Kacey Siskind recently took her first business trip to the U.S. since the pandemic began.
The vice-president of business development at Honk Mobile, a parking app, attended an industry conference in Texas.
“Our team was fully vaccinated and we felt that we could probably make our way and see how it went… we just wanted to take a chance and really be back out in the world,” said Siskind.
But in Dallas, you’d barely know there had ever been a global pandemic. Panel discussions and networking sessions at the conference happened indoors with no masks in sight — just lots of people eager to re-connect.
Siskind said she found the environment unnerving at first, but soon began to appreciate the experience.
“There is really nothing like being in person with somebody,” Siskind said. “There’s nothing like physically seeing them and talking to them.”
Only essential business travel has continued throughout the pandemic; for example, trips related to healthcare issues or critical infrastructure. Work trips related to maintaining or building relationships, making sales or attending conferences had been shut down.
In an online survey of 640 industry professionals, a June poll from the Global Business Travel Association, a U.S.-based industry group, found 91 per cent of companies say they’ve cancelled or suspended most or all international business travel — a huge hit for the industry.
Slow return for business travel in Canada
In Canada, virtual, online gatherings are expected to be the norm at least until the end of the year, event planners said.
“Our friends down in the states are moving a little bit quicker than us,” said Anh Nguyen, an event planner in Calgary. “In Canada, we’re seeing a little bit of a more conservative approach.”
Nguyen’s company, Spark Event Management, organized a number of virtual events over the past year. She believes many organizations — here and in the U.S. — won’t be willing to give up all the benefits that come with going online.
“There’s no such thing as sold out, right? So if you’re a 300-person event you can now reach 5,000-6,000 people if you wanted it to.”
Nguyen adds that with avatars, networking and breakout room software, industry is getting close to being able to replicate much of a real-life event experience online — though it’ll never be quite the same.
“The technology has grown and there’s a lot of money and investments being put into event technology right now,” Nguyen said.
Virtual gatherings may be great in some ways, but industry insiders note that they do next-to-nothing for local economies. Business travellers are often big spenders. They’re often on expense accounts, which benefit hotels, restaurants, taxis, airlines and more.
“Business travel contributes over $40 billion towards our Canadian economy in pre-pandemic numbers,” said Nancy Tudorach, who works with the Global Business Travel Association. “It’s about 2.5 to 3 per cent of our typical pre-pandemic GDP.”
Airlines are hurting
Vik Krishnan, a consultant with McKinsey & Company, said airlines in particular depend on expensive business class tickets.
“The business traveler tends to book late, they tend to travel with higher frequency, and they tend to also buy some of the more expensive fares,” he said. “Business travel for some airlines comprises 50 to 75 per cent of profits.”
A recent report from McKinsey noted that it took six years for airlines to recover from the impact of the Sept. 11 attacks, and that the industry still hadn’t fully recovered from the 2008 global financial crisis when the pandemic hit.
The COVID-19 pandemic has been larger in scale and deeper than any of those prior crises, Krisnan said. But if corporate travel remains curtailed, he said airlines probably won’t make up the difference by charging regular consumers more.
“This is an industry that has faced a lot of competition, has faced fairly relentless pricing pressure and cost pressure, and therefore, it’s no stranger to having to deal with an environment where you don’t have a lot of leeway and flexibility to raise prices.”
The recent emergence of new discount airlines in Canada, such as Flair and Canada Jetlines, could make it difficult for WestJet or Air Canada to charge more.
Business travel may stay depressed
Many of the companies that depend heavily on business travellers are expected to continue to struggle. McKinsey’s report on the airline industry forecasts pre-pandemic travel levels won’t be reached until 2024, and even then will only be at 80 per cent.
Others say the pandemic may have changed the approach to corporate travel forever.
Kacey Siskind suspects all business trips will now be evaluated differently.
“Is it efficient for us to go to a conference? Yes, if we’re going to see hundreds of people, it’s going to make sense for us to be there,” she said. “Is it smart for me to go off to New York for a night to have one meeting? Maybe not so much.”
Is global inflation nearing a peak? – Al Jazeera English
Calling the top of the current wave of inflation has been a painful exercise for economists and central bankers, who have been proven wrong time and again during the past year.
But data on Wednesday, which showed that some measures of inflation had cooled in the world’s two largest economies, was likely to rekindle a debate about whether the worst might be over after a year of torrid price growth.
