OTTAWA —
The economy will go in reverse for the first quarter of 2021, the Bank of Canada said Wednesday as it kept its key interest rate on hold, warning the hardest-hit workers will be hammered again on a path to a recovery that rests on the rollout of vaccines.
Workers in high-contact service industries will carry the burden of a new round of lockdowns, which the central bank warned will exacerbate the pandemic’s uneven effects on the labour market.
The longer restrictions remain in place, the more difficult it may be for these workers to find new jobs since the majority move to a new job but in the same industry.
Bank of Canada Governor Tiff Macklem said in his opening remarks at a late-morning news conference that the first-quarter decline could be worse than expected if restrictions are tightened or extended.
The central bank kept its key rate on hold at 0.25 per cent on Wednesday, citing near-term weakness and the “protracted nature of the recovery” in its reasoning.
The short-term pain is expected to give way to a brighter outlook for the medium-term with vaccines rolling out sooner than the central bank expected.
Still, the bank said in its updated economic outlook, a full recovery from COVID-19 will take some time. Nor does the Bank of Canada see inflation returning to its two per cent target until 2023, one year longer than previously forecast, and the bank’s key rate is likely to stay low until then.
Overall, there is reason to be more optimistic about the economy in the medium-term, but it will still need extraordinary help from governments and the central bank to get there, Macklem said.
The bank’s latest monetary policy report, which lays out its expectations for economic growth and inflation, forecast that COVID-19 caused the economy to contract by 5.5 per cent last year.
Despite an upswing over the summer and fall that may have spared the country from a worst-case economic scenario, the drive to a recovery will hit a pothole over the first three months of 2021.
The bank forecasts real gross domestic product to contract at an annual pace of 2.5 per cent in the first quarter of 2021, before improving thereafter if severe restrictions start easing in February.
The bank expects growth of four per cent overall for 2021, then 4.8 per cent next year, and 2.5 per cent in 2023.
Trevin Stratton, chief economist at the Canadian Chamber of Commerce, was more dour on lockdowns, saying the group doesn’t expect them to ease until well into March.
“During this period, we need to provide the right kind of support to individual Canadians and to businesses to get them through the lockdowns, recognizing that neither group is in the same financial position as it was in March 2020,” he said in a statement.
For the central bank, that help could come through ramping up its bond-buying to force down interest rates, or a small cut to its key policy rate among options Macklem mentioned Wednesday.
Keeping the door open to such a “micro” rate change is a shift in tone, as Macklem has previously said the current 0.25 rate is as low as it would go.
The bank said the path for the economy will be like riding a roller-coaster as resurgence in COVID-19, or new, more virulent strains, weigh down a recovery in one quarter before leading to strong upswing in the next.
Inflation may be equally rocky.
Gasoline prices, which have weighed down the consumer price index during the pandemic, will by March be “well above their lows of a year earlier,” the bank’s report said. That should significantly bump inflation, the report said, possibly to two per cent in the second quarter.
The bump will even out over the rest of the year. The bank forecasts inflation for 2021 at 1.6 per cent, then 1.7 per cent in 2022 and 2.1 per cent in 2023.
Statistics Canada reported Wednesday the annual pace of inflation cooled in December to 0.7 per cent compared with 1.0 per cent in November.
The agency also reported that the average last month of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 1.57 per cent.
The central bank’s lookahead rests on efforts to vaccinate Canadians by the end of the year without any hiccups in that timeline, which would mean broad immunity six months sooner than the bank previously assumed.
“It’s going to be very important that Canada get the vaccines, we get them distributed to Canadians and that Canadians take the vaccine,” Macklem said.
A shorter timeline for vaccinations should mean less scarring overall for the economy in the form of fewer bankruptcies and fewer workers out of jobs for long stretches, which makes it more difficult for them to get back into the labour force.
This report by The Canadian Press was first published Jan. 20, 2021.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
