Pent-up demand has Canadians shrugging off spiraling prices, for now | Canada News Media
Connect with us

Business

Pent-up demand has Canadians shrugging off spiraling prices, for now

Published

 on

Red-hot inflation has Canadians opening their wallets wider at the grocery store and gas pump, but that’s not stopping them from also spending on travel, new cars and home improvements as pent-up demand outweighs cost pressures, at least for now.

Household consumption was the top contributor to Canada’s economic growth last year, according to official data, as consumers embarked on a historic spending spree. The Bank of Canada sees the binge continuing to drive the economy in 2022 even as it kicked off a tightening cycle this month.

But record mortgage debt and higher interest rates, coupled with the prices of everyday essentials rising at their fastest pace in three decades, risk putting a damper on all this spending, and that could curb economic growth.

Consumers, however, have shrugged off the spiraling prices so far and once again are ramping up their discretionary spending, according to interviews with retailers, car dealers, real estate agents and economists.

“Canadians have solid balance sheets, they’ve racked up ample savings and, for the most part, confidence is holding up,” said Rannella Billy-Ochieng’, an economist at RBC Economics.

RBC has pegged excess savings in Canada as a result of the COVID-19 pandemic at more than C$300 billion ($238.5 billion), enough to help consumers hedge against the rising cost of living, said Billy-Ochieng’.

The Bank of Canada expects Canadians to draw down roughly C$40 billion of those excess savings through the end of 2023. Consumer spending intentions hit their highest level on record in the fourth quarter of 2021, the central bank said.

The result will be a tsunami of consumer activity unleashed on the Canadian economy, assuming inflation – currently running at 5.7% annually and set to go higher – is contained and geopolitical tensions do not broaden.

CARS AND TRIPS

At Sean’s Auto Sales in Ottawa, owner Sean Liu said consumers are clamoring for gently used cars despite record high fuel costs and hefty price increases.

“Sometimes I have two or three people fighting over one car,” Liu said.

The car buying frenzy is fueled by pent-up demand after months of low inventory due to a global semi-conductor chip shortage, said Huw Williams of the Canadian Automobile Dealers Association. With car lots filling back up, Williams sees a surge in sales followed by more normal buying patterns.

Tourism has also benefited, with travel spending touching pre-pandemic levels for the first time in February, according to RBC’s consumer spending tracker.

“People are seizing the moment to travel,” said Susan Catto, head of publishing and production at Travelzoo Canada, adding that most of the would-be travelers are buying trips they can take right away.

Catto expects bookings to increase considerably as pandemic-related border restrictions ease.

Canadians took out record mortgage debt during the pandemic, sending house prices surging 52% in just two years. With interest rates now rising, some 73% of Canadians are concerned about the impact on their living expenses, according to an Angus Reid survey this month for accounting firm Grant Thornton.

Nearly half of respondents said they could not afford an extra C$100 of debt payments per month.

“Some people have absolutely no financial room to spare,” said Freida Richer, a partner at Grant Thornton.

Established homeowners, however, have more breathing room. Higher property prices mean they are willing to spend a lot more on renovating their homes than in pre-pandemic times, said Tim Priddle, co-owner of the WoodSource, a lumber and millwork shop in Ottawa.

But Priddle expects demand for large home renovations to cool later this year as spending priorities shift again.

“A lot of people in 2023 will probably say ‘let’s go on a holiday to Europe’ rather than renovate the backyard,” he said.

($1 = 1.2578 Canadian dollars)

 

(Reporting by Julie Gordon in Ottawa; Editing by Paul Simao)

Business

TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

Published

 on

 

CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Business

BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

Published

 on

 

BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Business

Canada Goose reports Q2 revenue down from year ago, trims full-year guidance

Published

 on

 

TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.

The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.

Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.

On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.

In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.

It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:GOOS)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending

Exit mobile version