A multi-family development under construction in Vancouver on May 13.DARRYL DYCK/The Globe and Mail
The Canadian economy posted robust growth in the second quarter, but there are mounting signs of a slowdown as consumers grapple with sky-high inflation and rising interest rates.
Real gross domestic product stalled in May, which was better than the initial estimate of a 0.2-per-cent drop, Statistics Canada said in a report on Friday. The economy eked out growth of 0.1 per cent in June, according to a preliminary estimate. Thanks to stronger growth in April, Canada’s economy is on track to expand by 1.1 per cent in the second quarter, or an annualized rate of 4.6 per cent.
For financial analysts on Bay Street, the report was a mixed bag. Economic growth in the April-to-June period was stronger than the Bank of Canada’s forecast of 4 per cent. It was also markedly better than in the United States, which has posted two consecutive quarters of declining GDP, sparking a hearty debate over whether the country is mired in a recession.
On the other hand, recent months have seen sluggish growth in Canada. Consumer and business confidence is tumbling. The real estate industry has turned cold. And some high-profile companies in the tech sector – such as Shopify Inc. – are announcing layoffs.
Stephen Brown, senior economist at Capital Economics, said he was surprised by the tepid estimate for June growth, given that hours worked that month jumped by 1.3 per cent. Moreover, he noted that Canada’s economic recovery from COVID-19 has lagged behind the U.S. pace, and therefore Canada’s better fortunes of late are not as impressive as they seem.
“The fact that we’re already seeing a slowdown is a bit concerning,” Mr. Brown said. “We’ve been fairly bearish on the outlook for Canada, just because of the housing sector, but it does seem that we’re getting broader weakness elsewhere than was maybe anticipated.”
Despite the shift, the Bank of Canada is widely expected to continue hiking interest rates as it looks to tamp down inflation that is running near a four-decade high. The bank has raised its policy rate to 2.5 per cent from a pandemic low of 0.25 per cent in less than five months.
“The Bank of Canada is still expected to deliver a further, non-standard, rate hike at its next meeting” in September, said Andrew Grantham, a senior economist at CIBC Capital Markets, in a note to clients. “However, we expect that the impact on disposable incomes of high inflation and rising interest rates will start to show up more widely in economic data for the second half of the year, allowing the Bank of Canada to pause with rates just above 3 per cent.”
Friday’s report showed a split between the goods and services sides of the economy, the latter of which is getting a boost from consumers embracing the travel and entertainment industries.
The transportation and warehousing sector rose 1.9 per cent in May. Despite well-publicized headaches at major airports, economic output in air transportation jumped 14.1 per cent.
The hospitality sector also rose 1.9 per cent, its fourth consecutive month of expansion. Restaurant sales grew quickly this spring, in spite of sticker shock on menus.
The goods side was undoubtedly weaker. Real GDP fell 1.7 per cent in manufacturing, the first decline in eight months. Statscan said auto production was hampered by the lingering semiconductor shortage, in addition to refurbishments of some assembly plants.
Output fell 1.6 per cent in construction, the industry’s second consecutive monthly drop. Statscan noted that many of Ontario’s unionized construction workers were on strike in May, leading to delays for various projects. Residential-building construction dropped in May, but activity was 11 per cent higher than at the outset of the pandemic.
“We’re seeing a downturn in renovations and improvements, which is linked to the housing market,” Mr. Brown said. “Obviously, to the extent fewer investors are flipping homes, that means they’re going to be putting less money into improving them.”
Mr. Brown also pointed to preconstruction home sales in Toronto, which have fallen sharply. “That suggests we’ll see a downturn in housing starts over the second half of the year, just because so many developers rely on those preconstruction sales to get the initial funding.”
The outlook for Canada’s economy is murky. Recession fears are rising, although very few economists are projecting a sustained downturn. The Bank of Canada forecasts growth will slow to an annualized rate of 2 per cent in the third quarter. It also expects the economy to grow 1.8 per cent in 2023 – a hefty downgrade from 3.2 per cent in a previous forecast.
“On balance, we look for growth to cool notably in the second half to below a 1-per-cent annualized clip, a marked slowdown, albeit firmer than U.S. trends,” Bank of Montreal chief economist Doug Porter wrote in a research note.
The country, he added, “can’t fully avoid the pull of a slowing U.S. economy and the Bank of Canada’s aggressive rate hike campaign.”
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TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
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