Bank of Canada governor Tiff Macklem had some optimistic comments when he met with reporters Wednesday following his latest Monetary Policy Report. But, as usual, the risks for the economy make far more interesting reading.
One of those risks could begin showing itself in real estate data expected later today.
When the Canadian Real Estate Association releases its latest price and sales numbers for resale homes, there may be early signs that a moderate decline in demand for housing could change into what the bank has warned could become a “pronounced slowing.”
As usual, as smart as they may be, the clever people who advise Canada’s top central banker can only make educated estimates about what the future holds for the domestic and global economy, based on the data they collect now.
But overall, a newly announced cut in bond-buying stimulus by the Bank of Canada — from $3 billion to $2 billion a week — signals a growing confidence by Macklem and his advisers that the Canadian economy is on the mend.
Canadians more confident
“Canadians and Canadian businesses are more confident and that, we think, will be reflected in their spending and investment decisions,” Macklem told reporters Wednesday at the bank’s virtual news conference.
Effectively Macklem foresees a strong consumer-led economic boom — one that he said he had contributed to himself.
Asked whether he would suggest consumers should get out and shop, Macklem declined to give personal advice. Except by example. “I bought an exercise bike and I will admit it’s helped me get through this crisis,” he replied.
Part of Macklem’s optimism is the idea that an expected surge in consumer spending will help motivate businesses to invest to expand capacity. And a strong U.S. economy, where most Canadian exports go, means businesses here will be looking to gear up for external markets, too.
A sharp rise in inflation south of the border this week, hitting a new 13-year high of 5.4 per cent, is a sign the U.S. economy is struggling to fulfil demand in its own expanding economy.
Maybe Canada can help.
“It’s clear that the U.S. economy is experiencing some capacity constraints,” said Macklem. “We do expect the demand for our exports will be lifted by that strong U.S. economy.”
Like his U.S. counterpart, Fed Chair Jerome Powell, Macklem insisted once again that inflation remains temporary and is expected to snap back to two per cent by 2024 once pandemic-related disruptions are over.
But when reporters asked questions that implied doubts inflation would so easily disappear, Macklem revealed the Bank of Canada has uncertainties of its own.
In fact, the central bank’s monetary policy release, posted before Macklem spoke, made it clear how inflation remains a moving target.
Inflation still transitory
“The factors pushing up inflation are transitory, but their persistence and magnitude are uncertain and will be monitored closely,” it said.
A question that Macklem did not address directly was how inflationary wage pressure might be affected by the so-called transitory price increases. As previously discussed, even if they only last for a year or two, prices rising at rates of four and five per cent create sharp cuts in the spending power of wage earners. And whether individually or as part of a union, workers will be negotiating to get that spending power back.
Rather than addressing those future wage demands and their impact on the path of inflation, Macklem’s reply was retrospective. “To this point, wages are really quite subdued,” he said.
As mentioned, some of the most interesting parts of this week’s policy report were in the final section that itemized “risks to the inflation outlook.”
Those risks could lead to inflation being higher than expected, including a stronger-than-expected burst of consumer spending, or longer-lasting supply bottlenecks for either parts or for labour that will add to costs.
On the gloomier side, things that could pull inflation below the bank’s current expectations include a new outbreak of COVID-19 infections, especially among the unvaccinated; weaker than expected exports, potentially worsened by a rising loonie; and a slump in global growth that the bank currently has pegged at seven per cent for this year.
While the central bank and many others would be pleased to see some of the fever come out of Canada’s notoriously red-hot real estate sector, the risk is that a decline could go too far.
Whether in today’s CREA numbers or in coming months, many expect to see that prices and sales have begun to moderate.
People don’t need as much house
“The base-case projection includes a gradual moderation in housing market activity,” said this week’s MPR. “There is a risk that adjustment could be faster or more pronounced.”
A reversal of that kind, said Macklem, could be the product of otherwise benign economic forces, as families are no longer driven to scale up their living space because that’s where most of their lives happened, from work to school to recreation.
“Now that we can go to a restaurant, do you still want a bigger kitchen?” Macklem asked rhetorically, by way of explanation.
WATCH | The economic dangers of skyrocketing home prices:
“A rapid adjustment in the housing market could also have adverse effects on consumption, and these could be made even worse if house prices were to decline,” warned the policy report.
In an economy where housing plays such a big role, that could be a big setback, especially while total employment and business investment are still running significantly below pre-pandemic capacity.
