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Canada’s economy ended 2022 with a ‘thud.’ What does that mean for a recession? – Global News



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.

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“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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‘A she-covery’: Higher numbers of women entering workforce post-pandemic

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.”

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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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Canada’s job surge: How hot economy could affect employers, interest rates

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.

Read more:

Inflation keeps cooling. Does that mean we’re done with interest rate hikes?

“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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Canadians spending record hours worrying about their finances

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‘People are going to be shocked’: NSLC hikes prices ahead of federal tax increase



Regular shoppers at Nova Scotia liquor stores faced significant price hikes Monday on beer, wine and spirits.

Retiree John McCracken was picking up his usual bottle of wine when he spoke to CTV News outside the NSLC store on Joseph Howe Drive in Halifax.

“I bought last week, the same bottle was $2 less,” said McCracken. “We’re talking like $15, $16 bottle of wine. So not high-end wine.”

“If you go into that liquor store right now, people are going to be shocked.”


Workers were replacing pricing signs in all stores on Monday, but officials insist the overall increase only amounts to about 3 per cent.

“It has to do with overall costs to our supplier community. So that could be anything from freight, transportation, commodities costs, things like glass or aluminum, or other commodities like barley — all of those things are seeing an increase in price, and that’s what factoring in to the overall price increase,” said Allison Himmelman, a spokesperson for the Nova Scotia Liquor Corporation (NSLC).

She says the increase is below the cost of inflation.

Last month, the corporation reported a healthy earnings increase of 6.6 per cent.

On April 1, federal excise taxes are set to increase another 6.3 per cent — the biggest increase in 40 years. 

“The excise tax is actually just one factor that goes into our overall prices here at the NSLC,” said Himmelman.

“And it’s actually a very small factor because not all suppliers choose to pass on that excise tax to their retail product prices.”

Still, some local bars and restaurants say the hikes will have to be passed on to customers, which will hurt business.

“There’s no doubt, yeah, we can’t absorb it,” said Dimo Georgakakos, owner of the iconic Gus’ Pub & Grill in Halifax’s north end.

“We’ve been absorbing so many things, and in the bar business we’re a stoic bunch, and we just sort of put our heads down and keep doing it. And now, they just sort of do that and we’ve got to pass it on and it’s going to make customers come here less,” said Georgakakos, son of the bar’s founder.

He and others are still recovering from lost business in the pandemic, and worry many customers have gotten used to staying home.

“In general, things are not going to get back to the way they were,” said Georgakakos. “It’s going to be different.”

NSLC notes that increased revenue from price adjustments is also shared with producers, including Nova Scotia wineries, brewers and distillers.


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Saudi National Bank appoints chairman after Credit Suisse loss



Decision made nearly two weeks after former chairman Ammar Al Khudairy said the kingdom’s biggest bank by assets would not buy more shares in Credit Suisse on regulatory grounds.

Saudi National Bank, the largest shareholder in Credit Suisse before the bank’s rescue this month, named a new chairman after the lender suffered significant losses on its investment.

CEO Saeed Mohammed Al Ghamdi will take over as the new chairman from Ammar Al Khudairy, who resigned for personal reasons, the bank said on Monday. Deputy CEO Talal Ahmed Al Khereiji takes over as acting chief executive, a bourse statement said.

All changes are effective on Monday and come nearly two weeks after Al Khudairy said the kingdom’s biggest bank by assets would not buy more shares in the Swiss financial institution on regulatory grounds.


The remarks were seen as a trigger to a further sell-off in Credit Suisse’s shares and intensified a crisis of confidence in the lender that had already seen clients pull out more than $110bn in the last three months of 2022.

Combined with global jitters in the banking sector and an already weakened share price, Al Khudairy’s comments contributed to Credit Suisse losing a fifth of its value, which eventually forced it into a takeover by its domestic rival UBS for $3.2bn.

Saudi National Bank, which acquired almost 9.9 percent of Credit Suisse for 5.5 billion riyals ($1.46bn) in November, has itself lost more than $26bn in market value since October 27 after committing to the investment.

By last week, it was sitting on a loss of more than $1bn but said on March 20 that the drop in its investment’s value had no impact on its growth plans and would not affect profitability.

Al Khudairy also said this month that the bank was not looking at any international acquisitions now and instead was focused on its Saudi business.


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What every Canadian investor needs to know today




Canada’s main stock index opened up on Monday with energy and financial stocks adding upward pressure. On Wall Street, key indexes also started higher after a deal to acquire a big chunk of Silicon Valley Bank helped ease concerns about the health of the sector.

At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 58.63 points, or 0.3 per cent, at 19,560.12.

In the U.S., the Dow Jones Industrial Average rose 39.19 points, or 0.12 per cent, at the open to 32,276.72. The S&P 500 opened higher by 11.94 points, or 0.30 per cent, at 3,982.93, while the Nasdaq Composite gained 44.58 points, or 0.38 per cent, to 11,868.54 at the opening bell.


Overnight, First Citizens said it would buy Silicon Valley Bank’s deposits and loans along with certain other assets from the U.S. Federal Deposit Insurance Corporation.

