While private consumption is holding up against headwinds from rising living costs, uncertainties over the global economic outlook will weigh on Japan’s delayed recovery from the scars of the COVID-19 pandemic, analysts say.
Japan’s weak Q4 GDP rebound poses challenge for BOJ’s exit path
“From a negative growth in July-September, the rebound isn’t very impressive,” said Toru Suehiro, chief economist at Daiwa Securities.
“We can expect consumption to pick up as service spending stabilizes. But it’s difficult to project a strong recovery partly due to pressure from rising inflation,” he said.
The weak data highlights the delicate task at hand for Kazuo Ueda, the government’s nominee to become next Bank of Japan (BOJ) governor, as he plots a path to normalizing the bank’s ultra-easy policy without derailing a fragile economic recovery.
With inflation exceeding the BOJ’s 2% target, the outlook for the economy and wages will be key to how soon the central bank could phase out its massive stimulus program.
“It might be hard for the BOJ to normalize ultra-easy policy this year as overseas economies are slowing,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“The BOJ may have to wait until fiscal 2024 at the earliest.”
While private consumption rose 0.5% and external demand added 0.3 percentage point to growth, capital expenditure was a drag on the economy, falling a bigger-than-expected 0.5%, the data showed.
For the full year, the economy expanded 1.1% compared with a 2.1% increase in 2021, the data showed.
Japan has seen an increase in the number of overseas visitors since ending in October some of the world’s strictest border controls to prevent the spread of the COVID-19 pandemic.
Economy minister Shigeyuki Goto told reporters the economy was on course for a recovery as the pandemic’s impact fades.
“Rising inflation and the global slowdown are risks,” he said after the data release. “But corporate spending appetite hasn’t cooled … we’re not too pessimistic about the outlook.”
Some analysts, however, warn that global headwinds could weigh on the export-reliant economy and derail a fragile recovery by discouraging manufacturers to hike pay.
“With other advanced economies heading into recessions, we still expect net trade to drag Japan into a recession as well in the first half, especially since business investment is weakening faster than we had expected,” said Darren Tay, Japan economist at Capital Economics.
(Reporting by Leika Kihara and Tetsushi Kajimoto; Additional reporting by Eimi Yamamitsu; Editing by Shri Navaratnam)
From bubble to boom? New report shows economic momentum in Atlantic Canada
Atlantic Canada’s economy has “wind in its sails” and is poised for an economic breakout, according to a new report from the Ottawa-based think-tank Public Policy Forum.
The report, entitled the Atlantic Canada Momentum Index, says that Canada’s East Coast provinces are experiencing “historic” momentum, in large part because of population growth.
“It’s ‘have not’ no more,” said president and CEO Edward Greenspon. “Atlantic Canada did lag on a number of indicators in a lot of ways for years. But that’s not true anymore.”
The think-tank measured 20 metrics, including measuring economic and population growth, level of education, immigration numbers, median age and employment rate. It based provinces’ performance on how many of these indicators improved between 2015 and 2022.
It found Atlantic Canada is performing comparably to the national average, and that it is showing a significant improvement compared to its performance from 2008 to 2015.
“I am proud,” said Wade MacLauchlan, former P.E.I. premier and one of 17 former Atlantic Canadian premiers and deputy premiers who signed on to the report.
“This is something that I and hundreds of thousands of others have worked hard for over generations. And there is a real sense of accomplishment and something on which we can build and grow.”
But some Atlantic Canadians say this report doesn’t tell the whole story: they say they’re squeezed by skyrocketing housing costs, as population growth and increased wealth creates a strain on the existing housing stock.
Population propelling economic growth
Atlantic Canada’s population declined five decades in a row in proportion to the rest of Canada.
That tendency is shifting.
“For the first time, you’re beginning to see population growth,” said Greenspon.
Recent census numbers show the country’s fastest-growing cities — Halifax and Moncton — are in the Maritimes.
Much of that population growth is spurred by people like Pauline Landriault, an Ontario resident who is able to work remotely. She has a property in Nova Scotia and is hoping to move there permanently.
“There’s a lot of people who bought places here during the pandemic,” she said. “With the nature and the trails, it’s the most beautiful province in the country. It’s a hidden gem.”
