Economy

Canada rejigs inflation measures for post-pandemic life

Published

3 years ago

June 8, 2021

A year into the pandemic, Canada‘s national statistics agency is updating how it measures inflation, using new types of data for the first time as it bets on what lockdown spending shifts will prevail even as life returns more to normal.

Statistics Canada‘s overdue re-weighting of its consumer price index (CPI) basket, set for release with June data, could give another bump to inflation which is already running hot. It also has implications for real return bonds, which compensate investors for changes in CPI.

“It’s something that people are paying attention to … because of how odd the period preceding it was,” said Royce Mendes, senior economist at CIBC Capital Markets.

“If it puts more weight on something that generally has a higher inflation rate, and takes away some of the weighting on things that just generally over many years have lower inflation, you are going to see the monthly numbers perk up,” he said.

Statscan rejigs the weights of its CPI basket on a biennial basis, with the 2021 update delayed by six months due to the COVID-19 pandemic.

For the first time, the agency is using real world inputs – like price scanners at grocery stores – and actual consumer outlays, along with its traditional survey of household spending, to determine the new weightings.

The Bank of Canada targets inflation at 2%, with a 1%-3% control range. The central bank has said it expects inflation to be near the top end of its target band over the next few months due to the base-year effect, before dropping to around 2% later in 2021.

In April, inflation rose at its fastest pace in a decade to 3.4%, mostly due to the statistical comparison to last year when prices tanked during early pandemic shutdowns.

Statcan’s alternate index, weighted to better reflect the impact of spending shifts due to the pandemic, has consistently tracked above official inflation. Canadians spent less on gasoline and travel in 2020, for example, but more on food and housing.

Graphic: Canadian inflation amid the COVID-19 pandemic

Key to the rejig is a bet on just how much the pandemic shift in consumption habits will stick as vaccines roll out and Canadians return to a more normal life.

“For all we know we could go back to the same spending patterns we had before the pandemic,” said Derek Holt, head of Capital Markets Economics at Scotiabank. “I don’t think so – I don’t think we’ll all be boarding cruise ships and packing movie theaters anytime soon, but maybe we will.”

For bond investors, the tricky thing will be judging how a basket shakeup will change headline numbers, either up or down, particularly as some of the components that could be reduced in weight face sharp price rises as the economy reopens.

“Air fare inflation is going to be pretty high for the next year,” said Stephen Brown, senior Canada economist at Capital Economics. “So if they reduce the weight of airlines they’d actually be reducing headline inflation by doing that.”

(This June 4 story corrects to biennial, not semi-annual in 5th paragraph)

(Reporting by Julie Gordon in Ottawa and Fergal Smith in Toronto; Editing by David Gregorio)

Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

3 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

7 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

1 week ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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