The FDIC said in separate statement it has received equity appreciation rights in First Citizens stock with a potential value of up to U.S. $500-million as part of the deal, Reuters reported. First Citizens said the transaction was structured to preserve its solid financial position and the combined company will have a diverse loan portfolio and deposit base.

SVB’s collapse, the biggest since the 2008 financial crisis, earlier this month sent shockwaves through the global banking sector, triggering huge market volatility and an heightened focus on the health of institutions around the world.

In Canada, Finance Minister Chrystia Freeland delivers the federal government’s next budget on Tuesday afternoon. Investors will be looking for inflation relief among efforts to address the rising cost of living for Canadians.

“Climate policy, and more specifically, Canada’s response to the massive U.S. Inflation Reduction Act, will headline the budget,” Alvin Tan, Asia FX strategist with RBC, said.

“Some targeted relief to help more vulnerable groups cope with higher living costs is also expected, but plans to return the budget to balance remain at best aspirational.”

Later in the week, investors will get a look at the health of the Canadian economy at the start of the year when Statistics Canada releases its report on January GDP on Friday. Early estimates suggest GDP grew 0.3 per cent for the month.

Canadian companies reporting results include Dollarama on Wednesday and BlackBerry on Thursday.

The latest deadline to close Rogers Communications’ $20-billion deal to buy Shaw Communications expires at the end of the week. The companies are awaiting federal approval for the acquisition.

Overseas, the pan-European STOXX 600 was up 1.21 per cent by midday. Britain’s FTSE 100 advanced 0.95 per cent. Germany’s DAX and France’s CAC 40 were up 1.29 per cent and 1.06 per cent, respectively.

In Asia, Japan’s Nikkei finished 0.33-per-cent higher. Hong Kong’s Hang Seng fell 1.75 per cent.


Crude prices advanced as developments in the banking sector helped ease jitters in broader markets.

The day range on Brent was US$74.80 to US$75.96 in the early premarket period. The range on West Texas Intermediate was US$69.13 to US$70.24.

Brent added about 2.8 per cent last week while WTI rose more than 3 per cent.

Sentiment drew some support from new that First Citizens would buy a big chunk of failed Silicon Valley Bank, helping ease concerns about the state of the global banking sector.

Prices also saw some upward pressure from rising geopolitical tensions in Europe amid Russian President Vladimir Putin’s plans to place tactical nuclear weapons in Belarus.

Reuters reports that the move is one of Russia’s most pronounced nuclear signals yet and a warning to NATO over its military support for Ukraine, which has called for a meeting of the U.N. Security Council in response. NATO slammed Putin for his “dangerous and irresponsible” nuclear rhetoric.

In other commodities, gold prices fell for a second session as the U.S. dollar held relatively steady.

Spot gold was down 0.5 per cent at US$1,967.86 per ounce by early Monday morning. U.S. gold futures slipped 0.8 per cent to US$1,968.90.


The Canadian dollar was up modestly while its U.S. counterpart held recent gains against a group of world currencies.

The day range on the loonie was 72.75 US cents to 72.90 US cents early Monday morning.

There were no major Canadian economic releases due Monday.

On world markets, the dollar index, which measures the currency against six rivals, rose 0.06 per cent at 103.05, after advancing 0.5 per cent on Friday as investors sought safer holdings amid concerns about the health of the world’s banking sector.

The euro was up 0.08 per cent to US$1.0771, after falling 0.6 per cent on Friday, according to figures from Reuters.

Britain’s pound was at US$1.2260, up 0.25 per cent, after falling 0.5 per cent on Friday. The Australian dollar rose 0.14 per cent to US$0.6652. The New Zealand dollar was up 0.02 per cent at US$0.6202.

More company news

The Globe’s James Bradshaw reports Onex Corp. is offering to shorten a sunset clause that would keep founder Gerry Schwartz in control of the company to three years in a bid to win support from shareholders over the founder’s plan to step down as CEO. Mr. Schwartz, 80, is chairman and chief executive officer and also controls the $50-billion private equity and asset management company through multiple voting shares. He plans to step aside this spring, with president Bobby Le Blanc taking over as CEO.

Australia’s Origin Energy Ltd on Monday agreed a A$15.35 billion (US$10.21-billion) takeover offer from a consortium led by Canada’s Brookfield, nearing the conclusion of one of the biggest private equity-backed buyouts in the country announced last year. Once the deal is finalized, Origin will be broken up into two businesses – Energy Markets business to be acquired by Brookfield; while MidOcean Energy, the other consortium partner, would take control of Origin’s integrated gas business. –Reuters

Toronto-based Li-Cycle Holdings Corp said on Monday it will build a French facility to break down batteries from forklift manufacturer The Kion Group, marking the latest expansion by the rapidly growing recycling company. The French facility, which is expected to open in 2024 and complement similar sites under development in Germany and Norway, will break down lithium-ion batteries that power Kion’s forklifts and other heavy machinery, giving Li-Cycle a fresh source of batteries to recycle beyond the consumer automobile market. –Reuters

Economic news

Germany business climate

With Reuters and The Canadian Press


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