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ANALYSIS: A looming coronavirus debt crisis could swamp Canadian households – Global News

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The coronavirus pandemic that began as a public health crisis then metastasized into an economic crisis is likely to finish as a debt crisis that could end up swamping not only some governments but also hundreds of thousands — if not millions — of Canadian households.

The growing accumulation of debt at the household level combined with reduced incomes to service that debt — two phenomena characteristic of this pandemic — also threatens to slow the recovery.


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And dealing with a future debt crisis is going to present some new challenges to policy-makers, who will have to account for one of the unique aspects of this recession: it disproportionately affects women.

“What is absolutely clear is that women have been hit harder than men in this recession. And that’s the first time ever in history because in most recessions, usually, men take it on the chin first,” said Armine Yalnizyan, an economist and Atkinson fellow on the future of workers who has, among other things, acted as an adviser to federal government departments.

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Even before the pandemic, Canadian households had been taking on more and more debt. Fuelled by a long period of low interest rates, Canadians eschewed savings in favour of more spending — spending sometimes done with cash on hand but, increasingly, spending facilitated through lines of credit, credit cards or other borrowing.


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The national household savings rate has been steadily drifting downward in the last decade so that, just as the pandemic hit, Canadians were saving only about $3.60 for every $100 earned.

Meanwhile, the relative size of Canadian household debt has been ballooning over the last 20 years. In 1999, Canadian households had $106 of debt for every $100 of disposable income. Twenty years later, in the quarter before the pandemic, Canadian households owed $176 for every $100 of disposable income — a debt-to-income ratio of 176 per cent.

“And you’re probably going to see it at something like 230 per cent,” said Craig Alexander, chief economist at Deloitte Touche. “And the reason is that the denominator — income — will have fallen because of the employment shock that we’re having during the pandemic and the lockdown.

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“Before the pandemic, Canada’s No. 1 economic risk was the amount of leverage that households had taken on the enormous amount of debt that had accumulated during an exceptionally low interest rate environment for an extended period of time.”

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Canada’s big banks can see the writing on the wall. Lower incomes caused by job losses or reduced hours means it will be more difficult for Canadians to service current debt levels. As they reported their financial statements for the first quarter of 2020, banks increased their loan loss provisions by $11 billion. That’s not to say that banks expect they will one day be forced to write off all of that, but they certainly will have to write off a portion.

And yet, as of right now, income replacement programs like the Canada Emergency Response Benefit (CERB) are, so far at least, keeping the debt wolf at the door.

“Government supports and payment deferrals for some of these debts are giving Canadians, to a certain degree, a false sense of security, which is actually allowing them to put off dealing with the debts, even though those debts may be just as bad, if not worse, when the situation ends,” said Keith Emery, CEO of the non-profit credit counselling firm Credit Canada.

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But government supports are unlikely to last forever. The CERB is set to expire at the end of July, for example. And bank programs to allow mortgage holders to defer some payments only buy a few months of relief.

“The mortgage payments are going to start again,” said Alexander. “And then we’re going to find out what the real economic toll is because it’s when the mortgage deferrals end that you’re going to see whether or not there are Canadians that are having difficulty making their mortgage payments.”


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The Canada Mortgage and Housing Corp., the federal Crown corporation that provides mortgage insurance for most Canadian homeowners, recently told the House of Commons finance committee that it estimates 12 per cent of the country’s mortgage holders had already entered into a mortgage deferral agreement with their bank and that by September, that number could rise to 20 per cent, or one in five.

But those deferrals won’t last forever. Eventually, the bills will come due again.

“I think what we’re looking at potentially is sort of what’s being termed the deferral cliff, meaning that government supports and payment deferrals end while the economy hasn’t fully recovered, or in some cases, for personal consumers, they haven’t fully recovered,” said Emery.

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Getting everyone back to work at their pre-pandemic wage levels, of course, is the best solution for all.

But as governments consider policies to reflate the economy, they will be forced to confront the gender effects of the COVID-19 recession. That means, in the first place, accounting for the decimation of the service industry — everything from salons and stylists to restaurants and tourism — an industry that has typically relied heavily on female labour.

And since the ability of many women to work depends heavily on access to child care, ensuring child-care providers are up and running becomes a critical priority if the country is to emerge from what has been dubbed the “she-cession.”

“There is no recovery without a ‘she-covery,’” said Yalnizyan. “But there is no ‘she-covery’ without child care, and we don’t have a plan for either.”

And, however you term it, there is a much slower recovery as a result of these sky-high levels of consumer debt.

“Part of the question around how strong the recovery is going to be is how are we going to power growth with that much amount of debt being carried by the economy?” said Alexander. “The consumer is 60 per cent of the Canadian economy. So if we have households with weaker finances, it could be the case that they save more.”

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To economists, “saving more” is about the same as “paying down debt.” But neither paying down debt nor saving more is equivalent to spending more — which is what powers growth.

