governments won’t have much room for manoeuvre, either, having already racked up high debts.

“We should not expect governments to end up with the ample space to respond to a downturn that they had 10 years ago,” Lipton said. Stimulus may also be a hard sell politically, considering the financial burden it creates, he said.

The biggest immediate risk, though, is the current trade war between the United States and China. If all of the threatened tariffs are put in place, as much as three-quarters of a percent of global GDP would be lost by 2020, the IMF has estimated.

“That would be a self-inflicted wound. So it is vital that this ceasefire (recently announced between Washington and Beijing) leads to a durable agreement that avoids an intensification or spread of tensions.”

If it doesn’t and a stalemate sets in, there could be a damaging “fragmentation” of the global economy that causes a downturn, he said.

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Goodyear halts tire production in Venezuela as economy slips – Prince George Citizen

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VALENCIA, Venezuela — Goodyear Tire & Rubber Co. is halting production in Venezuela, making it the latest international corporation to abandon a South American nation in economic crisis, officials said Monday.

Spokesman Eduardo Arguelles told The Associated Press that Goodyear-Venezuela had made the “difficult decision” to no longer produce tires in the country, which has seen an economic contraction worse than the U.S. Great Depression.

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“Our goal had been to maintain its operations, but economic conditions and U.S. sanctions have made this impossible,” Arguelles said.

The company had endured tens of millions in losses in recent years as the Venezuelan bolivar plummeted in value against the U.S. dollar. The company based in Akron, Ohio, moved to deconsolidate its Venezuelan subsidiary in the fourth quarter of 2015, but continued to operate with a staff of about 1,100 from the depressed industrial city of Valencia.

Workers who arrived at the plant Monday were stunned to find it was no longer in operation.

“They closed doors without saying anything,” said Luis Aponte, a union worker who said government workers were on site assessing the situation.

There was no immediate response from the government.

The announcement came after a letter issued “to whom it may concern” circulated online stating the company had been forced to cease operations and that starting Monday no one in Venezuela would be authorized to continue producing the company’s products.

The letter also said Goodyear would fulfil its financial obligations to workers.

Goodyear’s retreat from Venezuela adds it to a growing list of corporations that have ceased operations in the country. Some of those enterprises, like General Motors, had assets including factories and vehicles seized by the government. Others chose to cut their losses because shortages, inflation and currency and prices controls made business difficult.

Kellogg, Bridgestone, Kimberly-Clark and General Mills have all closed or reduced operations in recent years.

Julian Rodriguez, 62, said he spent over three decades working for Goodyear and was unsure how he’d make ends meet after losing his only source of income.

“This is a grave situation,” he said.

The International Monetary Fund has estimated that inflation in Venezuela could top 1 million per cent by the year’s end.

President Nicolas Maduro activated an economic recovery plan in August that including increasing the minimum wage and printing a new currency, among other measures, but thus far the economy has shown few signs of improvement.

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Premier Ford Meets with Mayors to Grow the Economy and Deliver Better Services – Government of Ontario News

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Ontario’s Government for the People Renews Commitment to Municipal Partnerships

TORONTO — Premier Doug Ford met with Ontario mayors at Queen’s Park today to discuss their shared priorities, such as improving transportation infrastructure, increasing the supply of housing to bring down costs and making sure that municipalities are open for business.

“Ontario has some fantastic mayors, and we have some great working relationships. Today, we strengthened those relationships,” said Ford. “We’re going to work together to get things done. We’re going to build transit and infrastructure. We’re going to make sure everyone can afford a place to call home. And we’re going to show the world that Ontario is open for business.”

In a series of meetings throughout the day, Premier Ford met with Guelph Mayor Cam Guthrie; Kawartha Lakes Mayor Andy Letham; London Mayor Ed Holder; Mississauga Mayor Bonnie Crombie; Oro-Medonte Mayor Harry Hughes; Ottawa Mayor Jim Watson; and Windsor Mayor Drew Dilkens.

During one-on-one meetings with each mayor, Premier Ford discussed upcoming plans for the private retail sale of cannabis and restated his commitment to public health, public safety and protecting Ontario’s youth. He also discussed ways to deliver better services to the people of this province and get more money back in the taxpayer’s pocket.

All leaders committed to meeting regularly to make progress on the issues that matter most to people across Ontario’s municipalities.

“When it comes to Ontarians’ day-to-day lives, municipalities make the most direct impact,” said Ford. “Today, I had some great conversations with Ontario mayors about how to tackle the issues that people face every day. We’re committed to working for the people and respecting the taxpayer.”

For high-resolution photos from the meetings, click here.

Quick Facts

  • There are 444 municipal governments in Ontario.
  • Ontario’s Government for the People recently signed a joint memorandum of understanding (MOU) with the Association of Municipalities of Ontario (AMO) committing to regular consultation on provincial legislation or regulations that have a significant impact on municipalities.

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