That’s one of the reasons that while moving slowly to reduce stimulus in the form of bond purchases, the Bank of Canada insists it is far from ready to begin raising interest rates.
Instead Macklem has chosen a midpoint between pumping up the economy and letting out a little air.
Follow Don Pittis on Twitter @don_pittis
Canada’s wildfires could cost billions, kill thousands if nothing is done: report – Global News
Western Canada must urgently address the threats posed by highly destructive wildfires or face deadly and costly consequences, says a group of forest and environmental experts from British Columbia and the United States.
The experts, including Mathieu Bourbonnais, assistant professor of earth and environmental sciences at the University of B.C. Okanagan, predict devastating wildfires like those currently burning in B.C. will be “commonplace” by 2050.
The group has released a paper predicting billions of dollars spent on suppression and indirect costs from the fires _ as well as hundreds or thousands of premature deaths each year due to smoke exposure _ ifaction isn’t taken to address climate change and the “daunting” scale of fuel, such as fallen trees and dead vegetation, that’s built up.
“If you look at record-breaking seasons, we’ve spent hundreds of millions of dollars on fire suppression,” said Bourbonnais, a former wildland firefighter from Alberta.
Concerns about the adverse effects of B.C. wildfire smoke pollution
“You can think about, if you spread that out over a couple of seasons, how may communities we could be engaged with on protecting watersheds, protecting drinking water sources, the communities themselves, high-value infrastructure, the ecosystems,” he said in an interview. “By doing that, we’re investing in a future that hopefully we don’t need to spend those kind of dollars on fire suppression.”
The group’s paper suggests creating patches of space in the forest that contain less flammable material, a strategy that can also boost the efficacy of fire suppression efforts, said Bourbonnais.
“Rather than crews responding to a fire with nothing but fuel in front of them, there are natural fire breaks, there’s old prescribed burns that help slow the fire down.”
Asked about the paper, the director of fire centre operations for the BC Wildfire Service said there was recognition of the work that needed to be done with communities as well as reducing fuel in the forests following historic wildfire seasons in 2017 and 2018.
“I’m part of many different planning tables and discussions within this province and within this ministry on how do we do this better,” Rob Schweitzer told a news conference on Thursday.
“Through prescribed fire, through utilization of Indigenous traditional knowledge in use of fire, as well as amending our forest harvesting practices and the woody debris left behind, are all pieces that we continue to discuss and actually start to change policy and implement new strategies to help reduce that amount of fuel.”
South Okanagan couple loses home to Nk’Mip Creek wildfire
About 1,250 wildfires have charred 4,560 square kilometres of bush since the start of B.C.’s fire season in April, compared with the 10-year average of 658 fires and about 1,060 square kilometres burned over the same time period, Schweitzer said.
Three dozen of the 245 wildfires that were burning in B.C on Thursday were considered either extremely threatening or highly visible, including a 655-square-kilometre fire north of Kamloops Lake that prompted an evacuation order for nearly 300 properties.
There were 28 states of local emergency and more than 60 evacuation orders covering 3,443 properties on Thursday. Nearly 90 evacuation alerts covered 17,679 properties, where residents were told to be ready to leave at a moment’s notice, said Pader Brach, executive director of regional operations for Emergency Management BC.
The number of daily new fires has subsided this week, Schweitzer said.
Concern over long-term impact of Ontario wildfires
But higher temperatures are expected to contribute to “severe burning conditions” in B.C.’s southern half, he added. The forecast should bring more fresh air to the Interior, he said, fuelling a “short-lived increase in fire growth” but also aiding firefighting efforts by air, which have been hampered by smoky skies.
The service also anticipates some lighting this weekend, Schweitzer said, and crews are standing ready if new fires start.
Environment Canada issued heat warnings stretching across B.C.’s southern Interior, inland sections of the north and central coasts, as well as the south coast and parts of Vancouver Island. The wildfire service warns the combination of high temperatures and low relative humidity will make fires even more intense.
© 2021 The Canadian Press
Northern Canada may be a popular destination at the end of the world – CTV News
In the event of societal collapse, researchers suggest northern Canada may be “habitable” and could act as a lifeboat, but that other countries are better suited for survival.
The researchers found that Earth is in a “perilous state” due to rapid population growth and an energy consuming society that has altered the Earth’s system and biosphere. They say that societal collapse could happen in various forms, including economic collapse, worsening climate catastrophe, a pandemic worse than COVID-19, or another mass extinction event, which the researchers say is already underway.