The Atlantic bubble, which allowed unrestricted travel within the East Coast provinces for a period during the COVID-19 pandemic, may have also made the province attractive to people looking to relocate during the pandemic, according to former Nova Scotia premier Stephen McNeil.
McNeil said his province was beginning to see more jobs creation around 2015, and shifted focus toward attracting more people back to Atlantic Canada to fill those jobs.
He said his government fought the long-held belief that Maritimers must give up career advancement aspirations if they choose to stay out East.
“We can do all the economic stuff right, but if we don’t have people, then we’re doomed,” he said. “We’re as close to New York as Toronto is, but we’re more affordable.”
He said economic challenges in Alberta, low interest rates fostering growth, and Ontario’s high housing prices contributed to people’s decisions to move to Nova Scotia.
Immigration is also booming in Atlantic Canada: the average number of immigrants in Atlantic Canada from 2008 to 2015 was about 7,000 per year. From 2015 to 2022, that average more than doubled, to about 15,000 immigrants per year.
The median age of Atlantic Canadians, while older than the national average, has slowed in its growth.
“There’s a growth in confidence, in population and economic activity. In many ways, this is for Atlantic Canadians, the opportunity to say after 130 years of outmigration, let’s try something else,” MacLauchlan said.
With more prosperity, new challenges
Though the Public Policy Forum report does track the number of new housing builds in a region, it does not track the current costs of housing in Atlantic Canada, which have soared in recent years.
Halifax resident Melissa Gazzard relies on social assistance to pay her bills, and she said increased cost of housing has made it extremely difficult to find a long-term home.
“They’re leaving us that are out here to basically fend for ourselves,” she said. “It’s really hard. They put us in one circle, and say, ‘OK, we’ll deal with you later.’ But it never gets dealt with.”
One of the other metrics measured was access to a family physician, an area where Atlantic Canada continues to struggle.
Nearly 370,000 Atlantic Canadians don’t have a family doctor and the report shows that provinces have not made improvement in decreasing this number.
“There’s new challenges and problems. There’s problems around health care and access to physicians,” said Greenspon.
“There’s always going to be some people left behind, and policy needs to address that and make sure they don’t fall through cracks,” he said.
How to keep building?
For momentum to keep growing in Atlantic Canada, it needs to be fostered, the report concludes.
“It would be negligent to let this swelling momentum pass without putting the necessary policy supports in place to perpetuate it,” it reads.
The think-tank says it will meet with policymakers to discuss policies to build on the momentum.
“The message that I think is most important is to really recognize we can raise our expectations and that we should keep going. Because this is working and it is good for us,” said MacLauchlan.
McNeil, who left office in 2021, said he expects the trend will continue upward.
“Atlantic Canada is alive and well, and quite frankly, a global player,” he said.
Bank of Canada concerned about bringing inflation down
The Bank of Canada says it’s still concerned inflation might be harder to bring down than expected, noting the economy is still in excess demand.
On Wednesday, the central bank published a summary on the governing council’s deliberations ahead of its decision to hold its key interest rate steady on March 8.
The members of the governing council, which include governor TIff Macklem and his deputies, were encouraged to see the economy and inflation both slowing, supporting their decision to hold the key interest rate steady at 4.5 per cent.
However, the governing council remained concerned about the risk of inflation getting stuck above two per cent and agreed that supply was still outstripping demand in the economy.
In the fourth quarter, the Canadian economy posted no growth as the accumulation of business inventories slowed.
“With inventories adjusting earlier than anticipated, governing council concluded that growth in early 2023 may be a bit stronger than the bank had forecast,” the summary said.
Ahead of the federal and provincial governments rolling out their budgets, the governing council also discussed the risk of elevated government spending further fueling demand in the economy.
Finance Minister Chrystia Freeland has pledged that her March 28 budget will be fiscally restrained, noting that the federal government doesn’t want to make the Bank of Canada’s job of fighting inflation harder.
The central bank said it will incorporate the fiscal plans of both levels of government into its updated projections to be released in the next monetary policy report.
The Bank of Canada will release the report along with its next interest rate decision on April 12.
Economists widely expect the central bank to continue holding its key interest rate steady.