“Globally, the single biggest risk to the global economy, pre-pandemic, was the amount of leverage or debt that had been taken on. And now we’re going to have a situation that’s far worse when we get to the recovery,” said Alexander.  It doesn’t mean we won’t get a recovery, but it means that this recovery could be very slow and drawn out.”

David Akin is the chief political correspondent for Global News.

© 2020 Global News, a division of Corus Entertainment Inc.

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Looking for the next mystery bestseller? This crime bookstore can solve the case

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WINNIPEG – Some 250 coloured tacks pepper a large-scale world map among bookshelves at Whodunit Mystery Bookstore.

Estonia, Finland, Japan and even Fenwick, Ont., have pins representing places outside Winnipeg where someone has ordered a page-turner from the independent bookstore that specializes in mystery and crime fiction novels.

For 30 years, the store has been offering fans of Agatha Christie’s Hercule Poirot or Arthur Conan Doyle’s Sherlock Holmes a place to get lost in whodunits both old and new.

Jack and Wendy Bumsted bought the shop in the Crescentwood neighbourhood in 2007 from another pair of mystery lovers.

The married couple had been longtime customers of the store. Wendy Bumsted grew up reading Perry Mason novels while her husband was a historian with vast knowledge of the crime fiction genre.

At the time, Jack Bumsted was retiring from teaching at the University of Manitoba when he was looking for his next venture.

“The bookstore came up and we bought it, I think, within a week,” Wendy Bumsted said in an interview.

“It never didn’t seem like a good idea.”

In the years since the Bumsteds took ownership, the family has witnessed the decline in mail-order books, the introduction of online retailers, a relocation to a new space next to the original, a pandemic and the death of beloved co-owner Jack Bumsted in 2020.

But with all the changes that come with owning a small business, customers continue to trust their next mystery fix will come from one of the shelves at Whodunit.

Many still request to be called about books from specific authors, or want to be notified if a new book follows their favourite format. Some arrive at the shop like clockwork each week hoping to get suggestions from Wendy Bumsted or her son on the next big hit.

“She has really excellent instincts on what we should be getting and what we should be promoting,” Micheal Bumsted said of his mother.

Wendy Bumsted suggested the store stock “Thursday Murder Club,” the debut novel from British television host Richard Osman, before it became a bestseller. They ordered more copies than other bookstores in Canada knowing it had the potential to be a hit, said Michael Bumsted.

The store houses more than 18,000 new and used novels. That’s not including the boxes of books that sit in Wendy Bumsted’s tiny office, or the packages that take up space on some of the only available seating there, waiting to be added to the inventory.

Just as the genre has evolved, so has the Bumsteds’ willingness to welcome other subjects on their shelves — despite some pushback from loyal customers and initially the Bumsted patriarch.

For years, Jack Bumsted refused to sell anything outside the crime fiction genre, including his own published books. Instead, he would send potential buyers to another store, but would offer to sign the books if they came back with them.

Wendy Bumsted said that eventually changed in his later years.

Now, about 15 per cent of the store’s stock is of other genres, such as romance or children’s books.

The COVID-19 pandemic forced them to look at expanding their selection, as some customers turned to buying books through the store’s website, which is set up to allow purchasers to get anything from the publishers the Bumsteds have contracts with.

In 2019, the store sold fewer than 100 books online. That number jumped to more than 3,000 in 2020, as retailers had to deal with pandemic lockdowns.

After years of running a successful mail-order business, the store was able to quickly adapt when it had to temporarily shut its doors, said Michael Bumsted.

“We were not a store…that had to figure out how to get books to people when they weren’t here.”

He added being a community bookstore with a niche has helped the family stay in business when other retailers have struggled. Part of that has included building lasting relationships.

“Some people have put it in their wills that their books will come to us,” said Wendy Bumsted.

Some of those collections have included tips on traveling through Asia in the early 2000s or the history of Australian cricket.

Micheal Bumsted said they’ve had to learn to be patient with selling some of these more obscure titles, but eventually the time comes for them to find a new home.

“One of the great things about physical books is that they can be there for you when you are ready for them.”

This report by The Canadian Press was first published on Sept. 15, 2024.



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Labour Minister praises Air Canada, pilots union for avoiding disruptive strike

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MONTREAL – Canada’s labour minister is praising both Air Canada and the union representing about 5,200 of its pilots for averting a work stoppage that would have disrupted travel for hundreds of thousands of passengers.

Steven MacKinnon’s comments came in a statement shared to social media shortly after Canada’s largest air carrier announced it had reached a tentative labour deal with the Air Line Pilots Association.

MacKinnon thanked both sides and federal mediators, saying the airline and its pilots approached negotiations with “seriousness and a resolve to get a deal.”

The tentative agreement averts a strike or lockout that could have begun as early as Wednesday for Air Canada and Air Canada Rouge, with flight cancellations expected before then.

The airline now says flights will continue as normal while union members vote on the tentative four-year contract.

Air Canada had called on the federal government to intervene in the dispute, but Prime Minister Justin Trudeau said Friday that would only happen if it became clear no negotiated agreement was possible.