United States consumer prices did not rise in July compared with June due to a sharp drop in the cost of petrol, delivering much-needed relief to American consumers on edge after steady prices climbs during the past two years.
And China’s factory-gate inflation slowed to a 17-month low on an annual basis while consumer prices rose less than expected.
After wrongly predicting last year that high inflation would be transitory, most central bankers, including the US Federal Reserve, have stopped trying to put an exact date on when they expect current price growth to peak.
US central bank officials see inflation decelerating through the second half of the year, the European Central Bank puts the peak in the third quarter and the Bank of England sees it in October.
Here are some of the key data shaping the inflation debate:
Raw materials are getting cheaper…
The main culprit for the surge in consumer prices last winter – energy and other raw materials – may be the harbinger of lower inflation this time around.
Prices of critical commodities such as oil, wheat and copper have fallen in recent months after spiking earlier this year. Oil and food items soared after Russia invaded Ukraine.
The fall in prices came amid weaker global demand and economic slowdowns in China, the US and Europe, where consumers are dealing with high prices.
Some indices of inflation are already being affected: fewer firms are reporting increased input costs, and wholesale price rise is decreasing in many parts of the world
…But European energy bills won’t
With winter approaching on the continent, European households are unlikely to see their energy bills come down anytime soon. Recently, there have been talks of rationing in eurozone countries, including in Germany.
This is because gas prices in Europe – which, for years, has relied on Russia for a large portion of its imports – are still four times higher now than a year ago and close to record highs. There has been much uncertainty surrounding gas flow via the Nord Stream pipeline.
Even in the United Kingdom, which has its own gas but very little storage capacity, consumers are set to see their power bills jump in October when the current price cap expires.
There is bad news for German drivers, too, who will see a subsidy at the petrol pump expire at the end of August.
Expectations are (mostly) under control
Some central bankers can take comfort in the fact that investors have not lost faith in them.
Market-based measures of inflation expectations in the US and the eurozone are only just above the central banks’ 2 percent target, while they remain uncomfortably high in the UK.
After the Federal Reserve’s meeting last month, the central bank’s Chair Jerome Powell stressed that the Fed is ready to use all of its tools “to bring demand into better balance with supply in order to bring inflation back down to our 2 percent goal”.
Consumers in the US, eurozone and UK, expect to see inflation stay above the 2 percent target for years to come.
According to a survey conducted by the Reuters news agency, a vast majority of the economists polled said that inflation would stay elevated for at least another year before receding significantly. About 39 percent of economists asked said that they expect inflation to stay high past 2023.
Core prices may be trending down…
Core inflation, the number that measures inflation while excluding the price of volatile components like food and fuel, has started to cool in the US and UK. Some economists predict Japan and the eurozone will follow suit.
Nevertheless, core inflation remains higher than most central banks’ comfort zone both in developed and developing economies. That means that central banks will continue to increase borrowing costs. The US Federal Reserve last month raised rates by 75 basis points for the second consecutive time. The bank meets again in September to consider further tightening.
And an artificial intelligence model used by Oxford Economics suggests core inflation will also peak in Japan and the eurozone in the second half of the year.
The Long Short-Term Memory network, originally developed to help machines learn human languages, parses detailed inflation data to spot patterns that helps it predict the Consumer Price Index in the future.
…But wages are pointing up
Workers’ wages have increased in the last year due to a tight labour market but not as fast as inflation.
The US Employment Cost Index also recently revealed that higher wages also resulted in a significant increase in US labour expenses in the second quarter of 2022.
According to figures released earlier this week, the cost of labour per unit of production increased by about 10 percent for non-farm firms in the US in the second quarter of this year.
One of the main factors influencing pricing over the long term is wages, and if they climb too quickly, a spiral of price rises may start.
“If that happens, we end up with an almost self-fulfilling type prophecy, where firms will start to push price increases onto their customers,” Brent Meyer, policy adviser and economist at Atlanta’s Federal Reserve, recently told Al Jazeera.
Outside of the US, the economic recovery has been more muted, and the impending recession may make it harder for labour to negotiate lower wages.
Steep price drops will bring ‘sanity’ back to housing market in 2023: Desjardins – Global News
Desjardins is forecasting the average home price in Canada will decline by nearly 25 per cent by the end of 2023 from the peak reached in February of this year.