The latest consumer price index report showed inflation slowed further in February, with the annual rate falling to 5.2 per cent.
However, an ongoing concern for the Bank of Canada is the tight labour market and strong wage growth.
The unemployment rate continues to hover near record lows, while average hourly wages have been increasing at an annual rate of four to five per cent.
The Bank of Canada notes in its summary of deliberations that the governing council continues to believe that the pace of wage growth will make it harder to get inflation back to its two per cent target, given wage growth isn’t accompanied with productivity growth.
This report by The Canadian Press was first published March 22 2023.
NOVA Chemicals sets bold ESG aspirations to lead the plastics circular economy
- Set new industry standards for driving the transition to the plastics circular economy and solidifying the market for recycled polyethylene, with 30 per cent of its polyethylene sales[i] from recycled contet;
- Be at the forefront of decarbonization by reducing its Scope 1 and 2 absoute CO2 emissions by 30 per cent[ii]; and
- Become a Top 30 company in Canada.
Outlined in NOVA 2030: Our Roadmap to Sustainability Leadership, NOVA Chemicals has also shared its aspiration to reach net-zero Scope 1 and 2 emissions by 2050.
To achieve these aspirations, NOVA Chemicals anticipates investing between USD$2-4 billion by 2030 to expand its sustainable product offerings, decarbonize assets, and build a state-of-the-art mechanical recycling business while exploring new advanced recycling technologies to create high-quality, high-performance recyclable and low carbon plastics.
Building on its proprietary, Advanced SCLAIRTECHTM technology (AST), NOVA Chemicals will explore expanding its product portfolio to include the development of innovative, advanced materials. These new product offerings, which will include the company’s first ASTUTE™ polyolefin plastomers line, will better serve existing customers and provide more options for sustainability-focused end markets such as electric vehicles and renewables.
NOVA Chemicals has already begun growing its portfolio of recycled and recyclable polyethylene resins through its recently announced launch of SYNDIGO™ recycled polyethylene, a new portfolio of products made from circular polymers to encourage both waste and emissions reductions.
The company has also announced a virtual power purchase agreement (VPPA) with Shell Energy for renewable power, marking the first of many opportunities to increase low carbon, renewable energy in its power portfolio.
Today’s announcement builds upon NOVA Chemicals’ long-standing commitment to developing innovative solutions for its customers while enabling the circular economy and preparing for and responding to a changing world. NOVA’s approach to managing its material ESG topics including Responsible Care® and its commitment to the environment, health, and safety, can be found in its annual ESG report.
– 30 –
About NOVA Chemicals Corporation
NOVA Chemicals aspires to be the leading sustainable polyethylene producer in North America. Our driving purpose is to reshape plastics for a better, more sustainable world by delivering innovative solutions that help make everyday life healthier and safer and acting as a catalyst for a low carbon, zero-plastic-waste future. NOVA Chemicals’ innovative and quality product offerings, value chain collaboration, and unique customer experience is what sets us apart; our customers use our products to create easy-to-recycle and recycled content films, packaging, and products. Our employees work to ensure health, safety, security, and environmental stewardship through our commitment to sustainability and Responsible Care®.
NOVA Chemicals, headquartered in Calgary, Alberta, Canada, has nearly 2,500 employees worldwide and is wholly owned by Mubadala Investment Company of the Emirate of Abu Dhabi, United Arab Emirates. Learn more at www.novachem.com or follow us on LinkedIn.
NOVA Chemicals’ logo is a registered trademark of NOVA Brands Ltd.; authorized use.
Advanced SCLAIRTECH™, SYNDIGO™, LEEP™, and ASTUTE™ are trademarks of NOVA Chemicals.
Responsible Care® is a registered trademark of the Chemistry Industry Association of Canada.
This news release contains forward-looking statements. By their nature, forward-looking statements require NOVA Chemicals to make assumptions and are subject to inherent risks and uncertainties. NOVA Chemicals’ forward-looking statements are expressly qualified in their entirety by this cautionary statement. In addition, the forward-looking statements are made only as of the date of this news release, and except as required by applicable law, NOVA Chemicals undertakes no obligation to update the forward-looking statements to reflect new information, subsequent events or otherwise.
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