A few months ago, the only question about a looming recession was how bad it would be. But with the economy and labour markets showing surprising resilience, talk of a soft landing is making a comeback.
Economy
Recession or soft landing? Economists divided as economy, labour market prove resilient
The latest hints of optimism come as recent data on jobs and growth have come in stronger than expected. In December, 104,000 new jobs were created in Canada, while preliminary figures showed the economy grew by 0.1 per cent in November, following an identical gain in October. The picture south of the border has been similar, with jobless claims unexpectedly falling in January.
“It’s definitely possible,” said Doug Porter, chief economist at BMO Capital Markets, noting the strength in U.S. economic data.
“And of course, CPI just the other day showed that underlying inflation does seem to be moderating without a recession,” Porter added. “That’s definitely good news. My odds that I’m putting on a soft landing have been slowly rising over the last three months, and the fact that energy prices have backed off, not just here, but in Europe, as well, that’s playing a big role.”
Six months ago, Porter had put the odds of a soft landing at around 20 to 25 per cent, with a 50 per cent chance of a mild recession and a 20 to 30 per cent chance of a hard landing. While the bank’s base case is still for a mild recession, the prospect of a sustained downturn is starting to dissipate, in Porter’s eyes.
“Well, now I think it’s flipped,” he said. “It’s more like there’s about a 30 per cent chance of a soft landing and about a 15 per cent chance of a very hard landing with the sort of middle mild recession in between being about 50 to 55 per cent.”
The BMO economist isn’t alone in taking a more optimistic tone. South of the border, Goldman Sachs Group Inc. chief economist Jan Hatzius cited factors such as China’s economic reopening, falling inflation and a milder European winter, which is taking some of the strain off that region’s energy crisis, as potentially opening a path to a soft landing. The growing chorus of voices betting that a worst-case scenario has been averted also includes German Economy Minister Robert Habeck, who said a complete European economic meltdown had been averted, and Apollo Global Management chief economist Torsten Slok, who said the U.S. economic picture looks more like a soft landing.
The heads of Canada’s biggest banks also talked down the risk of a severe recession during the RBC Capital Markets 2023 Canadian Bank CEO Conference on Jan. 9. Toronto-Dominion Bank chief executive Bharat Masrani said while he couldn’t say with 100 per cent certainty that no recession would come to pass, he pointed to the jobs market, which continues to be remarkably strong.
“Are we seeing a depression here with some of the questions you’re asking me, saying, ‘Oh, my God, the world is coming to an end?’” Masrani said to the moderator of the event. “We don’t see that.”
To other economists, however, recent optimistic data may be a red herring distracting from the hard reality that the economy cannot emerge unscathed from the most aggressive policy tightening cycle in decades.
David Rosenberg, founder of Rosenberg Research & Associates, Inc., pushed back on the soft landing narrative during a Breakfast with Dave live event in Toronto on Jan. 19.
Rosenberg said he’s noticed the definition of soft landing start to creep out to include mild recessions.
“A soft landing is slower growth, which we’ve already had,” Rosenberg said, adding that he now expects a recession is either here already, or coming up quickly.
Our view is that you’ll see a relatively severe recession in Canada
David Doyle, head of economics, Macquarie Group
Rosenberg pointed to Canada’s overheated housing market and its sensitivity to interest rates in particular, noting that the vulnerabilities in the sector are now worse than before the country was plunged into a recession in the early 1990s.
“I have my concerns because there’s a lag of this (tightening cycle effect),” Rosenberg said. “That has me really concerned and nobody talks about it that the Canadian housing bubble, the price bubble, and the debt bubble was bigger than what John Crowe was dealing with in the late 1980s.”
“Our view is that you’ll see a relatively severe recession in Canada,” Doyle said in January, adding that Macquarie Group is expecting a U.S. contraction of 1.5 per cent of real gross domestic product in 2023.
“In Canada, we think it’ll be about twice that, so about a three per cent contraction and that’s because we’ll feel the effects of that U.S. recession, but we think it’ll be amplified in Canada, of course, because of our economy’s dependence on housing and the relationship the labour market here has with the housing market,” Doyle said.
“The question is how much stock can we put in the labour force survey, seemingly as the only real bright spot in the Canadian economy now?” Bartlett said. “It’s not that the economy’s tanking elsewhere, it’s just that it’s very, very weak.”
“This is going to continue to weigh on economic activity in Canada and points to further weakness as we go into 2023, and we continue to expect that we’re going to tip into a recession in the first half of this year,” said Bartlett.
Business
A timeline of events in the bread price-fixing scandal
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
The Canadian Press. All rights reserved.
Economy
S&P/TSX composite up more than 250 points, U.S. stock markets also higher
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
Economy
Construction wraps on indoor supervised site for people who inhale drugs in Vancouver
VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.
Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.
The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.
“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.
“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”
Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.
The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.
The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.
Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.
More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.
Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.
“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.
Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.
“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.
Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.
Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.
Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”
“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.
This report by The Canadian Press was first published Sept. 18, 2024.
The Canadian Press. All rights reserved.
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