A low inflation rate in Manitoba is a sign the province’s gas tax holiday is working, the premier is boasting, but the low rate may also demonstrate the economy he presides over is slumping.
Premier Wab Kinew hosted a news conference Tuesday to celebrate Manitoba’s annual inflation rate dropping to 0.8 per cent in January, which is the lowest growth in a country struggling mightily with the rising cost of living.
Statistics Canada acknowledges in its report that Manitoba’s decision to remove the provincial gas tax temporarily, beginning in January, has contributed to its low inflation rate.
Kinew treated the report as validation of his government’s decision.
“Governments can’t do everything, and we recognize that, but governments can do some things. And I’m very proud that in the first few months of our administration taking office, we have done one thing to make your life more affordable,” Kinew said.
“Of course, the fight and the ongoing impacts of inflation are by no means over, but today the good news is we are taking action to help you and your family.”
Gas-tax cut helps tank inflation
Starting on Jan. 1, Manitoba drivers stopped paying the provincial 14 cent-a-litre tax on gasoline and diesel fuel. The suspension will last for at least six months, with the option to extend it for the duration of the year.
While Manitoba’s inflation rate was already the country’s lowest (1.7 per cent last December) prior to the gas tax holiday, Statistics Canada said in a statement the lower price of gas was the “largest contributor” to Manitoba’s inflationary decline and had “roughly twice the impact” of the other categories the agency measures to assess inflation.
Other factors include the price of groceries increasing at a slower rate year-over-year, and a lower cost for air transportation, Statistics Canada said.
“We expected to be able to lower the inflation rate in Manitoba by cutting the provincial fuel tax, and now we have the concrete evidence to back that up,” Kinew told reporters.
On a nationwide level, Canada’s annual inflation rate slowed to 2.9 per cent in January, mostly due to a deceleration in the price of gas.
Manitoba’s 14 cent-a-litre reduction on gas prices ultimately had an impact on the national inflationary average.
Shiu-Yik Au, an assistant professor of finance at the University of Manitoba’s Asper School of Business, said the price of gas has an outsized role on the inflation rate because energy costs impact many other factors, ranging from grocery prices to business expenses.
Still, a slowing inflation rate could be a sign that Manitoba’s economy is slumping, Au said. He noted the Bank of Canada prefers interest rate growth in the range of one to three per cent.
“We’re starting to drift toward the too few, too little” category, Au said.
Shiu-Yik Au, an assistant professor of accounting and finance at the Asper School of Business, says he’s wary of the province reporting an inflation growth rate in January that falls below one per cent. (Submitted by Shiu-Yik Au)
He said Kinew is right to talk up the provincial economy to bolster consumer confidence, since people tend to spend less when they feel the economy is sagging.
“If they cut back spending, it’s going to slow down economic growth, which is going to lead to slightly lower inflation,” Au said, while indicating one month doesn’t signify a trend on its own.
Deloitte Canada, however, recently pegged Manitoba’s economic growth in 2024 at a “relatively subdued” 0.4 per cent. The firm anticipates a “rough ride” for the manufacturing sector and expects households to “pull back” on spending, although the construction of various projects will offset some of those losses.
Asked about the various economic forecasts projecting some headwinds for the province, Kinew said his government always wants to “see more growth” before again pointing to the low inflation rate as a good sign for the provincial economy.
PCs worry about other taxes
In a statement, Obby Khan, the Progressive Conservatives’ finance critic, said the NDP government is “distracting” Manitoba with short-term tax relief while also letting school divisions raise school taxes without penalizing them and continuing to charge the federal carbon tax — slated to increase in April — on home heating bills.
Kinew wouldn’t reveal on Tuesday if his government would extend the fuel-tax cut into the second half of 2024.
While he’s encouraged by the lower inflation rate, the premier said interest rates remain high and are affecting people’s ability to pay their mortgages and other debts.
Kinew said his government would help Manitobans so long as those impacts are felt, but he wouldn’t specify how.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
