Economists say the latest GDP data from Statistics Canada showing a contraction in the economy suggests the Bank of Canada’s rate hiking campaign may be coming to an end.
The Canadian economy appeared to stall in the second quarter as investment in housing continued to fall, led by drop in new construction. The economy contracted at an annualized rate of 0.2 per cent in the second quarter, Statistics Canada reported, far weaker than forecasters had expected.
The decline in the second quarter came as housing investment fell 2.1 per cent to post its fifth consecutive quarterly decrease. New construction dropped 8.2 per cent in the quarter, while renovation spending fell 4.3 per cent.
The drop in spending came as Canadians face higher borrowing costs fuelled by interest rate hikes by the Bank of Canada, which is trying to bring inflation back to its target of two per cent.
Tu Nguyen, an economist with accounting and consultancy firm RSM Canada, said the cooling economy should be enough evidence for the central bank to forgo further rate hikes unless there is another major external shock that sends inflation upward.
“The bank’s goal is eventually to restore price stability, to taper an overheated economy. Their goal is not to incur a recession. So it looks like the bank is achieving their goal,” she said.
“They’re certainly going to continue monitoring the data because there has been quite a lot of noise. The reason why I’m fairly confident that this is the end of it is we don’t expect spending to really go up towards the end of the year.”
Nguyen said this is the first time since the early days of the pandemic that spending on services did not grow, which she noted is a powerful signal of a cooling economy. This, despite household savings going up, suggests “people actually have more money in their pockets but they’re choosing to save it and not spend it because they’re anticipating a recession.”
The Bank of Canada’s next interest rate decision is set for next week.
The central bank raised its key interest rate by a quarter of a percentage point to five per cent in July as it said it remained concerned that progress toward its two per cent inflation target could stall.
Nguyen predicted the Bank of Canada likely won’t cut rates until at least April 2024.
“The bank needs to see sustained evidence of inflation going at least towards two per cent. It probably won’t get to two per cent until 2025 but it needs to stay below three per cent for long enough,” she said.
“If the bank cuts rates too early, it’s encouraging businesses and households to go out and borrow again, sort of heating up the economy again, and we really need a period of cooling down.”
Statistics Canada also revised its reading for growth in the first quarter to an annual pace of 2.6 per cent, down from 3.1 per cent.
“The surprise contraction in second-quarter GDP leaves little doubt that the Bank of Canada will keep interest rates unchanged next week,” wrote Stephen Brown, deputy chief North America economist for Capital Economics, in a note to clients.
“With the fall in monthly GDP in June and the apparent stagnation in July setting a weak foundation for the third quarter, the Canadian economy may already have fallen into a modest recession.”
The weakness in the second quarter was also attributed to lower inventory accumulations, as well as slower growth in exports and household spending.
Exports of goods and services crept up 0.1 per cent in the second quarter compared with a 2.5 per cent increase in the first quarter.
Growth in real household spending slowed to 0.1 per cent in the second quarter compared with 1.2 per cent in the first quarter.
Meanwhile, business investment in non-residential structures gained 2.4 per cent in the second quarter, boosted by a 3.3 per cent gain in spending on engineering structures.
The overall pullback in the second quarter came as the economy contracted by 0.2 per cent in June.
Services-producing industries dropped 0.2 per cent in June, while goods-producing industries contracted 0.4 per cent for the month.
Statistics Canada also said its early estimate for July suggested real GDP was essentially unchanged for the month, though it cautioned the figure would be updated.
HALIFAX – The Nova Scotia government has released a code of conduct for municipal politicians across the province.
The code includes 40 guidelines under 14 categories, covering topics from gifts and benefits, to how officials should handle confidential information.
Municipal Affairs Minister John Lohr says a code ensuring elected municipal officials have clear guidance on conduct and behaviour is long overdue.
The code was originally requested by the provinces’ municipalities and villages, and it was developed based on recommendations of a working group established in January 2022.
