Canada looks set to dodge a recession despite the ongoing downward pressure from higher interest rates, Deloitte Canada said in its economic outlook report.
A number of worrisome trends are still weighing on the economy, Deloitte said, including sticky inflation, rising business insolvencies and increasing mortgage delinquencies.
“Against this backdrop, we remain cautious about the near-term outlook,” the firm said in its report.
“But based on its current trajectory, Canada appears likely to skirt a recession and even seems poised to begin recovering from its current slump in the second half of this year.”
In an effort to fight breakneck inflation, the Bank of Canada raised the country’s key interest rate from near zero in March 2022 to the current five per cent with a series of hikes.
Inflation has cooled significantly since then, and Deloitte says the central bank is poised to start cutting interest rates in June. Most economists are expecting cuts to begin in either June or July.
Despite these positive signs, Canada’s economy is likely to remain “stuck in neutral” in 2024, Deloitte said, particularly in the first half of the year, with real GDP growth coming in at around one per cent this year before reaching 2.9 per cent in 2025.
Some of the assumptions underpinning Deloitte’s forecasts include robust GDP growth in the U.S., a continued softening of inflationary pressures, cuts from the Bank of Canada and a steady flow of newcomers to the country, supporting demand.
Statistics Canada reported on Thursday that Canada’s GDP rose 0.6 per cent in January, with a preliminary estimate of 0.4 per cent growth in February.
The economic recovery is contingent on interest rate cuts, the report said, which themselves depend on inflation continuing to moderate.
“The good news is that measures to cool inflation have made significant progress,” the report stated.
“That being said, the factors that are keeping inflation elevated are not likely to reverse in the near term.”
The biggest headwind is the cost of housing, Deloitte said, as Canadians continue to renew mortgages at higher rates. Higher shelter costs are also being felt by renters.
“Further, wage pressures continue to run well above inflation without any commensurate increase in productivity, and that is driving up unit labour costs for businesses and making it difficult to contain inflation,” the report said.
The labour market continues to hold up remarkably well, Deloitte said, though it predicts employment gains will slow sharply in 2024.
Household spending will remain modest over the first half of the year, Deloitte said, as consumers continue to grapple with the higher cost of living.
“Next year should be much better as interest rates come down, the economy picks up, and pent-up demand is unleashed,” the report said.
Deloitte’s report notes that business investment is falling at a “worrying pace” and elevated interest rates will likely limit the recovery in that area this year.
High rates are weakening the economy and eroding business confidence, the report said: “To cope with softer demand and tighter credit conditions, businesses are increasingly delaying their investment plans, focusing more on maintenance and repair rather than expanding operations.”
Unlike in Canada, the U.S. economy has remained much stronger under the weight of interest rate hikes, though the country’s central bank is also expected to begin cutting rates toward the back half of the year.
Deloitte said it expects the U.S. economy’s strength to somewhat moderate in the coming months but remain positive, posting real growth of 2.4 per cent in 2024 and 1.4 per cent in 2025.
This report by The Canadian Press was first published April 1, 2024.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.
The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.
Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.
On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.
In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.
It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.
This report by The Canadian Press was first published Nov. 7, 2024.
