The Bank of Canada is expected to preach patience at its interest rate announcement this week as economists say weakening economic conditions are setting the stage for rate cuts in the coming months.
The central bank is widely expected to continue holding its key interest rate at five per cent on Wednesday, as many forecasters anticipate the first rate cut to come in around June.
But the Bank of Canada will have the opportunity to weigh in on the latest gross domestic product figures and how those affect the path for interest rates.
Economists say the slowdown in the Canadian economy is broadly in line with what the central bank was expecting — and hoping for.
“At the margin, things are looking a little bit weaker than what the Bank of Canada might have envisaged,” said Royce Mendes, managing director and head of macro strategy at Desjardins.
“Domestic spending was lower in the fourth quarter than it was in the third quarter. And that’s particularly concerning, given the fact that the population grew so dramatically during that period.”
The Canadian economy grew at an annualized rate of one per cent in the fourth quarter, which exceeded economists’ expectations and the Bank of Canada’s most recent forecast.
But the headline figure appears to be masking how weak the Canadian economy actually is.
Economic growth during the last three months of the year was driven by global factors, including strong U.S. spending trends which boosted Canadian exports.
Meanwhile, on a per-capita basis, real GDP continued to fall in the fourth quarter.
“This is probably the weakest one-per-cent growth I think any of us have lived through,” said Douglas Porter, BMO’s chief economist.
The Bank of Canada’s aggressive rate hikes are largely responsible for the economic slowdown. Consumers have reeled back spending as many of them face higher borrowing costs on their mortgages and other debt.
Companies are also feeling the pinch, as evidenced by falling business investment.
Perhaps the one outlier in the economic data has been the labour market. According Statistics Canada’s labour force survey, the unemployment rate ticked down to 5.7 per cent in January, hovering around pre-pandemic levels, while annual wage growth remained above five per cent.
However, Mendes says he’s grown skeptical of the labour force survey. He points out that payroll data from Statistics Canada suggests labour market conditions are weakening more meaningfully.
“I think the Bank of Canada is looking at all of these data in totality, and will come to the conclusion that if anything, the labour market has weakened since the time of the January monetary policy report,” he said.
The softening of the Canadian economy, along with improving supply chains, has paved the way to slower price growth.
Canada’s annual inflation rate tumbled to 2.9 per cent in January, back down in the Bank of Canada’s one to three per cent target range.
But the central bank has been clear that it won’t wave the victory flag until inflation is on a sustainable path back to two per cent.
That means inflation would have to continue steadily declining and core measures of inflation — which strip out volatile price movements — would need to follow suit.
Mendes says he’ll be watching closely to see what the central bank says about core measures of inflation, looking for a signal on where it will take its key interest rate.
The Bank of Canada has often pointed out that its two core measures of inflation are well above its target, suggesting price growth is still stubbornly high.
But Mendes’ research suggests those measures are flawed because they strip out too many components, making it harder to gauge where inflation is headed.
“At the least I expect the Bank of Canada to take a more holistic view of the inflation indicators and to acknowledge the progress that we are seeing in taming underlying inflationary pressures. If they don’t, I would take that as a very, very hawkish signal,” he said.
VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
