As COVID-19 spreads and oil prices plumb record lows, the dreaded “R” word — recession — is starting to resurface in Canada.
A rising number of COVID-19 cases in the U.S. raises the risk of dwindling demand and major supply chain disruptions for Canadian businesses, some analysts say. At the same time, the oil price war between Russia and Saudi Arabia, both of whom have pledged to flood the market with ramped-up supply, bodes ill for Canada’s oil-producing companies.
So is Canada about to hit a recession?
Right now, that’s “almost a coin toss,” said RBC chief economist Craig Wright.
Given the recent oil-price shock and how important the energy sector is for Canada, that risk seems to be rising nearly “by the day,” he added.
Still, for now, Wright puts the odds slightly in favour of Canada being able to avoid an economic downturn.
“I’d say probably 55 [per cent] chance of no recession, 45 [per cent] a risk of recession,” he said.
1:55 Stocks fall, oil drops: big problems for Alberta’s bottom line
Stocks fall, oil drops: big problems for Alberta’s bottom line
For now, Wright sees Canada headed for flat growth in 2020. RBC’s current forecast is for a 1-per cent contraction in the second quarter — from April to June — with the economy crawling back into positive territory in the second half of the year, eventually ending 2020 with a meagre but still positive 0.6-per cent annual growth.
Other economists share a similar assessment. CIBC currently projects a minor contraction of 0.3 per cent in the second quarter, followed by “a small negative” in the June-to-September period with annual GDP growth at 1 per cent for 2020.
That forecast dates to before Monday’s oil price drop, said CIBC chief economist Avery Shenfeld, who added the bank wants to see how recent developments evolve before updating its projections.
1:53 Alberta economy grappling with coronavirus fears and oil price drop
Alberta economy grappling with coronavirus fears and oil price drop
If oil prices stay at the current low levels, the bank may have to shave off half a percentage point of GDP growth from its outlook.
Brent crude, the benchmark for global oil prices, was at US $37 a barrel on Tuesday, after dipping as low as $32 a barrel on Monday. West Texas Intermediate, the benchmark for North America, rose to nearly $34 after dropping to $31.
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1:02 COVID-19: Morneau says measures to stimulate economy coming by end of week
COVID-19: Morneau says measures to stimulate economy coming by end of week
Saudi Arabia and Russia have both pledged to scale up oil production even amid weak global energy demand after the OPEC+ group of oil-producing countries failed to reach an agreement to do exactly the opposite: cut back output in order to support prices amid the coronavirus outbreak.
The news from the energy markets further rattled investors already worried about the economic impact of COVID-19, triggering a historic stock sell-off. In Canada, the S&P/TSX composite index dropped 10 per cent on Monday, the biggest one-day plunge since 1987.
On Wall Street, the S&P 500 tumbled 7 per cent to its lowest since June 2019, while the Dow Jones Industrials crashed by a record 2,000 points, its biggest decline since 2008.
That prompted BMO to revise down its already negative forecast for the second quarter of the year. The bank now expects a slump of -3.5 per cent in the April-to-June period with a weaker-than-expected rebound in the latter part of the year, according to economist Benjamin Reitzes.
But like RBC and CIBC, BMO still sees Canada ekeing out a modest 0.5-per cent growth for the year as a whole.
Government stimulus could make a big difference, both Wright and Shenfeld said.
0:36 COVID-19: Morneau declines to say whether budget will be delayed over virus fears
COVID-19: Morneau declines to say whether budget will be delayed over virus fears
With the Bank of Canada cutting interest rates and extra government spending likely in the works, RBC sees Canada bouncing back with two per cent growth in the last three months of the year, Wright said.
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Ottawa should step in to cushion the blow for businesses struggling with the oil price crash and supply disruptions caused by coronavirus, Wright said. It should also think about temporarily boosting Employment Insurance benefits for individual Canadians.
Shenfeld said the government’s first order of business when planning stimulus measures should be to think about measures to help businesses affected by coronavirus-related factory shutdowns and other operational disruptions.
Ottawa should also accelerate unemployment benefits for those who are forced into quarantine, he added.
“Not everyone has an employer who’s going to pay them, and they have to make their rent check at the end of the month.”
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On Monday, Finance Minister Bill Morneau said Ottawa would announce targeted measures to shore up the economy, including funding for health care, by the end of the week.
With debt-to-GDP around 30 per cent and the cost of borrowing at near-zero, the federal government has lots of room to run a large deficit in order to support the economy, both Wright and Shenfeld said.
2:03 Coronavirus outbreak: Freeland commends cross-Canada cooperation on COVID-19 containment
Coronavirus outbreak: Freeland commends cross-Canada cooperation on COVID-19 containment
Provincial coffers, on the other hand, aren’t in as good shape as they were heading into the financial crisis of 2008-2009, Shenfeld said.
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Alberta, where the government of Jason Kenney recently chartered a path to rebalancing the books, will likely see its fiscal numbers pushed “massively off track,” Wright said.
Kenney’s 2020-21 budget, released last month, projects a shrinking $6.8 billion deficit, but the target is based on oil prices of $58 per barrel.
Still, “there’s a time and a place for balancing the budget and during an economic downturn, that’s not the time,” he added.
Alberta has been running large deficits in recent years, but its net debt to GDP stands at around 10 per cent, the lowest in Canada and much lower than Ontario’s 40 per cent.
The potential impact of COVID-19 and the oil market woes on Canada’s job market remains difficult to predict, both Wright and Shenfled said.
If the economic hit is temporary, the main effect on employment may be simply shortened hours for some employees. However, if downturn turns deeper and longer-lasting those reduced work scheduled could turn into layoffs, Wright said.
The good news is there’s space for “the federal government to step in andavoid some of the bigger downside shocks to the job market.”
VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