This report from The Canadian Press was first published Sept. 15, 2024.

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As plant-based milk becomes more popular, brands look for new ways to compete

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When it comes to plant-based alternatives, Canadians have never had so many options — and nowhere is that choice more abundantly clear than in the milk section of the dairy aisle.

To meet growing demand, companies are investing in new products and technology to keep up with consumer tastes and differentiate themselves from all the other players on the shelf.

“The product mix has just expanded so fast,” said Liza Amlani, co-founder of the Retail Strategy Group.

She said younger generations in particular are driving growth in the plant-based market as they are consuming less dairy and meat.

Commercial sales of dairy milk have been weakening for years, according to research firm Mintel, likely in part because of the rise of plant-based alternatives — even though many Canadians still drink dairy.

The No. 1 reason people opt for plant-based milk is because they see it as healthier than dairy, said Joel Gregoire, Mintel’s associate director for food and drink.

“Plant-based milk, the one thing about it — it’s not new. It’s been around for quite some time. It’s pretty established,” said Gregoire.

Because of that, it serves as an “entry point” for many consumers interested in plant-based alternatives to animal products, he said.

Plant-based milk consumption is expected to continue growing in the coming years, according to Mintel research, with more options available than ever and more consumers opting for a diet that includes both dairy and non-dairy milk.

A 2023 report by Ernst & Young for Protein Industries Canada projected that the plant-based dairy market will reach US$51.3 billion in 2035, at a compound annual growth rate of 9.5 per cent.

Because of this growth opportunity, even well-established dairy or plant-based companies are stepping up their game.

It’s been more than three decades since Saint-Hyacinthe, Que.-based Natura first launched a line of soy beverages. Over the years, the company has rolled out new products to meet rising demand, and earlier this year launched a line of oat beverages that it says are the only ones with a stamp of approval from Celiac Canada.

Competition is tough, said owner and founder Nick Feldman — especially from large American brands, which have the money to ensure their products hit shelves across the country.

Natura has kept growing, though, with a focus on using organic ingredients and localized production from raw materials.

“We’re maybe not appealing to the mass market, but we’re appealing to the natural consumer, to the organic consumer,” Feldman said.

Amlani said brands are increasingly advertising the simplicity of their ingredient lists. She’s also noticing more companies offering different kinds of products, such as coffee creamers.

Companies are also looking to stand out through eye-catching packaging and marketing, added Amlani, and by competing on price.

Besides all the companies competing for shelf space, there are many different kinds of plant-based milk consumers can choose from, such as almond, soy, oat, rice, hazelnut, macadamia, pea, coconut and hemp.

However, one alternative in particular has enjoyed a recent, rapid ascendance in popularity.

“I would say oat is the big up-and-coming product,” said Feldman.

Mintel’s report found the share of Canadians who say they buy oat milk has quadrupled between 2019 and 2023 (though almond is still the most popular).

“There seems to be a very nice marriage of coffee and oat milk,” said Feldman. “The flavour combination is excellent, better than any other non-dairy alternative.”

The beverage’s surge in popularity in cafés is a big part of why it’s ascending so quickly, said Gregoire — its texture and ability to froth makes it a good alternative for lattes and cappuccinos.

It’s also a good example of companies making a strong “use case” for yet another new entrant in a competitive market, he said.

Amid the long-standing brands and new entrants, there’s another — perhaps unexpected — group of players that has been increasingly investing in plant-based milk alternatives: dairy companies.

For example, Danone has owned the Silk and So Delicious brands since an acquisition in 2014, and long-standing U.S. dairy company HP Hood LLC launched Planet Oat in 2018.

Lactalis Canada also recently converted its facility in Sudbury, Ont., to manufacture its new plant-based Enjoy! brand, with beverages made from oats, almonds and hazelnuts.

“As an organization, we obviously follow consumer trends, and have seen the amount of interest in plant-based products, particularly fluid beverages,” said Mark Taylor, president and CEO of Lactalis Canada, whose parent company Lactalis is the largest dairy products company in the world.

The facility was a milk processing plant for six decades, until Lactalis Canada began renovating it in 2022. It now manufactures not only the new brand, but also the company’s existing Sensational Soy brand, and is the company’s first dedicated plant-based facility.

“We’re predominantly a dairy company, and we’ll always predominantly be a dairy company, but we see these products as complementary,” said Taylor.

It makes sense that major dairy companies want to get in on plant-based milk, said Gregoire. The dairy business is large — a “cash cow,” if you will — but not really growing, while plant-based products are seeing a boom.

“If I’m looking for avenues of growth, I don’t want to be left behind,” he said.

Gregoire said there’s a potential for consumers to get confused with so many options, which is why it’s so important for brands to find a way to differentiate themselves, whether it’s with taste, health, or how well the drink froths for a latte.

Competition in a more crowded market is challenging, but Taylor believes it results in better products for consumers.

“It keeps you sharp, and it forces you to be really good at what you’re doing. It drives innovation,” he said.

This report by The Canadian Press was first published Sept. 15, 2024.



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