As omicron piles on economic fears, Canadian outlook offers glimmer of bland optimism - CBC.ca | Canada News Media
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As omicron piles on economic fears, Canadian outlook offers glimmer of bland optimism – CBC.ca

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Headlines that make the heart race may be good for the news business, but they aren’t so hot for economic stability.

Amidst a fireworks display of breaking stories that include warnings of a new and potentially worse COVID-19 variant of concern, Friday’s stock market tumble, worrying inflation updates and a new round of supply chain problems caused by B.C.’s flooding, data out this week on the Canadian economy is expected to be reassuringly bland.

And after a weekend of hand-wringing, there are increasing signs — at least in financial circles — that despite a name that sounds like a Marvel Comics villain, the omicron variant is just more of the same.

Stocks and oil rebound

“Investors [are] betting that the impact of the omicron COVID-19 variant will be less profound than initially feared,” the Wall Street Journal reported Monday, as stocks and oil rebounded from “their largest one-day percentage decline since April 2020.”

Of course, there remains plenty to learn about the latest coronavirus variant and its impact on the Canadian economy, but a new stream of business news out this week — including the country’s growth rate, unemployment figures and the state of Canada’s banks — is expected to be reassuring.

While Canadian inflation hovering near five per cent remains a worry, new data for gross domestic product, out later this morning, is not expected to show the kind of economic growth that would set inflation soaring.

A customer enters a fast-food restaurant with ‘Help Wanted’ signs posted in Laval, Que. Employers across the country are dealing with labour shortages. (Ryan Remiorz/The Canadian Press)

Instead, economists assess that the data from July to September will show the economy grew at an annualized rate of 3.2 per cent. If that’s the way things turn out, it will be a sharp bounce-back from an economy that shrank in the second quarter.

While that is healthy growth for an advanced economy, it is also bland enough to avoid sparking new inflationary fears. 

As Bank of Montreal economist Doug Porter said in a report to investors earlier this month: “Given the wildness of the prior 18 months, no one is complaining about ho-hum.”

When Statistics Canada released its data on Tuesday morning, it was not so ho-hum as had been predicted — with an annualized growth rate of 5.4 per cent.

Meanwhile, BMO’s results will be out Friday, at the end of a series of bank-profit numbers that begin Tuesday with the Bank of Nova Scotia. Despite all the gloomy economic headlines, Reuters is predicting a boost in dividends, saying Canadian banks, as a group, are “set to post strong results.”

Optimism on the upswing

Lower down the financial food chain, the Canadian Federation of Independent Business has released a moderately optimistic outlook in its monthly Business Barometer

Small business owners are a bit like Canadian farmers, who will never admit to things being absolutely good; so a CFIB release that says, “Overall, small business optimism is on an upswing,” sounds positively buoyant. 

Among the CFIB report’s reservations are that its optimism index has not gained back September’s losses and a growing expectation of sharply rising prices and higher wages in coming months.

WATCH | Rising food prices a major contributor to Canada’s inflation rate:

Rising food prices contribute to 18-year high inflation

1 month ago

The continued increase in food prices is a major contributor to Canada’s inflation rate reaching an 18-year high and some economists say the rising costs could last longer than initially thought. 2:30

“We have never observed price and wage increase plans at this level in the monthly barometer’s 12-year history,” said Andreea Bourgeois, a senior research analyst at CFIB.

“Price increase plans over the next 12 months reached 4.3 per cent in November, while wage plans reached 3.1 per cent, a 0.6 percentage point increase since last month and the highest level recorded since CFIB started publishing its monthly Business Barometer in 2009,” said the CFIB summary of its report.

Goldilocks growth

While high, those expectations indicate small business is following — not leading — inflation that hit 4.7 per cent last month.

Something else economy-watchers will pay close attention to this week will be November auto sales figures, which come out on the first of the month — a fresh indicator of the extent to which seasonally adjusted vehicle purchases are improving or worsening, as supply chain problems work their way through the economy.

“We can’t go back and change what’s happened,” said Bank of Canada governor Tiff Macklem on Monday, speaking at the bank’s Symposium on Indigenous Economies. “But we can try to correct some of the consequences that arose from ugly periods in our past.”

Bank of Canada Governor Tiff Macklem speaks during a news conference in Ottawa on Oct. 27. (Adrian Wyld/The Canadian Press)

Macklem was of course referring to Canada’s notorious historic treatment of Indigenous people

But in a very different context, that is what the country’s top central banker has said he would like to see in economic and jobs growth, too. And Macklem wants it to be not too fast and not too slow.

Currently, that is exactly what Canadian economists are forecasting for Friday’s jobs numbers. They estimate that the economy will crank out between 30,000 and 40,000 jobs, ticking the unemployment rate down another point to 6.6 per cent.

As in the story of Goldilocks and the Three Bears, that kind of unemployment growth is not too hot and not too cold — it’s just right for an economy worried about inflation.

If that’s the way it turns out, this week’s economic figures could signal a fairy-tale ending for what has been another hectic year.


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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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 Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

The Canadian Press. All rights reserved.

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