Economy

Strong US economic growth for last quarter likely reflected consumers’ resistance to Fed rate hikes – Halifax.CityNews.ca

Published

11 months ago

October 25, 2023

WASHINGTON (AP) — The government is expected Thursday to report stellar growth for the U.S. economy during the July-September quarter, highlighting the durability of consumer and business spending despite the Federal Reserve’s efforts to cool the expansion with high interest rates.

Last quarter’s robust growth, though, will probably prove to be a high-water mark for the economy before a steady slowdown beginning in the current October-December quarter and extending into 2024.

Thursday’s report is sure to be seized upon by the Biden administration as evidence that its policies have helped spur solid growth, though surveys show that most Americans hold a sour view of the president’s handling of the economy.

The Commerce Department’s figures are expected to show that the nation’s gross domestic product — the economy’s total output of goods and services — expanded at a 3.8% annual pace in the third quarter, according to a survey of economists by FactSet. If accurate, that would amount to the fastest quarterly pace in nearly two years and up sharply from a 2.1% growth rate in the April-June quarter. Some economists have estimated that last quarter’s annual growth could turn out to be as high as 4.5%.

Americans likely drove the economy by stepping up their spending, splurging on everything from cars to concert tickets to restaurant meals. Businesses have also been spending on new factories and other buildings, and companies likely increased their stockpiles of goods, which boosts output.

Still, the breakneck pace is expected to slow because consumers are likely reining in their spending in the final three months of the year, and the sluggish housing market is dragging on the economy. This month, nearly 30 million people began repaying several hundred dollars a month in student loans, which could slow their ability to spend. Those loan repayments had been suspended since the pandemic first struck three years ago.

The economy faces other challenges as well, including a spike in longer-term interest rates since July. The average 30-year mortgage rate is approaching 8%, a 23-year high, putting home buying out of reach for many more Americans.

Fed officials have acknowledged the pickup in growth, which could potentially undercut their efforts to fight inflation. Brisk consumer spending typically leads companies — those that sell physical goods as well as those, like restaurants and entertainment venues, in the economy’s vast service sector — to raise prices, thereby fueling inflation.

But Fed Chair Jerome Powell, in a discussion last week, said he was generally pleased with how the economy was evolving: Inflation has slowed to an annual rate of 3.7% from a four-decade high of 9.1% in June 2022. At the same time, steady growth and hiring have forestalled the recession that was widely predicted at the end of last year.

If those trends continue, it could allow the Fed to achieve a highly sought-after “soft landing,” in which the central bank would manage to slow inflation to its 2% target without causing a deep recession.

At the same time, Powell has acknowledged that if the economy were to keep growing robustly, the Fed might have to raise rates further. Its benchmark short-term rate, which affects the rates on many consumer and business loans, is now about 5.4%, a 22-year high.

“Additional evidence of persistently above-trend growth,” Powell said last week, “could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

Fed officials were surprised by a blowout government report last week on retail sales, which showed that spending at stores and restaurants jumped last month by much more than expected. Americans spent more both for necessities like gas and groceries as well as for discretionary items, such as cars and restaurant meals, on which consumers typically cut back if they are worried about a weakening economy.

There are signs that consumers might continue to resist the Fed’s efforts to cool spending and the economy. Many student loan borrowers started repaying their loans before the official end of the moratorium Oct. 1, suggesting that they were able to make those payments, at least for now, without having to sharply cut back spending in other areas.

“We view this initial jump as a sign that households were willing and able to resume these payments without requiring a large reduction in spending,” economists at JPMorgan write in a research note.

And while high mortgage rates have depressed the sales of existing homes, the vast majority of homeowners are still paying low rates that are fixed for 30 years, meaning that their housing costs remain low even as the Fed hikes rates. That’s a contrast to homeowners in the United Kingdom and Europe, for example, who are more likely to have floating-rate mortgages. About eight in 10 U.S. homeowners have a mortgage rate below 5%, according to online brokerage Redfin.

With inflation generally easing, the Fed is expected to keep its short-term rate unchanged when it meets next week. Many economists increasingly expect the central bank’s policymakers to keep rates on hold when they meet in December as well.

Powell will hold a news conference Wednesday that will be scrutinized for any hints about the Fed’s next moves.

Christopher Rugaber, The Associated Press

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Business

A timeline of events in the bread price-fixing scandal

Published

7 hours ago

September 19, 2024

Anne Joseph

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)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

7 hours ago

September 19, 2024

Anne Joseph

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)

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

21 hours ago

September 18, 2024

Anne Joseph

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.

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