Canada’s economy was well prepared for the shock of the coronavirus and will likely recover faster than those of comparable countries, according to the governor of the Bank of Canada.
But even with strong economic fundamentals and a robust program of economic support, Stephen Poloz said that in a best-case scenario it would take the economy a year to regain its former health once the global economy begins to reopen, while a worst-case scenario could deliver deflation and debt defaults.
When the economy does start to grow again, it won’t be felt equally in all provinces, Poloz said, with resources-based regional export economies awaiting the rest of the world’s economies to regain enough strength to start buying Canadian commodities again.
Poloz made the remarks before the House of Commons finance committee Thursday as he took questions on the government’s response to COVID-19.
Liberal MP Sean Fraser asked if he felt the fiscal measures — such as the Canada emergency response benefit (CERB) and the CRA salary subsidy — would help the economy recover faster than after past recessions and more quickly than other comparable economies around the world.
“Yes I have quite a lot of confidence in that,” Poloz said during the virtual meeting.
Poloz explained that both the CERB and the CRA subsidy are “elastic” measures because they are not tied to a predetermined budget but rather increase and decrease depending on how many claims are made.
WATCH | Poloz explains the best-case scenario for economic recovery:
Bank of Canada Stephen Poloz spoke with MPs on the Commons Finance committee on Thursday 1:33
He said those programs help to put a floor under people as the economy sinks and then turns into the foundation for the recovery, ensuring workers are better poised to rejoin the economy once it fully reopens.
Poloz also said part of his optimism is because Canada’s balance sheet was in good shape heading into the crisis; including a low debt-to-GDP ratio compared to other countries.
“We started this whole episode with our economy operating [at] full employment, at capacity and inflation on target, which is not something that was shared by many other countries,” he said.
“It’s like a person who is healthy and fit, has a better chance of shaking off the COVID-19 virus, so does a healthy, fit economy have more resilience as we go forward.”
Poloz said that while the Bank of Canada usually predicts for how the economy will grow in the coming months, the uncertainty of the pandemic and how it will shake out means that he can only provide best- and worst-case scenarios.
“It’s important for us to bear in mind that this is a temporary thing,” Poloz said. “This is not an open-ended situation. Our scenario, that we describe as our ‘best case’ given where we are today, would have us looking at various places in the economy where they begin to restart sometime in late May probably.”
Slow, uneven restart
He said that the economy, in this best-case scenario, would start slowly, with many people perhaps still working from home and businesses and services opening up in stages.
“The economy should begin restarting before the third quarter starts, and for sure would be doing so in the third quarter,” he said. “That means we are going to get a ‘V’ shaped trajectory, so down sharply, then of course back up but not all the way.”
Poloz said Canada’s economy, in this scenario, would initially bounce about halfway back, almost as quickly as it was shut down, but then growth would, over the course of about a year, eventually return to the same trend it was on before the global economy shut down.
“When we look back at this we’ll say ‘well that was a full year, more or less, departure from our previous path,'” he said.
The worst-case scenario is a bit of a bottomless pit that could see deflation, reducing income for companies and making it harder for them to pay off debts.
Poloz also said the recovery is likely to be much slower for provinces that rely heavily on the export of natural resources such as oil and gas, an industry hit hard by a fall in global oil prices. Canada’s reliance on selling commodities into international markets will return to growth slowly as countries around the world recover, and become ready to start trading, at different rates, he said.
“As an important exporter we know our foreign counter-parties will be going through [the recovery] at different times, so it’s not like we are going to have a simultaneous recovery,” he said.
“That’s why oil and other commodities might take a little longer to get the full benefits of a recovery.”
Finance Minister Bill Morneau also made a brief appearance before the committee and revealed that Canadian banks have made 220,000 government-backed loans to small businesses to help carry them through the shut down.
That $8.8 billion in lending is part of Ottawa’s recently announced programs to provide government-backed loans of up to $40,000 for small businesses. The loans are interest free for the first year and up to $10,000 of the loan is forgivable.
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.
