Canada’s economy stalled to end 2022, new data shows, but some economists say strong underlying demand could keep a recession at bay for longer or skirt the downturn entirely.
Statistics Canada said Tuesday that real gross domestic product (GDP) was “nearly unchanged” in the final quarter of last year, snapping a streak of growth for the preceding five quarters.
The actual GDP figures were a surprise to many economists, with the consensus expecting growth of 1.6 per cent in the fourth quarter. The Bank of Canada had expected growth of 1.3 per cent last quarter.
“It was a little bit shocking when we saw that,” says James Orlando, senior economist with TD Bank.
Orlando tells Global News that while flat growth might sound grim — he called it a “thud” of an economic release in a note to clients Tuesday — the details reveal more strength in the economy than the headline number suggests.
For instance, lower inventory accumulations were the main drag on GDP last quarter, StatCan said, following record growth for this segment in the second and third quarters of 2022.
Orlando says this is mostly an aftershock from the COVID-19 pandemic still reverberating through the economy. Businesses rushed to build their inventories back up after pandemic restrictions lifted — hence the record quarters — but pumped the brakes on production towards the end of the year when fears of a recession started to show on the horizon.
“For a business, you don’t want to be stuck with a lot of inventory if the economy slows down,” Orlando says.
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StatCan said businesses’ investments in machinery, equipment and housing declined in the final months of 2022, though Orlando says that was roughly in line with what economists expected.
Hidden in the flat GDP reading was solid consumer demand, Orlando noted, with spending here up two per cent annually.
“You’ve got to look past the inventories to see the underlying decent fundamentals in the economy, specifically on the consumer side,” he says.
Economic rebound to start 2023?
While Statistics Canada said real GDP declined by 0.1 per cent in December, the agency also said early indications suggest growth of 0.3 per cent month-to-month in January.
A few economic readings support the strong start to the year, Orlando notes. TD’s credit card tracker suggests Canadians kept spending in January despite expectations of an economic slowdown; a blockbuster jobs report for the month also supports continued demand from consumers.
Despite the Q4 “thud,” TD Bank expects growth in the first quarter of 2023 will rebound to 0.3 per cent annualized.
This pushes against thinking that Canada could start the new year in a recession, Orlando says. While TD is expecting an economic slowdown with negative growth in the third quarter, the bank is not currently calling for a recession in 2023.
Orlando says the strong jobs figures – the economy added 150,000 positions in January – are backing continued spending from Canadian households, which can in turn buoy GDP growth and push economic activity higher overall this year.
“It goes against the narrative of the hard landing,” he says.
“Everyone is expecting the slowdown in spending, the slowdown in the labour market, but the impact of the good data we’ve got could keep carrying through and keep this momentum going for a little while longer.”
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Not all economists are sure that a strong start to 2023 is enough to skirt a recession this year.
Stephen Brown, deputy chief North America economist at Capital Economics, acknowledges that the economy will probably grow “marginally” in the first quarter of 2023, but he doesn’t expect that momentum to last.
He points to the “temporary” nature of some of the factors fuelling the strong advance numbers for January, including relatively warmer weather across the country, which tends to be favourable for consumer spending.
Leading indicators such as business sentiment surveys suggest GDP is set to stagnate or outright decline through the middle of the year, Brown says.
“I think the risks of recession are still real and we are still forecasting a recession over the second and third quarters.”
Brown notes, however, that he doesn’t expect a large rise in overall unemployment in Canada during the downturn, as some sectors, such as high-touch services including travel and dining out, continue their long recovery from the pandemic.
The latest provincial outlook from The Conference Board of Canada released Tuesday meanwhile predicts the country will see very little improvement in the economy this year and at least one quarter of negative economic growth.
But the think tank also says the worst-case scenarios of a protracted recession or highly destabilized labour and capital markets are becoming less likely.
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Among the provinces, the report says Newfoundland and Labrador will have the fastest-growing economy this year as the Terra Nova offshore oil platform returns to production.
The Conference Board says the Alberta and Saskatchewan economies will also perform well in the near term, powered by the oil and gas sector and favourable outlooks in agriculture.
On the other end of the spectrum, the report says the economies of Quebec and New Brunswick will be nearly flat this year before returning to growth in 2024.
What does this mean for the Bank of Canada?
Orlando said the central bank’s governing council likely “feels vindicated” about its plans for a conditional pause in interest rate increases to assess whether their hikes to date have been effective enough in cooling down the economy and, by extension, inflation.
“The Bank of Canada doesn’t really have to do anything,” he says.
“Obviously, they’re going to be sitting, watching, making sure that things don’t really start to surge too much. But I think they’re going to be pretty content being where they are and just watching the incoming data.”
Brown says the Bank of Canada, which is set to announce its next interest rate decision March 8, finds itself in a distinct position from its peers in central banking. Price pressures are proving “a bit stickier than expected” in the U.S. and Europe he says, while the inflation outlook in Canada is “quite encouraging,” coming in lower than expected at annual rate of 5.9 per cent last month.
“Coupled with GDP being weaker than expected, that’s all consistent with the bank remaining comfortable with this conditional pause that it told us about in January,” he says.
The Bank’s policymakers are likely to remain cagey on timing for interest rate cuts, Brown says, with the upside risks to inflation keeping odds closer to additional hikes than reductions in the months ahead.
— with files from The Canadian Press
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TORONTO – Will Taylor Swift bring chaos or do we all need to calm down?
It’s a question many Torontonians are asking this week as the city braces for the massive fan base of one of the world’s biggest pop stars.
Hundreds of thousands of Swifties are expected to descend on downtown core for the singer’s six concerts which kick off Thursday at the Rogers Centre and run until Nov. 23.
And while their arrival will be a boon to tourism dollars, it could further clog the city’s already gridlocked streets.
