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Will the Bank of Canada hike rates again? This week will decide

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Anyone worried about interest rates, economic growth and jobs numbers is bracing for a busy and consequential week. Canadians will be hit by a tsunami of economic data over the next 10 days.

The latest inflation numbers, data on how much stuff Canada’s economy is cranking out and a key reading on the mood of consumers won’t just tell us how the economy has performed through the first half of the year, they’ll set policy decisions that will dictate how the rest of the year will unfold.

“I would say it’s very important,” said RBC economist Carrie Freestone.

Freestone said she believes the Bank of Canada will probably raise rates when it meets on July 12, but that this week’s data should tell us all we need to know about the bank’s decision.

“We think they’re gonna go 25 (basis points). They could have to hike higher if we’re in a situation where expectations are not tamed,” she told CBC News.

The Bank of Canada has been aggressively raising interest rates in an attempt to rein in inflation. The theory is that as rates rise, consumers are squeezed by higher debt payments.

With more money going toward servicing their debt, Canadians have less of it to spend anywhere else. That tends to slow down the economy and bring down prices — which is exactly what the Bank of Canada is trying to accomplish with rate hikes in the first place: bring down inflation.

The problem is through most of this year, economic data have come in hotter than expected.

Gross domestic product, the total value of all goods and services produced by the country’s economy, grew at an annualized rate of 3.1 per cent in the first quarter of 2023. Canadian employers have added more than 230,000 jobs so far this year.

 

Retail sales are up — but not because people are buying more

 

Retail sales numbers from Statistics Canada show increases in all sectors but furniture, appliances and electronics. Analysts say it is due to higher prices rather than people making more purchases, which has them forecasting another interest rate hike in July.

And just last week, retail sales figures showed Canadian consumers were still spending at rates that just don’t show an economy that is slowing.

“In some ways it feels like in the Road Runner when Wile E. Coyote runs off a cliff and he just hasn’t looked down yet,” said Randall Bartlett, the senior director of Canadian economics at Desjardins Group.

“Households are getting more and more squeezed, but they’re continuing to behave in a way that doesn’t necessarily reflect that reality of higher borrowing costs and higher inflation,” said Bartlett.

And that’s why this week’s data are so important.

Prices continue to rise, but slower

Economists surveyed by Bloomberg say year over year inflation numbers will show a sharp deceleration in price growth. Inflation peaked last summer at 8.1 per cent. Prices continue to rise, but at a steadily slower pace.

Then last month, Statistics Canada said prices began to accelerate again. The year over year, headline rate jumped from 4.3 per cent to 4.4 per cent.

This week, economists expect some solid progress in the fight to rein in inflation. RBC’s forecast shows headline inflation likely fell to 3.6 per cent.

“It’s a huge drop,” said RBC’s Claire Fan. “But a lot of that decline can be explained away by lower energy prices.”

Last May, gas prices were climbing inexorably toward a peak above $2 per litre. Compare that to gasoline prices in May of this year, where they hovered between $1.50 and $1.60.

Gas prices are way down from the peak seen last summer
Gas prices are down 36 per cent from this time last year. (Robert Short/CBC)

Fan says that drop will help consumers weather higher prices. But she says the Bank of Canada is looking for a sustained drop in a measure of inflation that economists call the core rate because it strips out volatile things like gasoline and food, which tend to move up and down a lot.

She says the central bank will be watching GDP numbers closely as well.

Her forecast shows economic growth in April will come in flat. But Fan says that month saw a strike by the Public Service Alliance of Canada. If you strip out the economic impact of that, she says the economy expanded once again in April.

Most economists assume a rate hike is coming

Data on GDP and inflation give folks like Fan and others some hard numbers to gauge how the economy is doing, but two releases from the central bank also set to come out this week should paint a picture of how Canadian businesses and consumers are feeling.

The Business Outlook Survey tells us how businesses feel about the state of the economy today and how they expect to adjust hiring and investments over the course of the rest of the year. Similarly, the Survey of Consumer Expectations provides a glimpse into how households are managing inflation, higher borrowing costs and whether they intend to slow down consumer spending.

