The Canadian economy rebounded slightly last month but still saw little growth, backing a case for the central bank to keep rates on hold despite inflation remaining elevated.
Preliminary data suggest gross domestic product edged up 0.1 per cent in August, Statistics Canada reported Sept. 29 in Ottawa, as declines in the retail and oil and gas industries partly offset increases in the wholesale and finance sectors.
That followed a flat GDP reading in July, which missed expectations for a 0.1 per cent increase in a Bloomberg survey.
Bonds rallied after the numbers were released, driving the Canada two-year benchmark yield to 4.876 per cent, down more than 4 basis points, the lowest intraday level since Sept. 19.
The economy is now on track to expand at a 0.2 per cent annualized rate in the third quarter, if September output is flat. That’s weaker than the 0.4 per cent consensus estimate in a Bloomberg survey.
Although that means Canada could escape a technical recession with this rebound after a second-quarter contraction, the pace of growth is far weaker than the 2.6 per cent seen during the first three months of this year.
The report points to an economy that’s still in a soft patch as interest-rate increases weigh on indebted households and restrain spending. It leaves room for the Bank of Canada to hold short-term borrowing costs steady in late October, despite a worsening inflation backdrop.
The consumer price index rose four per cent in August, the second straight month of acceleration and double the central bank’s target, with core inflation still elevated.
“While inflationary pressures remain sticky above the Bank of Canada’s target range, the slowing in the economy should give central bankers confidence that their medicine is slowly working,” Royce Mendes, head of macro strategy at Desjardins, said in a report to investors. “As the economy continues to cool from the lagged impacts of rate hikes, price pressures should dissipate further.”
This is the only GDP release before the next rate decision on Oct. 25, when the bank will also release a new set of economic projections. The majority of economists in a Bloomberg survey expect it to hold the policy rate steady at five per cent, with five out of 30 forecasters seeing a 25 basis-point hike.
In July, services industries rose 0.1 per cent, while goods-producing sectors contracted 0.3 per cent.
The manufacturing sector — which had the largest negative contribution in July — declined 1.5 per cent, the second straight monthly contraction, due to lower inventory formation. The port strike in British Columbia affected the chemical manufacturing the most, with the subsector seeing a 3.6 per cent decrease.
Transportation and warehousing contracted 0.2 per cent, with air transportation being the largest contributor to the sector’s decline. Professional, scientific and technical services contracted 0.2 per cent, the first time in eight months.
Oil and gas extraction rose 1.5 per cent in July, up for the sixth time in the last seven months. Finance and insurance rose for the third consecutive month, up 0.3 per cent. Real estate, rental and leasing edged up 0.1 per cent, continuing growth since November 2022.
Mining, excluding oil and gas, and accommodation and food services grew in July, after experiencing declines a month earlier due to forest fires. The former increased 4.2 per cent and the latter rose 2.3 per cent.
“While some disruptions have compromised the ‘cleanliness’ of recent GDP data, the bigger picture is that Canada is really struggling to grow right now,” Robert Kavcic, an economist at the Bank of Montreal, said in a report to investors. He added that real GDP looks “even weaker” when considering that the population is exploding.
“The Bank of Canada still has their eyes on stubborn core inflation and firm wage growth, but struggling growth argues for them to remain on hold and lean on the tightening that has already been put in place.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Companies in this story: (TSX:TRZ)
The Canadian Press. All rights reserved.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
Companies in this story: (TSX:DOL)
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
Companies in this story: (TSX:TD)
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