Swift’s shows collide with other scheduled events at the nearby Scotiabank Arena, including a Toronto Raptors game on Friday and a Toronto Maple Leafs game on Saturday.
Some locals have already adjusted their plans to avoid the area.
Aahil Dayani says he and some friends intended to throw a birthday bash for one of their pals, until they realized it would overlap with the concerts.
“Ultimately, everybody agreed they just didn’t want to deal with that,” he said.
“Something as simple as getting together and having dinner is now thrown out the window.”
Dayani says the group rescheduled the birthday party for after Swift leaves town. In the meantime, he plans to hunker down at his Toronto residence.
“Her coming into town has kind of changed up my social life,” he added.
“We’re pretty much just not doing anything.”
Max Sinclair, chief executive and founder of A.I. technology firm Ecomtent, has suggested his employees stay away from the company’s downtown offices on concert days, since he doesn’t see the point in forcing people to endure potential traffic jams.
“It’s going to be less productive for us, and it’s going to be just a pain for everyone, so it’s easier to avoid it,” he said.
“We’re a hybrid company, so we can be flexible. It just makes sense.”
Toronto Transit Commission spokesperson Stuart Green says the public agency has been preparing for over a year to ease the pressure of so many Swifties in one confined area.
Dozens of buses and streetcars have been added to the transit routes around the stadium, while the TTC has consulted with the city on how to handle potential emergency scenarios.
“There may be some who will say we’re over-preparing, and that’s fair,” Green said.
“But we know based on what’s happened in other places, better to be over-prepared than under-prepared.”
This report by The Canadian Press was first published Nov. 13, 2024.
REDWOOD CITY, Calif. – Electronic Arts has incorporated the Professional Women’s Hockey League into its NHL 25 video game.
The six teams starting their second seasons Nov. 30 will be represented in “play now,” “online versus,” “shootout” and “season” modes, plus a championship Walter Cup, in the updated game scheduled for release Dec. 5, the PWHL and EA Sports announced Wednesday.
Gamers can create a virtual PWHL player.
The league and video game company have agreed to a multi-year partnership, the PWHL stated.
“Our partnership with EA SPORTS opens new doors to elevate women’s hockey across all levels,” said PWHL operations senior vice-president Amy Scheer in a statement.
“Through this alliance, we’ll develop in-game and out-of-game experiences that strengthen the bond between our teams, players, and fans, bringing the PWHL closer to the global hockey community.”
NHL 22 featured playable women’s teams for the first time through an agreement with the International Ice Hockey Federation.
Toronto Sceptres forward Sarah Nurse became the first woman to appear on the video game’s cover in 2023 alongside Anaheim Ducks centre Trevor Zegras.
The Ottawa Charge, Montreal Victoire, Boston Fleet, Minnesota Frost and New York Sirens round out the PWHL. The league announced team names and logos in September, and unveiled jerseys earlier this month.
“It is so meaningful that young girls will be able to see themselves in the game,” said Frost forward Taylor Heise, who grew up playing EA’s NHL games.
“It is a big milestone for inclusivity within the hockey community and shows that women’s prominence in hockey only continues to grow.”
This report by The Canadian Press was first published Nov. 13, 2024.
Maple Leaf Foods Inc. continued to navigate weaker consumer demand in the third quarter as it looked ahead to the spinoff of its pork business in 2025.
“This environment has a particularly significant impact on a premium portfolio like ours and I want you to know that we are not sitting still waiting for the macro environment to recover on its own,” said CEO Curtis Frank on a call with analysts.
Frank said the company is working to adapt its strategies to consumer demand. As inflation has stabilized and interest rates decline, he said pressure on consumers is expected to ease.
Maple Leaf reported a third-quarter profit of $17.7 million compared with a loss of $4.3 million in the same quarter last year.
The company says the profit amounted to 14 cents per share for the quarter ended Sept. 30 compared with a loss of four cents per share a year earlier. Sales for the quarter totalled $1.26 billion, up from $1.24 billion a year ago.
“At a strategic level … we’re certainly seeing the transitory impacts of an inflation-stressed consumer environment play through our business,” Frank said.
“We are seeing more trade-down than we would like. And we are making more investments to grow our volume and protect our market share than we would like in the moment. But again, we believe that those impacts will prove to be transitory as they have been over the course of history.”
Financial results are improving in the segment as feed costs have stabilized, said Dennis Organ, president, pork complex.
Maple Leaf, which is working to spin off its pork business into a new, publicly traded company to be called Canada Packers Inc. and led by Organ, also said it has identified a way to implement the plan through a tax-free “butterfly reorganization.”
Frank said Wednesday that the new structure will see Maple Leaf retain slightly lower ownership than previously intended.
The company said it continues to expect to complete the transaction next year. However, the spinoff under the new structure is subject to an advance tax ruling from the Canada Revenue Agency and will take longer than first anticipated.
Maple Leaf announced the spinoff in July with a plan to become a more focused consumer packaged goods company, including its Maple Leaf and Schneiders brands.
“The prospect of executing the transaction as a tax-free spin-off is a positive development as we continue to advance our strategy to unlock value and unleash the potential of these two unique and distinct businesses,” Frank said in the news release.
He also said that Maple Leaf is set on delivering profitability for its plant protein business in mid-2025.
“This includes the recent completion of a procurement project aimed at leveraging our purchasing scale,” he said.
On an adjusted basis, Maple Leaf says it earned 18 cents per share in its latest quarter compared with an adjusted profit of 13 cents per share in the same quarter last year.
The results were largely in line with expectations, said RBC analyst Irene Nattel in a note.
Maple Leaf shares were down 4.5 per cent in midday trading on the Toronto Stock Exchange at $21.49.
This report by The Canadian Press was first published Nov. 13, 2024.
