More rate hikes by the Bank of Canada could “spell trouble” for a growing number of Canadians facing financial headwinds, Angus Reid Institute said in an economic outlook released June 6.
Economy
More Bank of Canada rate hikes could ‘spell trouble’ as more people struggle with finances
Canadians are under financial stress and don’t feel good about direction of economy, polls say
Households more likely to have children under 18 appeared to be at greater risk of experiencing economic stress, the poll suggested, with 37 per cent of those in the 35-44 age group and 38 per cent of those in the 45-54 age group in the struggling category.
“Those who find themselves in dire straits financially are not optimistic about the year to come,” the pollster said in the report, which surveyed 2,808 Canadians from May 30 to June 2.
In the struggling category, 68 per cent said they expect to be financially worse off next year. The cost of living is their biggest concern.
Statistics Canada said the consumer price index in April accelerated 4.4 per cent from the year before. That, coupled with stronger-than-expected economic growth in the first quarter, has more economists calling for an interest rate hike when the Bank of Canada announces its latest rate decision on June 7.
The rising number of people experiencing financial stress lines up with another survey release on June 6 that found Canadians’ view of where the economy is heading darkened once again after briefly showing some signs of improving, based on the April edition of the Maru Household Outlook Index (MHOI).
A growing majority of people in May said they think the economy is headed in the wrong direction, with 64 per cent feeling that way compared to 61 per cent, Maru Public Opinion said. The last time people felt positive about the economy was in November 2021, when 54 per cent said they felt good about where things were headed.
More people said they held a negative view of the economy’s prospects over the next 60 days, with 62 per cent indicating they didn’t think things would improve, up three percentage points from the prior reading.
Maru compiles its household index each month by asking a panel of about 1,500 people a series of questions about the economy’s prospects over the next 60 days.
“What’s driving the MHOI this month are mostly derived from positive views on long savings and the ability to purchase household necessities — outpullling negative sentiments on the state of the economy — which is still decidedly negative for upwards of two thirds of consumer-citizens — and investing, while spending and all other categories assessed are virtually stagnant,” Maru said in a press release.
Almost half the survey’s respondents said they will put money aside for retirement, up five percentage points from 44 per cent in April, and 86 per cent said they will be able to buy necessities for their families over the next two months, up from 82 per cent last month. Also, 64 per cent said they have two months of savings set aside for an emergency expense, up one percentage point from April.
The resilience of the Canadian consumer has continued to surprise markets.
Last week, Statistics Canada said that first-quarter gross domestic product (GDP) increased 3.1 per cent, outpacing Bay Street and Bank of Canada forecasts of 2.5 per cent and 2.3 per cent, respectively.
Economists attributed most of the strong results to continued consumer spending. But credit history company Equifax Inc. last week said Canadians were dipping into their savings to cover higher monthly payments as they continued to ramp up debt to a record $2.3 trillion.
“While the MHOI caught some good vibes on savings this month, they’re now half as much as last year’s fourth quarter’s 5.8 per cent,” said Maru, referring to the household savings rate, which Statistics Canada said fell to 2.9 per cent in the first quarter.
Maru runs a parallel survey of consumers in the United States, and every measure it tracks fell in May, “which means something more chilling may be settling in before the heat of summer arrives,” the company said.
Economy
B.C.’s debt and deficit forecast to rise as the provincial election nears
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
The Canadian Press. All rights reserved.
Economy
Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
Economy
Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa
HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.
Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.
The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.
Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”
Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.
Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
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