Canada’s economy continues to defy expectations for a pullback.
The Ontario government has announced the construction of a Volkswagen electric vehicle (EV) battery manufacturing plant in St. Thomas, on Talbot Line near Yarmouth Centre Road, close to the city’s airport.
The announcement was released Monday by the office of Vic Fedeli, the province’s minister of economic development and trade, and is the first public confirmation of the deal that has long rumoured to be in the works.
The company said production is set to begin in 2027, calling it its first overseas “gigafactory” for battery cell manufacturing.
“I think that means a very large plant with a very large workforce,” said St Thomas Mayor Joe Preston on Monday. “We’re already clearing the land and getting things ready for as fast as a construction that we can do.”
Preston said the plant will likely result in thousands of jobs, at the plant itself, along the supply chain and during the plant’s construction, which is expected to take two to four years.
“In the long-run, it’s maybe more than we can dream. It’s that good for St Thomas.”
The province recently passed legislation that would allow the City of St Thomas to annex 607 hectares of farmland from the Municipality of Central Elgin with the aim to turn the parcel into industrial lands as part of what the province called an investment “mega-site.”
Neighbours were upset by the legislation, which they said was done in secret and without their consultation.
Preston said it’s typical for governments to keep real estate deals confidential until they’re a fait accompli.
“Obviously any negotiation on property or land purchases needs to be done quietly. We certainly don’t put up billboards about it,” he said.
Volkswagen officials met with Premier Doug Ford on Feb 23, according to a provincial news release to seal the deal.
Batteries at the plant, once built, would be manufactured by PowerCo, a Volkswagen subsidiary in its first overseas battery manufacturing plant.
Brendan Sweeney is managing director of the Trillium Netowrk for Advanced Manufacing at Western University in London, Ont.
Sweeney said the new EV battery manufacturing plant “really is a vote of confidence in Ontario as a location for manufacturing and particularly southwestern Ontario, especially given that this is not an incumbent manufacturer making a new investment — this is a manufacturer that is quite new to Canada.”
Sweeney said that by the time the plant is built, it will likely feed at least three other EV manufacturing plants in North America, including a yet-to-be-built EV plant in the Carolinas and a not-yet announced Audi plant, the location of which is still to be determined.
Given all that, Sweeney said, the plant could be as big, if not bigger, than the recently announced Stellantis EV battery plant in Windsor, which will employ 2,500 workers.
“This could be as big or bigger,” he said. “It’s very exciting.”
Sweeney said the announcement means St. Thomas will likely see a large amount of growth in the form of new housing and more suppliers in order to serve the new plant.
He said part of the reason Volkswagen may have chosen the St. Thomas site is because of recent layoffs at the CAMI Assembly plant in Ingersoll and the Brose auto-parts manufacturing plant in London, as well as the recent closure of the Johnson Controls International plant in Tillsonburg.
“That, in an odd way, is likely one of the reasons this [Volkswagen EV] plant landed where it did. There’s an available workforce that knows the auto industry very well.
“Those layoffs, in such a tight labour market, might have made Volkswagen say, ‘Oh, there’s people available,'” Sweeney said. “The quality of the workforce in the region is probably a big draw.”
Provincial officials and company officials from Volkswagen were not immediately available for comment Monday.
Canadians in some provinces and territories will soon be paying a little bit more at the gas station as a federal carbon price is set to go up starting Saturday.
The fuel charge is rising by 30 per cent from $50 per tonne of emissions to $65 on April 1. This will translate to an increase of roughly three cents per litre for gas, reaching a total of 14 cents per litre.
The scheduled increase will apply in Ontario, Manitoba, Saskatchewan, Alberta, Yukon and Nunavut.
Meanwhile, the carbon price jump will go into effect in Newfoundland and Labrador, Nova Scotia, and Prince Edward Island on July 1.
Canadians will see high oil, gas prices through 2023, experts say: ‘A very expensive time’
Canada began pricing carbon pollution in 2019.
The move is part of Ottawa’s commitment to tackle climate change with a goal to reach net-zero carbon emissions by 2050.
Canadians will see high oil and gas prices through 2023
While Canadians will see an increase at the pumps, the carbon price increase is not expected to have a huge impact on their gas expenses, said Hadrian Mertins-Kirkwood, a senior researcher with the Canadian Centre for Policy Alternatives.
