First comes some welcome news from the Bank of Canada — interest rates aren’t going up.
Then, there’s the downside, with expectations of a weakening national economy and a narrower path for a soft landing.
First comes some welcome news from the Bank of Canada — interest rates aren’t going up.
Then, there’s the downside, with expectations of a weakening national economy and a narrower path for a soft landing.
The bank said there’s evidence higher rates are starting to slow the economy and inflation, affecting areas such as consumer spending.
In Canada, the central bank now projects the economy will grow by just 1.2 per cent this year and by a feeble 0.9 per cent in 2024.
It’s not a call for a recession, although it is tepid growth in the coming year.
But as Bank of Canada governor Tiff Macklem also cautioned, inflationary risks have risen since the summer — core inflation is still too high — and the pathway for a soft landing for the economy “has gotten narrower.”
Added to this complex picture are global oil markets, which have been particularly volatile in recent weeks due to geopolitical factors.
“A considerable amount of uncertainty surrounds the forecast,” states the bank’s new Monetary Policy Report.
“Another risk is that the war in Israel and Gaza spreads further into a broader regional conflict, disrupting oil supplies and leading to a resurgence of inflation in energy prices.”
The price for West Texas Intermediate (WTI) oil is now assumed to average US$85 a barrel through 2025, and $90 for Brent crude — both up $10 a barrel.
“Rising global tensions are increasing risks. In a more hostile world, energy prices could move up sharply, supply chains could become disrupted again, and all that could push up inflation again around the world,” Macklem told reporters.
The decision arrives as consumers are still grappling with higher borrowing costs and rising expenses for groceries, mortgages and rent.
Rents in Alberta are 15 per cent higher this month than a year earlier, according to the latest report by Rentals.ca.
Higher interest rates also affect consumers looking to buy major items, such as vehicles or homes, with many scaling back their expectations due to reduced buyer power.
“A project really has to make a lot of sense to move forward within this interest-rate environment.”
While the Canadian outlook is weakening, Alberta’s economy is expected to outperform the country this year due to strong population growth and buoyant commodity prices.
The Conference Board of Canada forecasts Alberta’s economy will expand by 2.6 per cent this year, double the national level, before slowing to 1.9 per cent in 2024.
Amid projections of strong crude prices, oil and gas producers are now making capital spending decisions for 2024. Any jump in energy prices will also hit consumers in the pocketbooks.
“It’s a double-edged sword,” Planincic said.
“Price increases (in oil), that’s a benefit to Alberta producers and a benefit to the Alberta government’s bottom line . . . However, the challenge is from a global perceptive, that could increase the likelihood of a recession or a further slowdown in consumer spending.”
Alberta is expecting to see major investment decisions on decarbonization initiatives in the coming years, such as Dow’s proposed ethylene cracker and derivatives complex at Fort Saskatchewan, or the Pathways Alliance’s planned carbon capture and storage network, noted Calgary Chamber of Commerce CEO Deborah Yedlin.
“Even if we see slower growth across the country, Alberta is still in a very unique position, where it won’t be as affected because of all of the things that are going on,” she said.
Prices for WTI oil closed up $1.65 on Wednesday to $85.39 a barrel, while Brent crude traded around $90. It’s worth noting both prices are now at the Bank of Canada’s assumptions.
“The risk to that is likely to the upside at this particular moment,” said Rory Johnston, founder of the Commodity Context newsletter.
“Prior to what was happening in the Middle East, my (2024 price expectation) was . . . somewhere between mid $90s and $105, just given how tight everything looked” between supply and demand.
The uncertain state of the provincial economy is also captured by a new report from the Business Council of Alberta.
Wage increases in the province, which have lagged behind the rest of the country, are now exceeding inflation, while population growth has reached levels not seen since the 1980s.
However, Alberta lost more than 38,000 jobs in September, according to the latest Statistics Canada report, which could be a one-month blip or the sign of a bigger trend, added Planincic.
“It is very mixed,” she said.
“Ultimately, high interest rates and a slowing global economy, these things are already affecting Albertans and Alberta businesses — and we’re going to continue to see that play out.”
Chris Varcoe is a Calgary Herald columnist.
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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney will chair a Liberal task force on economic growth, the party announced Monday as Liberal MPs meet to strategize for the upcoming election year.
Long touted as a possible leadership successor to Prime Minister Justin Trudeau, Carney was already scheduled to address caucus as part of the retreat in Nanaimo, B.C., this week.
The Liberals say he will help shape the party’s policies for the next election, and will report to Trudeau and the Liberal platform committee.
“As chair of the Leader’s Task Force on Economic Growth, Mark’s unique ideas and perspectives will play a vital role in shaping the next steps in our plan to continue to grow our economy and strengthen the middle class, and to urgently seize new opportunities for Canadian jobs and prosperity in a fast-changing world,” Trudeau said in a statement Monday.
Trudeau is expected to address Liberal members of Parliament later this week. It will be the first time he faces them as a group since MPs left Ottawa in the spring.
Still stinging from a devastating byelection loss earlier this summer, the caucus is now also reeling from news that its national campaign director has resigned and the party can no longer count on the NDP to stave off an early election.
Last week, NDP Leader Jagmeet Singh ended his agreement with Trudeau to have the New Democrats support the government on key votes in exchange for movement on priorities such as dental care.
All of this comes as the Liberals remain well behind the Conservatives in the polls despite efforts to refocus on issues like housing and affordability.
Some Liberal MPs hope to hear more about how Trudeau plans to win Canadians back when he addresses his team this week.
Carney appears to be part of that plan, attempting to bring some economic heft to a government that has struggled to resonate with voters who are struggling with inflation and soaring housing costs.
Trudeau said several weeks ago that he has long tried to coax Carney to join his government. The economist and former investment banker spent five years as the governor of the Bank of Canada during the last Conservative government before hopping across the pond to head up the Bank of England for seven years.
Carney is just one of a host of names suggested as possible successors to Trudeau, who has insisted he will lead the party into the next election despite simmering calls for him to step aside.
Those calls reached a new intensity earlier this summer when the Conservatives won a longtime Liberal stronghold in a major byelection upset in Toronto—St. Paul’s.
But Trudeau held fast to his decision to stay and rejected calls to convene his entire caucus over the summer to respond to their concerns about their collective prospects.
The prime minister has spoken with Liberal MPs one-on-one over the last few months and attended several regional meetings ahead of the Nanaimo retreat, including Ontario and Quebec, which together account for 70 per cent of the caucus.
While several Liberals who don’t feel comfortable speaking publicly say the meetings were positive, the party leader has mainly held to his message that he is simply focused on “delivering for Canadians.”
Conservative House leader Andrew Scheer was in Nanaimo ahead of the meeting to express his scorn for the Liberal strategy session, and for Carney’s involvement.
“It doesn’t matter what happens in this retreat, doesn’t matter what kinds of (communications) exercise they go through, or what kind of speculation they all entertain about who might lead them in the next election,” said Scheer, who called a small press conference on the Nanaimo harbourfront Monday.
“It’s the same failed Liberal policies causing the same hardships for Canadians.”
He said Carney and Trudeau are “basically the same people,” and that Carney has supported Liberal policies, including the carbon tax.
The three-day retreat is expected to include breakout meetings for the Indigenous, rural and women’s caucuses before the full group convenes later this week.
This report by The Canadian Press was first published Sept. 9, 2024.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
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