 

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Right now, most economists assume the Bank of Canada has another interest rate increase up its sleeve. The bank has repeatedly said the perils of high inflation are a threat to everyone and risk upending financial stability. Bank of Canada governor Tiff Macklem has said he needs to see economic growth slow further as evidence of the kind of progress the bank is looking for.

Fan, for one, said she thinks it will take considerable changes to the forecast for the bank to back away from another increase in interest rates.

“It would likely take substantial downside surprises in data releases (i.e., lower inflation and / or GDP data) to prevent another hike at the next meeting in July,” she wrote in a note to clients.

But if there’s been one constant in these three and a half years or so, it’s that every time economists say they have a handle on what’s going to happen next, the data come in as a surprise.

 

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Bad traffic, changed plans: Toronto braces for uncertainty of its Taylor Swift Era

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TORONTO – Will Taylor Swift bring chaos or do we all need to calm down?

It’s a question many Torontonians are asking this week as the city braces for the arrival of Swifties, the massive fan base of one of the world’s biggest pop stars.

Hundreds of thousands are expected to descend on the downtown core for the singer’s six concerts which kick off Thursday at the Rogers Centre and run until Nov. 23.

And while their arrival will be a boon to tourism dollars — the city estimates more than $282 million in economic impact — some worry it could worsen Toronto’s gridlock by clogging streets that already come to a standstill during rush hour.

Swift’s shows are set to collide with sports events at the nearby Scotiabank Arena, including a Raptors game on Friday and a Leafs game on Saturday.

Some residents and local businesses have already adjusted their plans to avoid the area and its planned road closures.

Aahil Dayani says he and some friends intended to throw a birthday bash for one of their pals until they realized it would overlap with the concerts.

“Something as simple as getting together and having dinner is now thrown out the window,” he said.

Dayani says the group rescheduled the gathering for after Swift leaves town. In the meantime, he plans to hunker down at his Toronto residence.

“Her coming into town has kind of changed up my social life,” he added.

“We’re pretty much just not doing anything.”

Max Sinclair, chief executive and founder of A.I. technology firm Ecomtent, suggested his employees avoid the company’s downtown offices on concert days, saying he doesn’t see the point in forcing people to endure potential traffic jams.

“It’s going to be less productive for us, and it’s going to be just a pain for everyone, so it’s easier to avoid it,” Sinclair said.

“We’re a hybrid company, so we can be flexible. It just makes sense.”

Swift’s concerts are the latest pop culture moment to draw attention to Toronto’s notoriously disastrous daily commute.

In June, One Direction singer Niall Horan uploaded a social media video of himself walking through traffic to reach the venue for his concert.

“Traffic’s too bad in Toronto, so we’re walking to the venue,” he wrote in the post.

Toronto Transit Commission spokesperson Stuart Green says the public agency has been working for more than a year on plans to ease the pressure of so many Swifties in one confined area.

“We are preparing for something that would be akin to maybe the Beatles coming in the ‘60s,” he said.

Dozens of buses and streetcars have been added to transit routes around the stadium, and the TTC has consulted the city on potential emergency scenarios.

Green will be part of a command centre operated by the City of Toronto and staffed by Toronto police leaders, emergency services and others who have handled massive gatherings including the Raptors’ NBA championship parade in 2019.

“There may be some who will say we’re over-preparing, and that’s fair,” Green said.

“But we know based on what’s happened in other places, better to be over-prepared than under-prepared.”

Metrolinx, the agency for Ontario’s GO Transit system, has also added extra trips and extended hours in some regions to accommodate fans looking to travel home.

A day before Swift’s first performance, the city began clearing out tents belonging to homeless people near the venue. The city said two people were offered space in a shelter.

“As the area around Rogers Centre is expected to receive a high volume of foot traffic in the coming days, this area has been prioritized for outreach work to ensure the safety of individuals in encampments, other residents, businesses and visitors — as is standard for large-scale events,” city spokesperson Russell Baker said in a statement.