“It’s an incremental increase, but it’s not actually going to be a huge change year-over-year that people will notice ,” he told Global News.
For individuals, it could mean a $1 jump per tank depending on how big the vehicle is, Mertins-Kirkwood estimated. For businesses too, it’s “not a major expense,” he said.
Mertins-Kirkwood said things like oil market fluctuations and gas taxes have a much bigger impact on energy costs.
“Those swings are way bigger than the carbon price.”
The carbon price increase comes amid some temporary relief for Canadians with lower gas prices reported in February after record-high costs last year. Gas prices in Canada surpassed $2 per litre for the first time ever last year.
On a monthly basis, Canadian drivers paid one per cent less for gas in February, Statistics Canada said in its latest report released on March 21. Overall, gas prices dropped by 4.7 per cent in February – which was the first yearly decline since Jan 2021, StatCan reported.
The agency said the year-over-year decline is partially attributed to the significant jump in prices seen in February 2022 amid Russia’s invasion of Ukraine.
The Canadian national average for gas prices stood at 150.8 cents per litre on Friday morning, according to GasBuddy. The CAA’s estimate for Friday was 149 cents per litre.
The carbon tax will not only raise gas prices, but could make its way into Canadian pocketbooks in other ways too.
Federal budget increases airport security fees
For instance, aviation gasoline in the four provinces is also going up by roughly 3.5 cents a litre to a total of almost 16 cents per litre, which could potentially mean higher airfares down the line.
However, the rates for aviation gasoline and aviation turbo fuel will remain unchanged in the territories due to the “high reliance” on air transportation, the federal government says.
Light fuel oil, which is used in household equipment, is increasing to 17 cents per litre – an increment of nearly four cents.
Carbon pricing can have also ripple effects on food prices, other grocery items and shipped goods experts say, as Canada’s truck-based transportation industry will be spending more money to fill up the tank.
“It’s possible it could have an impact on things like shipping, but it’s a relatively minor impact,” said Mertins-Kirkwood.
Ottawa has claimed that eight out of 10 Canadian families will get more money back than they pay under the federal carbon pricing plan because of the Climate Action Incentive.
Canadians can claim CAI payments by filing annual federal taxes.
Prime Minister Trudeau urges Alberta to contribute to carbon-capture incentives
Mertins-Kirkwood said most households, except those earning a high income, are “better off” from the carbon pricing due to the government rebate which recycles revenue back to families.
However, the Parliamentary Budget Officer (PBO), an independent watchdog, said in a report last year that a bulk of Canadian households over the long term will see a “net loss” from the federal carbon pricing by 2030-31.
The PBO said that Albertans in the top income quintile would pay the largest net cost from the carbon tax, while the lowest-income quintile households in Saskatchewan stand to see the largest net gain via the rebate.
— With files from Global News’ Craig Lord
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© 2023 Global News, a division of Corus Entertainment Inc.
GDP rose 0.5 per cent and also likely rose in February
Canada’s economy continues to defy expectations for a pullback.
Statistics Canada released data on March 31 that showed the economy grew 0.5 per cent month over month in January, a remarkable reversal from December when GDP contracted 0.1 per cent. January’s reading also beat Bay Street analysts estimate for growth of 0.4 per cent.
At the same time, Statistics Canada said preliminary data suggest the economy grew 0.3 per cent in February, indicating additional momentum. Economic activity rebounded in the vast majority of the broad industries that the agency monitors, including manufacturing, construction, and accommodation and food services.
Economists said the monthly numbers suggest quarterly GDP — measured somewhat differently — probably grew at an annual rate of around 2.5 per cent, well above the Bank of Canada’s forecast of 0.5 per cent.
While the report showed an economy healthier than many expected, economists now think the GDP surprise could make the Bank of Canada‘s job tougher as it seeks to cool inflation by raising interest rates to tamp down demand.
Here’s what some of them are saying about the GDP numbers and what it means for the Bank of Canada and interest rates.
“Today’s release of the monthly GDP suggests that the Canadian economy started the year strong. As such, the strength in January and February is pointing to growth in the first quarter of 2023 at around three per cent quarter over quarter annual rate, far from a contraction. This follows a period of weakness in the last quarter of 2022, as higher interest rates took a toll on rate-sensitive sectors.
