‘High interest rates are likely going to weigh on the B.C. consumer and businesses the most’ — TD Economist Marc Ercolao.
Remember that recession that economists have been promising ever since high inflation started in the later part of 2021?
It still hasn’t materialized. But by next year, TD Economics expects Canada will see at least an economic cooling, with B.C. leading the way in terms of negative indicators.
Canadian and American economies have, so far, defied normal cycles, in which rising interest rates (intended to tame to inflation) would typically have put the brakes on an over-heated economy by now.
“At least for Canada, I think it’s really a consumer-driven propulsion that’s been to the surprise of most people,” said TD economist Marc Ercolao. “And that’s also coming from a strong labour and employment market picture that appears to be defying the physics of the traditional economic cycles.”
In its most recent provincial forecast, TD Economics has had to revise its projections for real GDP growth across Canada, based on stronger than expected household spending.
Alberta and Saskatchewan are expected to have the highest real GDP growth in 2023, at 2.7 per cent and 2.4 per cent, respectively, while B.C.’s real GDP growth is expected to be just 1.2 per cent. Ontario’s real GDP growth is expected to about the same — 1.3 per cent.
“Despite the impressive staying power of household spending across the regions, we still believe that the resilience is on borrowed time,” TD Economics says in its new provincial forecast.
“In recent months, cracks have been seen in both consumer spending and labour markets.”
TD Economics now expects unemployment rates across Canada to rise between 0.8 and 2 percentage points by the end of next year, and it warns that B.C. may finally cede its decade-long position of leading the country on positive economic indicators, like high growth and low unemployment.
“As spending and investment gears down into 2024, economic growth and job gains are likely to effectively fizzle out.”
The forecast notes “industry-based GDP data” for B.C. indicated growth of 3.6 per cent in 2022.
“However, last year marked the end to a decade-long streak of growth outperformance relative to the nation,” the TD Economics provincial forecast notes. “What’s more, the provincial economy appears set for a larger cyclical downswing this year and next relative to most other provinces.”
TD Economics is forecasting B.C.’s real GDP growth will be just 0.5 per cent in 2024, and that unemployment could rise to 5.9 per cent.
“As household spending eases, B.C. firms have taken their foot off the hiring accelerator so far this year,” the provincial forecast says. “Job growth in the January-May period slowed to a more pedestrian 1.5 per cent (year-over-year), below the national pace.”
It also notes that, “despite a burst of activity related to the development of the Kitimat LNG project” (LNG Canada), construction activity in B.C. “more broadly is poised to exert a drag on the economy as capital expenditure intentions point to a 6 per cent contraction.”
To address inflation, central banks in Canada, the U.S. and elsewhere have been raising interest rates. Eventually, that can be expected to result in less spending on big-ticket items, as the cost of borrowing increases.
“We really are riding this momentum wave – this prolonged strength that’s been defying traditional economic cycles,” Ercolao said. “I think it’s the consensus that we still expect the provinces to head into the territory of choppy waters. It’s only a matter of time before the interest rates bite.
“Forward-looking, high interest rates are likely going to weigh on the B.C. consumer and businesses the most.”
On a positive note, B.C. is still very much a resource economy, and commodity prices are expected to remain relatively strong, the forecast predicts.
“Most commodity prices are still expected to remain at or above their longer-term averages, supporting activity in commodity producing provinces.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
