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.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