“The resilience of the Canadian economy is likely to complicate the Bank of Canada’s job of bringing inflation back to its target. The Bank of Canada signalled at its latest meeting that it would keep its policy rate unchanged for some time to better assess the impact of previous rate hikes on the economy and inflation. However, with growth likely close to three per cent, excess demand in the economy is growing, adding to inflationary pressures and raising the likelihood that further rate hikes will be necessary. Similarly, the tight labour market is supporting strong wage growth. However, the banking woes in the U.S. and Europe suggest caution is warranted.
“The Bank of Canada is likely at a crucial juncture and facing a significant dilemma. The central bank may have to choose between fighting inflation and hiking interest rates again or focusing on financial stability and keeping rates on hold.”
“The strength of GDP growth in January, and probably February too, suggests the Bank of Canada will use its April meeting to reiterate that, despite the recent banking turmoil, it is still prepared to raise interest rates again if needed.
“The big surprise is that, despite the early estimates showing falls in manufacturing, wholesale and retail sales in February, the preliminary estimate points to another 0.3 per cent month-over-month gain in GDP last month. That gain implies the economy is heading for growth of about 2.5 per cent annualized this quarter, slightly higher than the two per cent gain we have pencilled in.
“A 2.5 per cent expansion would also be stronger than the bank’s forecast of a 0.5 per cent rise, but recall that the stagnation in GDP last quarter was weaker than the bank’s estimate of a 1.3 per cent gain. Moreover, we know that the rebound in activity is helping to lower prices rather than contributing to inflationary pressures. For example, the CPI passenger vehicle price index fell by 2.5 per cent over the first two months of the year. So while the bank will stick to its hawkish messaging, we doubt recent developments will cause it resume rate hikes.”
“There were many indications that the economy got off to a solid start in 2023, but today’s double-barrelled blast of strength is well above even the most optimistic views. Even if growth stalls in March, it now looks like Q1 will post growth of 2.5 per cent, up from a flat read in Q4. While we continue to look for a notable cool-down in the next two quarters, we are bumping up our GDP growth estimate for all of 2023 by three ticks to one per cent. Suffice it to say that if the strength seen in the opening months of the year persists, the Bank of Canada is going to find itself in a tough spot.”
“Today’s outsized move in January real GDP and continued momentum through February leaves little room to equivocate. The Canadian economy started the year on a very strong footing. We are now tracking real GDP growth approaching three per cent annualized in Q1, well above the bank’s 0.5 per cent tracking in the January 2023 monetary policy report.
“As such, expect substantial upward revisions to the central bank’s near‑term forecast when it’s published in a week and a half. But with the recent global banking sector volatility and inflation coming in below expectations in February, there are plenty of good reasons for the bank to stay on the sidelines for the foreseeable future. However, the data suggest the central bank should reiterate its hawkish‑leaning forward guidance.”
“After stalling in Q4 2022, it now looks like GDP will grow modestly in Q1. Still, we believe a contraction in the economy will be unavoidable this spring and summer as the full impact from higher interest rates materializes, lenders tighten credit due to ongoing financial turmoil, and the U.S. slips into recession.”
“Despite the continued rebound of the Canadian economy in Q1 after a sluggish quarter, we still believe that the Bank of Canada should maintain its pause in monetary tightening. The rate hikes have been very aggressive and will continue to weigh on the economy given the lag in their pass-through.
“In addition, the outcome of the ongoing turmoil in the global banking sector and its impact on credit conditions in the coming months remains uncertain. We expect to see ups and downs in output in later quarters that will leave GDP essentially flat over the next year. This is an argument for patience. All the more so given the encouraging developments in inflation that are now emerging.”
“While the Bank of Canada is currently on a conditional pause as it awaits more data, the strength in the real economy, as measured by upward revisions from last month’s preliminary figure (for GDP) and another probable above-potential reading in February, could tilt the central bank in a more hawkish direction.
“While it is still too early to call for another rate hike, the odds are shifting in that direction: BoC officials stated they are mostly worried about upside risks to inflation and have shown little panic about recent global banking troubles. Stronger growth means the costs to another hike are falling, and it also puts upward pressure on inflation. Markets largely agree with our assessment, as they are now pricing only 35 basis points of rate cuts by year end, the fewest in nearly three weeks, and a far cry from the 90 basis points of cuts priced just a week ago.”