The working group recommended a code that applied across the province, with processes for investigating complaints and imposing sanctions.
The provincial government says councils and village commissions must adopt the code of conduct by Dec. 19.
This report by The Canadian Press was first published Oct. 21, 2024.
PARIS (AP) — The French transport minister is expected to meet with cycling associations on Monday following the death of a cyclist in Paris after a dispute with a driver.
The 27-year-old cyclist, Paul Varry, was allegedly deliberately run over last Tuesday by an SUV driver, who now faces preliminary charges of murder. The incident has sparked protests across France, with demonstrators calling for safer roads for cyclists and an end to “motorized violence.”
Varry, a dedicated advocate for urban cycling, was known for his work improving cycling infrastructure in Saint-Ouen, a northern suburb of Paris. Hundreds gathered on Saturday to honor him, including cycling groups like Paris en Selle, which vowed to continue his fight for safer roads.
Transport Minister François Durovray, in a post on X, expressed his deep sympathy for Varry’s family and said that cyclists “have a place on the road,” vowing to address safety concerns. He called Monday’s meeting an opportunity to listen and act on behalf of France’s cycling community, which has been shaken by Varry’s death. The tragedy has reignited national debates on road safety and cyclist protection as France sees an increasing number of cyclists in its urban centers.
Alexis Fremeaux, co-president of the French Federation of Bicycle Users, said that “Paul’s death, killed by a motorist in Paris, has resonated deeply.
“It stirred such emotion because this kind of murder is exceptional. But the violence that cyclists face on the roads today — every cyclist has experienced it. Whether it’s threats, being put under pressure, being endangered, or even deliberate collisions — every cyclist has a story to tell.”
Cycling advocates hope that Varry’s death will spark action and lead to What they say are long-overdue reforms to improve road safety.
ZURICH (AP) — Canadian national team captain Jessie Fleming, former U.S. national team captain Becky Sauerbrunn and Netherlands forward Vivianne Miedema are among more than 100 women’s soccer players who have signed an open letter protesting FIFA’s sponsorship deal with Saudi Arabian state oil giant Aramco.
The letter calls the deal, which includes sponsorship at the 2027 Women’s World Cup in Brazil, “much worse than an own goal,” citing Saudi Arabia’s record on the rights of women and LGBTQ+ people and the impact of Aramco’s oil and gas production on climate change.
“As well as funding the Saudi regime, Aramco is one of the biggest polluters of the planet we all call home. In taking Aramco’s sponsorship, FIFA is choosing money over women’s safety and the safety of the planet — and that’s something we as players are standing against, together,” Fleming said in comments via campaign group Athletes Of The World.
Fellow Canadians Erin McLeod, Emma Regan, Samantha Chang and Nyla Peterkin also signed their names to the letter.
Sauerbrunn voiced concern for women who are imprisoned in Saudi Arabia.
“The safety of those women, the rights of women, LGBTQ+ rights and the health of the planet need to take a much bigger priority over FIFA making more money,” said Sauerbrunn.
The letter calls on FIFA to replace Aramco “with alternative sponsors whose values align with gender equality, human rights and the safe future of our planet,” and to give players a voice on the ethical implications of future sponsorship deals.
“This letter shows that as players this is what we don’t want to stand for and accept within women’s football. It’s simple: this sponsorship is contradicting FIFA’s own commitments to human rights and the planet,” Miedema said.
FIFA’s deal with Aramco was announced in April as part of ever-closer ties between Saudi Arabia and world soccer’s governing body. FIFA is expected to confirm Saudi Arabia as host of the 2034 men’s World Cup in December. It is the only candidate for the tournament.
“FIFA values its partnership with Aramco and its many others commercial and rights partners. FIFA is an inclusive organisation with many commercial partners also supporting other organizations in football and other sports,” world soccer’s governing body said in an emailed statement Monday, adding that commercial revenue is reinvested into developing women’s soccer.