The goal of the study, published in the journal Sustainability on July 21, was to create a shortlist of nations that could host survivors in the event of a societal collapse, where civilization could start over. The researchers evaluated the land, how much was available and its quality, how easy or difficult it is to travel to the country, available renewable resources, climate and agriculture, to determine where it would be best to survive the end of the world.
Islands with low population density, particularly those with distinct seasonal changes, fared the best with New Zealand topping the list. Iceland, U.K., Australia (specifically Tasmania) and Ireland made up the rest of the shortlist where it would be best for society to restart after a collapse.
Northern Canada, while not on the shortlist, could act as a “lifeboat” in the event of societal collapse due to climate change and extreme temperatures, but survival would rely on maintaining agriculture and renewable energy sources to keep the population alive.
The researchers showed that the shortlisted countries had strong renewable energy sources, were in temperate climates, and have plenty of agricultural land and space for growth. In the case of Iceland, where suitable land for livestock is not in abundance, this downside is offset by fisheries and the island’s wealth of renewable resources, of which geothermal resources have already been widely developed.
While this may give Canadians living in northern regions a chance to breathe a sigh of relief, there are still zombie fires to contend with as climate change warms the north and shortens winters.
Coronavirus: What's happening in Canada and around the world – CBC.ca
Health authorities in Thailand are racing to set up a large field hospital in a cargo building at one of Bangkok’s airports as the country reports record numbers of coronavirus cases and deaths.
Other field hospitals are already in use in the capital after it ran out of hospital facilities for thousands of infected residents. Workers rushed to finish the 1,800-bed hospital at Don Mueang International Airport, where beds made from cardboard box materials are laid out with mattresses and pillows.
The airport has had little use because almost all domestic flights were cancelled two weeks ago. The field hospital is expected to be ready for patients in two weeks.
The quick spread of the delta variant also led neighbouring Cambodia to seal its border with Thailand on Thursday and order a lockdown and movement restrictions in eight provinces.
-From The Associated Press, last updated at 6:30 a.m. ET
What’s happening in Canada
What’s happening around the world
As of early Thursday morning, more than 196 million cases of COVID-19 had been reported worldwide, according to Johns Hopkins University. More than 4.1 million deaths had been reported.
In the Asia-Pacific region, Tokyo reported 3,865 new cases on Thursday, up from 3,177 on Wednesday and double the number it had a week ago. Japan’s Chief Cabinet Secretary Katunobu Kato told reporters the new cases are soaring not only in the Tokyo area but also across the country. He said Japan has never experienced an expansion of infections of this magnitude.
The World Health Organization’s Africa director says the continent of 1.3 billion people is entering an “encouraging phase after a bleak June” as supplies of COVID-19 vaccines increase. But Matshidiso Moeti told reporters on Thursday that just 10 per cent of the doses needed to vaccinate 30 per cent of Africa’s population by the end of 2021 have arrived. Some 82 million doses have arrived in Africa so far, while 820 million are needed.
Less than two per cent of Africa’s population has been fully vaccinated, and the more infectious delta variant is driving a deadly resurgence of cases.
“There’s a light at the end of the tunnel on vaccine deliveries to Africa but it must not be snuffed out again,” Moeti said.
In the Americas, the Centers for Disease Control and Prevention (CDC) said on Wednesday that 66.6 per cent of U.S. counties had transmission rates of COVID-19 high enough to warrant indoor masking and should immediately resume the policy.
COVID-19 continues to inflict a devastating toll on the Americas, with Argentina, Colombia, Cuba, Ecuador and Paraguay among the countries with the world’s highest weekly death rates, the Pan American Health Organization said.
In the Middle East, Iran on Wednesday reported 33,817 new cases of COVID-19 and 303 additional deaths. The country, which has been hit hard by COVID-19, is experiencing yet another surge in cases.
In Europe, Spain’s prime minister said existing measures to protect the most vulnerable from the pandemic’s economic fallout will be prolonged until the end of October.
Spain, one of the countries that was hardest hit at the beginning of the health emergency, has extended subsidies for the unemployed and furloughs for companies that have gone out of business to try to cushion an economic drop of 11 per cent of its gross domestic product in 2020.
-From The Associated Press, Reuters and CBC News, last updated at 11:15 a.m. ET
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