Homeless advocate Diana Chan McNally questioned whether money and optics were behind the measure.

“People (in the area) are already in close proximity to concerts, sports games, and other events that generate massive amounts of traffic — that’s nothing new,” she said in a statement.

“If people were offered and willingly accepted a shelter space, free of coercion, I support that fully — that’s how it should happen.”

This report by The Canadian Press was first published Nov. 13, 2024.



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‘It’s literally incredible’: Swifties line up for merch ahead of Toronto concerts

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TORONTO – Hundreds of Taylor Swift fans lined up outside the gates of Toronto’s Rogers Centre Wednesday, with hopes of snagging some of the pop star’s merchandise on the eve of the first of her six sold-out shows in the city.

Swift is slated to perform at the venue from Thursday to Saturday, and the following week from Nov. 21 to Nov. 23, with concert merchandise available for sale on some non-show days.

Swifties were all smiles as they left the merch shop, their arms full of sweaters and posters bearing pictures of the star and her Eras Tour logo.

Among them was Zoe Haronitis, 22, who said she waited in line for about two hours to get $300 worth of merchandise, including some apparel for her friends.

Haronitis endured the autumn cold and the hefty price tag even though she hasn’t secured a concert ticket. She said she’s hunting down a resale ticket and plans to spend up to $600.

“I haven’t really budgeted anything,” Haronitis said. “I don’t care how much money I spent. That was kind of my mindset.”

The megastar’s merchandise costs up to $115 for a sweater, and $30 for tote bags and other accessories.

Rachel Renwick, 28, also waited a couple of hours in line for merchandise, but only spent about $70 after learning that a coveted blue sweater and a crewneck had been snatched up by other eager fans before she got to the shop. She had been prepared to spend much more, she said.

“The two prized items sold out. I think a lot more damage would have been done,” Renwick said, adding she’s still determined to buy a sweater at a later date.

Renwick estimated she’s spent about $500 in total on “all-things Eras Tour,” including her concert outfit and merchandise.

The long queue for Swift merch is just a snapshot of what the city will see in the coming days. It’s estimated that up to 500,000 visitors from outside Toronto will be in town during the concert period.

Tens of thousands more are also expected to attend Taylgate’24, an unofficial Swiftie fan event scheduled to be held at the nearby Metro Toronto Convention Centre.

Meanwhile, Destination Toronto has said it anticipates the economic impact of the Eras Tour could grow to $282 million as the money continues to circulate.

But for fans like Haronitis, the experience in Toronto comes down to the Swiftie community. Knowing that Swift is going to be in the city for six shows and seeing hundreds gather just for merchandise is “awesome,” she said.

Even though Haronitis hasn’t officially bought her ticket yet, she said she’s excited to see the megastar.

“It’s literally incredible.”

This report by The Canadian Press was first published Nov. 13, 2024.

The Canadian Press. All rights reserved.



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Via Rail seeks judicial review on CN’s speed restrictions

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OTTAWA – Via Rail is asking for a judicial review on the reasons why Canadian National Railway Co. has imposed speed restrictions on its new passenger trains.

The Crown corporation says it is seeking the review from the Federal Court after many attempts at dialogue with the company did not yield valid reasoning for the change.

It says the restrictions imposed last month are causing daily delays on Via Rail’s Québec City-Windsor corridor, affecting thousands of passengers and damaging Via Rail’s reputation with travellers.

CN says in a statement that it imposed the restrictions at rail crossings given the industry’s experience and known risks associated with similar trains.

The company says Via has asked the courts to weigh in even though Via has agreed to buy the equipment needed to permanently fix the issues.

Via said in October that no incidents at level crossings have been reported in the two years since it put 16 Siemens Venture trains into operation.

This report by The Canadian Press was first published Nov. 13, 2024.

Companies in this story: (TSX:CN)

The Canadian Press. All rights reserved.



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