In its latest residential real estate outlook published on Thursday, Desjardins says it’s expecting a sharp correction in the housing market, adjusting its previous forecast that predicted a 15-per-cent drop in the average home price over that same period.
Desjardins says the worsened outlook stems from both weaker housing data and more aggressive monetary policy than previously anticipated.
The Bank of Canada raised its key interest rate by a full percentage point in July, pushing up the borrowing rates linked to mortgages, and further increases are expected this year.
The report also notes housing prices have dropped by more than four per cent in each of the three months that followed February, when the national average home price hit a record $816,720.
Despite the adjustment in the forecast, prices are still expected to be above the pre-pandemic level at the end of 2023.
Regionally, the report says the largest price corrections are most likely to occur in New Brunswick, Nova Scotia and Prince Edward Island, where prices skyrocketed during the pandemic.
“While we don’t want to diminish the difficulties some Canadians are facing, this adjustment is helping to bring some sanity back to Canadian real estate,” the report said.
The authors also note that the upcoming economic slowdown will ease inflationary pressures enough for the Bank of Canada to begin reversing interest rate hikes. Desjardins expects the Canadian housing market to stabilize late next year.
Bidding wars a thing of the past in Calgary’s once hot housing market
© 2022 The Canadian Press
Canada Pension Plan reports $23-billion loss in June quarter as markets churn – The Globe and Mail
The Canada Pension Plan Investment Board said it lost 4.2 per cent in its most recent quarter, subtracting $23-billion from the fund’s assets.
It could have been worse: The three months ended June 30 were awful for most investors. According to Royal Bank of Canada’s RBC I&TS All Plan Universe, defined benefit pension plan assets decreased by 8.6 per cent, tied with the third quarter of 2008 for the biggest decline in the 28 years RBC has been began tracking Canadian plan performance.
The S&P Global LargeMidCap Index, a measure of stocks CPPIB uses as 85 per cent of its benchmark reference portfolio, fell nearly 13.5 per cent in the quarter. The FTSE Canada Universe All Government Bond Index, the remaining 15 per cent of the benchmark, fell nearly 6 per cent. Blended, that means CPPIB beat a benchmark of negative 12.4 per cent by more than eight percentage points.
CPPIB closed the quarter with assets of $523-billion, compared to $539-billion at the end of the previous quarter. The investment losses were offset by $7-billion in contributions from the Canada pension Plan.
In the early days of the COVID-19 pandemic, when global markets tumbled, the CPPIB asset mix blunted the pain, and the pension fund manager lost much less money than an ordinary investor in the stock market. However, CPPIB often trails when public stock markets rise rapidly, as they did in several recent quarters when investors shook off their pandemic fears.
Now, we have returned to falling markets, and CPPIB is outperforming them.
“Financial markets experienced the most challenging first six months of the year in the last half century, and the fund’s first fiscal quarter was not immune to such widespread decline,” John Graham, CPPIB chief executive officer, said in a statement accompanying the returns. “The uncertain business and investment conditions we noted in the previous quarter continue, and we expect to see this turbulence persist throughout the fiscal year.”
CPPIB said its loss was driven by declines in public stock markets, but investments in private equity, credit and real estate also contributed “modestly.” CPPIB also lost money in fixed income investments, such as bonds, due to higher interest rates imposed by central banks to fight inflation.
Gains by external portfolio managers, quantitative trading strategies and investments in energy and infrastructure contributed positively. CPPIB also recorded foreign exchange gains of $3.1-billion as the Canadian dollar weakened against the U.S. dollar. (Most of CPPIB’s investments are held outside Canada, but it reports results in Loonies.)
The Canada Pension Plan, founded in 1966, is the primary national retirement program for working Canadians. The government created CPPIB in 1999 to professionally manage the plan’s money. Over time, CPPIB has embraced active management and its blend of stocks, bonds, real estate, infrastructure, private equity and other specialized investments has outperformed public markets and its reference portfolio.
While CPPIB reports quarterly, it points to its multigenerational mandate and likes to emphasize its long-term returns. The plan’s five-year net return, net of investment costs, was 8.7 per cent through June 30; the 10-year net return was 10.3 per cent.
CPPIB’s annualized return for the 10 years ended last Sept. 30 was, at 11.6 per cent, the highest 10-year performance figure in its history.
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