Uh-oh. More good news that may be bad for your economic health | Canada News Media
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Uh-oh. More good news that may be bad for your economic health

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At first glance, the reappearance of “sold over asking” real estate signs may seem like an encouraging signal for the Canadian economy, especially for highly invested homeowners who have watched prices fall from last year’s highs.

But a growing number of economists worry that a series of recent indicators, the latest being Wednesday’s rise in Canadian retail sales, may instead be a red flag for central bankers, goading them into more rate hikes that could ultimately make many Canadians feel miserable.

With each new smidgen of optimistic data, money market traders point to a rising chance that central bankers will raise rates again. A growing number of Canadian bank economists agree there will be another rise in interest rates when the Bank of Canada’s Tiff Macklem announces his rate decision on July 12.

Rate hike ‘baked in’

“We expect that there is a 25-basis-point hike baked in for July,” said RBC economist Carrie Freestone on Wednesday, using economist-speak for a quarter percentage point, shortly after the retail figures came out.

That will mean more pain for short-term and floating-rate borrowers, whose interest costs rise with the Bank of Canada overnight rate.

Borrowers looking for longer-term fixed-rate loans are more directly affected by the Federal Reserve, the U.S. central bank that paused last week after 10 consecutive rate increases while warning that two more quarter-point rises are likely before the year is out.

Fed chair Jerome Powell reiterated that warning in front of a hostile U.S. congressional committee on Wednesday.

Prices are still surging but shoppers are still shopping, one more sign of an economic boom that repeated interest rate hikes just can’t seem to quell. (Andy Hincenbergs/CBC)

“Inflation pressures continue to run high and the process of getting inflation back down to two per cent has a long way to go,” Powell testified to the House Financial Services Committee.

The fact is very few people, including members of Congress, like rising interest rates. Stock prices, which have recently been on the upswing, slumped after Powell spoke.

The continued surge in the price of everything, long after prices were supposed to be contained by rising interest rates, is not just a U.S. and Canadian phenomenon. As the Wall Street Journal reported this week, “inflation around the world just won’t go away.”

Buoyant global outlook

Policymakers worry that the effect of rate hikes are ebbing, the Journal reported. A decline in house prices seems to have stopped and unemployment has begun to fall again.

“Canada, Sweden, Japan and the U.K. skirted recessions after growth unexpectedly rebounded,” said the Wall Street Journal report. “Business surveys suggest a relatively buoyant outlook.”

In the U.S., there have been many reports that a persistently rising stock market is making the Federal Reserve nervous. In the Journal’s words, a rising market was telling Powell, “You haven’t done enough.”

U.S. Federal Reserve Chair Jerome Powell testifies before Congress this week and suggested there may be more interest rate hikes this year. (Jonathan Ernst/Reuters)

BMO’s chief economist, Doug Porter, echoed that point in a recent market overview.

“The Canadian housing market is sending the Bank of Canada the same message,” he wrote, noting that sales have now rebounded to last year’s levels, and prices are rising, too.

Thus, we’re seeing the return of “sold over asking” signs.

“We suspect that for all the Bank [of Canada]’s talk about Q1 GDP [economic growth], April CPI [inflation] and a strong job market, the rekindling in the housing market really hit a nerve,” said Porter.

And that may mean continuing rate hikes until house buyers feel the effect. Conventional economics tells us that if interest rates go high enough, even with a housing shortage, eventually no one will be able to afford a loan to pay high house prices. But evidently, we have not reached that point.

More spending, but not so much stuff

The latest retail data does indicate that some consumers are beginning to feel the pinch as borrowing costs and prices outpace incomes.

While retail sales were up more than one per cent in dollar terms, consumers were not getting as much for their money. The actual amount of stuff they were able to buy only rose by a third of a per cent and sales of things like furniture and appliances, which many people borrow to buy, actually fell.

As RBC’s Carrie Freestone noted in a CBC interview on Wednesday, before the Bank of Canada makes its decision, there are plenty more indicators besides retail sales and houses to show whether prices are responding to the central bank’s action, including new inflation numbers and employment data.

Central bankers both here and in the U.S. have warned repeatedly about inflationary expectations, a self-fulfilling prophecy that makes prices keep rising because people expect higher prices. But it may be that Macklem and Powell face a different kind of expectation, where people refuse to believe that a rising economy is about to end.

Certainly Canadians who learned to ignore nearly two decades of gloomy predictions about housing and thus profited from enormous returns in an unquenchable residential real estate market may be difficult to convince.

That continued optimism is hard to reconcile with the latest round of warnings from banks and regulators that serious bad news could be around the corner. The latest warning was from the Office of the Superintendent of Financial Institutions, which raised capital requirements again as “insurance” for a coming financial storm.

“Today’s decision reflects our assessment that financial system vulnerabilities remain elevated and in some cases have continued to increase,” said banking regulator Peter Routledge this week. “Households and [companies] remain highly leveraged, making them more vulnerable to economic shock.”

But until that shock comes, many Canadians who have heard similar warnings before may not be inclined to listen.

 

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

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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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N.B. election: Parties’ answers on treaty rights, taxes, Indigenous participation

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FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.

Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?

Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.

Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.

Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.

Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?

Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.

Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.

Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.

Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?

Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.

Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.

Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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Canadian Coast Guard crew member lost at sea off Newfoundland

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ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.

The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.

He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.

The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.

Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”

The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.

Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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