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Reaction to the $26 billion Rogers-Shaw merger in Alberta was mixed on the day it was announced.
Bob Schulz, a professor at the University of Calgary’s Haskayne School of Business, called the merger a “win-win.”
“It’s a blockbuster deal for Canada, but it could be the rising (rural telecommunications) star for the world in the developing countries that we actually test here,” Schulz said Friday.
He noted Canada’s spread out pockets of population presents a unique operating environment for telecommunications companies, and faces competition from emerging companies like Elon Musk’s Starlink.
Shaw executive chair and CEO Brad Shaw said the deal was an “exciting new chapter” for connectivity in the country.
“In today’s telecommunications industry, we recognize that companies need even greater scale to compete and make ongoing investments for future technology,” Shaw said in a statement. “This merger will provide the scale necessary for the future success and competitiveness of the wireline business that Shaw has built over the past five decades.”
Schulz was quick to point out that while the merger would reduce two telcos into one, the stipulation that Shaw’s Freedom Mobile be sold to Quebecor-owned Videotron will help with competition in the mobile phone market.
Rogers must fulfill list of conditions in Shaw merger or face stiff financial penalties
“Consumers may think it’s a bad idea by having the two go together, but if Videotron comes in because they have lower prices, it may force the Rogers-Shaw combination to move down.”
The U of C professor said the conditions of the merger is likely to put added pressure on existing telcos.
“If Videotron decides that they’re going to expand, then Bell would have to do something a little different in order to compete or decide they’re going to compete less of the west and more of the east,” Schulz said. “And it’s also going to be interesting to see what happens with Telus, because now Telus will have a stronger competitor to compete with in the west.”
Minister of Technology and Innovation Nate Glubish said the Alberta government will be “unwavering” in holding the merged companies “accountable to conditions of this deal and the commitments they have made to Alberta jobs, consumers and communities.”
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“We will closely monitor the requirement for Rogers to create about 3,000 jobs in Western Canada and invest a further $1 billion to connect rural, remote and Indigenous communities to high-speed internet,” Glubish said, noting the investment aligns with the province’s broadband strategy.
He welcomed the entry of the low-cost mobile offering from Videotron, which is to include rates 20 per cent lower than current offerings and invest $150 million into their network.
“While the telecommunications industry is under the exclusive jurisdiction of the federal government, we will hold Rogers and Shaw to their commitments outlined in this deal and protect Albertans’ interests going forward.”
The Opposition’s municipal affairs critic called the merger a “loss of an iconic Alberta company.”
“(Shaw has) deep roots in the province that go back almost 60 years, employing hundreds of people in their headquarters in Calgary and thousands across Western Canada,” Calgary-Buffalo MLA Joe Ceci said in a statement.
What Rogers purchase of Shaw will mean for Canadian consumers
Ceci said a deal of this size will change the telco landscape in the country and could jeopardize jobs, increase customer costs and reduce access to services.
One of the 21 stipulations made by the federal government was for Rogers to establish a western headquarters in Calgary.
“I am encouraged to see these conditions included in the deal and we will be watching closely to ensure they are implemented,” Ceci said in a statement. “However, it is concerning that the Danielle Smith government failed to advocate for Alberta. They sought intervenor status in the deal, but did not take a position.”
Calgary student Ashmal Dawoodani endorses the government encouraging competition and called the Rogers-Shaw deal “only beneficial to the larger corporations.”
“Just selling off the mobile assets to another company is sort of like a short term solution. It’s not really looking too long-term,” Dawoodani said. “I think we do have some of the highest phone bills across the world and I don’t think that’ll change from such a small move like that.”
Nicole Flemming said the merger could limit options for customers like her.
“I like to have more choice with my cell phone providers and Internet providers so I don’t really like that idea (of the merger),” Fleming told Global News “It gives me less choice as a consumer – I like to shop around.”
Shaw Communications and Corus Entertainment, the parent company of Global News, are owned by the Shaw family based in Calgary.
© 2023 Global News, a division of Corus Entertainment Inc.
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