This country has already slipped into a recession, say Oxford Economics
Some economists think so.
“Whereas the [Bank of Canada] BoC has underplayed the Q3 GDP contraction and still anticipates a soft landing, we believe the economy has already slipped into a recession,” said the team at Oxford Economics led by Tony Stillo.
“Four key themes will shape the economy’s performance in 2024, which we expect will be well below the consensus view and worse than other advanced economies.”
The first theme is a moderate recession followed by a muted recovery.
Oxford believes the recession started in Canada in the third quarter of 2023 and will continue until the second quarter of 2024, resulting in a 1.1 per cent peak to trough decline in gross domestic product.
Economic activity will continue to contract through the mid-year as mounting mortgage renewals push up debt service costs, forcing consumers to pull back on spending.
The housing correction, now in its fifth quarter in a row, will continue as highly indebted households are forced to deleverage. Oxford predicts another 5 to 10 per cent drop in home prices by mid 2024, bringing the overall correction to a 22 per cent decline from the peak in February 2022.
Businesses will struggle during the first half of the year as profits are hit by reduced demand and tighter credit conditions depress capital investment and hiring plans. At the same time a slowdown in the United States will hurt Canadian exports which are not expected to return to pre-recession levels until 2025, they said.
The second theme that Oxford identifies is population growth. With another 1.5 million new arrivals expected over the next two years, the labour supply will grow but the boost to actual economic activity will be gradual. Thus supply will continue to outpace job growth, driving the unemployment rate up to 7.5 per cent by the third quarter of 2024.
The third theme, and this is a big one, is the Bank of Canada. Oxford expects inflation to fall back to the 2 per cent target by the end of this year, a year earlier than the Bank’s forecast. By mid-year policy makers should see that inflation is clearly on track and will begin gradually cutting its benchmark interest rate, ending the year at 4.25 per cent, they said.
“That said, we expect the BoC will ease only gradually back to a 2.25 per cent neutral stance over several years given its concerns that inflation and inflationary expectations could get stuck well above the 2 per cent target, and its strong preference to avoid a course reversal and resume hiking rates,” Oxford said.
Lastly is fiscal policy. Unless the recession is severe, Oxford believes governments in Canada will hold back on major new spending. However, that won’t prevent budget shortfalls from growing.
Oxford expects total government revenue to decline by 1.2 per cent in 2024 amid the economic downturn. Government spending, meanwhile, is expected to rise 4.4 per cent just from higher unemployment and social assistance and debt costs.
2024 could also include some wildcards, Oxford cautions. Wildfires, extreme weather, labour strikes and supply disruptions are all possibilities.
Globally, slowing growth in the United States and the world and a rise in tensions and conflicts all add risk and uncertainty, said the economists.
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Canada’s population growth is high among its peer countries in the Organisation for Economic Co-operation and Development.
According to today’s chart from National Bank of Canada economists, Canada’s growth in 2023 was 3.2 per cent, five times the OECD average. All 10 provinces grew at least twice as fast as that average, from 1.3 per cent in Newfoundland to 4.3 per cent in Alberta.
Though immigration strengthens Canada’s prospects in the long run, National economists say recent growth may be a lot for the economy to absorb as the workforce is not aging faster than the OECD average.
Buying bonds, guaranteed investment certificates and money market funds seems like a good idea while rates are still high. But portfolio manager Emily Wheeler says it’s important to understand what fixed income represents and the role bonds may play in a portfolio versus the role of equities. Get the answer from FP Investing
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.
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.
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.
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