British Columbia is headed into a potentially nasty recession, according to the latest analysis from the Business Council of B.C.
The organization’s latest 2020 forecast amid the novel coronavirus pandemic suggests the province’s economy could shrink between seven and 12 per cent.
“Both those numbers would be unprecedented, even the lower one, in terms of a decline in economic activity,” council president Jock Finlayson told CKNW Radio, Tuesday.
5:26 COVID-19 B.C. aid package details
COVID-19 B.C. aid package details
“So we’re really in uncharted waters here, there’s no doubt about that.”
Finlayson said even the seven-per-cent figure would be the same as about three times the impact of the Great Recession in 2009.
Finlayson said it was difficult to calculate the magnitude of the effect of completely shutting down entire sectors.
He said if the crisis goes on for more than three or four months, it it would amount to a “complete sort of meltdown.”
The Canadian Federation of Independent Businesses warned Tuesday that a third of all small businesses in the country could go under within the month without additional aid.
The federal government is offering businesses a 10-per-cent wage subsidy to keep employees on the payroll, deferring income tax payment deadlines until September, and boosting tax credits to small and medium-sized businesses.
The B.C. government is deferring payment of a slew of provincial taxes, including PST and the Employer Health Tax until the end of September, and cutting the school tax for certain property classes.
Finlayson called those good first steps, but urged more action than “temporary tax relief.”
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“Given the numbers … around the decline in economic activity that were anticipating, I think it’s pretty clear governments, both federally and provincially, will have to do more, as will the Bank of Canada.”
2:07 B.C. government unveils $5-billion aid package to help people, businesses impacted by COVID-19 pandemic
B.C. government unveils $5-billion aid package to help people, businesses impacted by COVID-19 pandemic
B.C. and Ottawa need to study what countries in Europe are doing, he added, and be prepared to borrow the best ideas that will work in Canada.
He pointed to Denmark, which is guaranteeing wages up to 75 per cent, and Germany, which is spending “enormous sums” to support companies of national importance.
Finlayson said the European Central Bank is expanding its quantitative easing program and directly buying debt issued by corporations to try to stabilize credit markets and waves of bankruptcy.
Quantitative easing is an unconventional monetary policy that sees central banks buy government securities or other securities in an effort to increase the supply of money and stimulate the economy.
“My own personal view — and we’re (the Business Council of B.C.) not ready to recommend this — but my own view is we’re going to have to look at options like that in Canada, if this crisis persists over the next few months.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
