Bank of Canada Governor Tiff Macklem waits to appear at a Finance Committee meeting on Feb. 1, in Ottawa.Adrian Wyld/The Canadian Press
The Bank of Canada governor is urging all levels of government to work together to boost the supply of homes across the country, arguing that the rising cost of housing, which has become the biggest driver of overall inflation, can’t be addressed by monetary policy alone.
In a Thursday appearance before the House of Commons finance committee, Tiff Macklem was peppered with questions about housing affordability and the central bank’s own role in increasing shelter costs for many homeowners by pushing up mortgage rates.
“You’re not going to solve housing with low interest rates and you’re not going to solve it with high interest rates. We’ve tried both, and we’ve had high shelter price inflation,” he said.
“The durable solution is to increase the supply, and that includes both the supply of homes and the supply of purpose-built rental.”
Even as overall consumer price index inflation has declined – falling to 3.4 per cent in December from a 2022 peak of 8.1 per cent – shelter costs have continued to surge.
This is partly a result of the Bank of Canada’s own monetary policy tightening campaign, as higher interest rates push up monthly mortgage payments. Mortgage interest costs rose 28.6 per cent in December from the year before.
But rents have also been rising rapidly, jumping 7.7 per cent year-over-year in December, as brisk population growth driven by immigration has run into a long-standing shortage of rental units. And home prices, while dipping from 2022 highs, have not fallen as much as the central bank had expected.
Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Wilkins make their way to the Finance Committee meeting.Adrian Wyld/The Canadian Press
Typically “as interest rates go up, you would see a decline in house prices,” senior deputy governor Carolyn Rogers told the parliamentary committee on Thursday. “But because we have sort of a chronic, structural shortage of housing in Canada, we haven’t seen that sort of offset.”
Both Mr. Macklem and Ms. Rogers batted away questions about when the Bank of Canada will lower interest rates. Last week, the bank held its policy interest rate at 5 per cent for the fourth consecutive time. It dialled back its threats of additional rate hikes, but said that it was too early to start talking about easing monetary policy.
Bay Street analysts and financial markets are betting the central bank will start cutting rates in the first half of 2024, with most pointing to the June rate announcement as the mostly likely date. Earlier this week, former Bank of Canada deputy governor Paul Beaudry, who left the bank last summer, said he thought a July rate cut was more likely.
“We can’t put it on the calendar,” Mr. Macklem said Thursday. “We need to see how inflation evolves.”
The bank’s latest forecast sees annual CPI inflation hovering around 3 per cent until the middle of 2024, before dropping to 2.5 per cent by the end of the year, and back to the bank’s 2-per-cent target sometime next year.
A big part of getting inflation back under control will involve getting a handle on increasing shelter costs. But here, the central bank faces several dilemmas.
Lower interest rates will be a relief to homeowners with variable-rate mortgages and fixed-rate mortgages coming up for renewal. But any hint of rate cuts could spark another run-up in home prices. That happened last spring when the Bank of Canada first announced a “conditional pause” to monetary policy tightening, which ultimately contributed to the bank’s decision to hike interest rates two more times last summer.
High interest rates also discourage new home construction by increasing costs for developers and reducing demand for preconstruction sales. This is showing up in a decline in housing starts. In effect, the bank’s efforts to reduce demand in the short-run could have a negative impact on longer-term supply.
Mr. Macklem downplayed this dynamic, arguing that there was a worthwhile tradeoff, at least from the perspective of controlling inflation.
“Yes, there is an impact on the supply side,” he told members of Parliament, referring to higher interest rates. “Developers have pointed that out. But when we look at the sector as a whole, the impact on demand is much stronger than on the supply side.”
In the medium-term, governments at all levels – federal, provincial and municipal – need to do more to encourage home construction while avoiding policies that increase demand for housing, Mr. Macklem said.
“Things that improve supply will be particularly helpful in the current situation … speeding up permitting, taking some of the uncertainty out of the process, making it more predictable.”
Federal and provincial governments have announced several policy changes in recent months aimed at boosting construction. This includes cutting taxes on new purpose-built rental units and increasing funding available to builders by expanding Canada’s mortgage securitization system.
The federal government has also taken steps to reduce demand on rental housing by capping the number of international students permitted to study in Canada. Last week, Ottawa said it would approve around 360,000 undergraduate study permits in 2024, a 35-per-cent reduction from last year.
Mr. Macklem said in an interview with The Canadian Press last week that the cap “will help take a bit of pressure off rents going forward.”
HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
