Canada’s economy is showing signs of underlying strength as some consumers and businesses brush off recession fears, a flurry of data releases on Friday suggest.
Some economists say the door is open for the Bank of Canada to pause its rate hike cycle once again amid easing inflation concerns and an expected economic slowdown in the second half of the year, while others feel it’s still too soon for the central bank to declare victory.
The country’s GDP growth was “essentially unchanged” in April, according to Statistics Canada’s report on for the month, revised down from early estimates for 0.2 per cent growth in the month.
Drags from the public sector strike and a slowdown in manufacturing were offset by strength in the mining and oil and gas sectors, StatCan said. The real estate industry, too, pulled up GDP as the housing market continue its spring rebound.
Statistics Canada also revised up its earlier estimate for March, swinging the month’s GDP to a modest gain of 0.1 per cent compared to a slight dip of 0.1 per cent.
Statistics Canada’s flash estimate for May shows 0.4 per cent GDP growth is expected for the month. But that number could be revised.
Where is the recession?
Capital Economics’ deputy chief North America economist Stephen Brown tells Global News that, stripping the impact of the strike from the GDP data, the economy likely would have grown roughly 0.1 per cent in April.
Add that to early estimates of a solid rebound in May, and Brown says “it’s a sign the economy is enjoying some renewed momentum.”
BMO chief economist Doug Porter said in a note Friday morning that despite calls for a slowing in Canada’s economy this year, the country has not posted a single month of negative growth so far in 2023.
Even one of the largest strikes in years couldn’t drag the country’s economy into a contraction, he noted, suggesting the Bank of Canada’s rapid interest rate hikes over the past year and expectations of a global slowdown in demand have not meaningfully slowed Canada’s momentum.
“The bigger picture is that the Canadian economy is managing to keep its head above water in the face of many challenges,” he said.
BMO revised up its GDP expectations for the second quarter of the year to 1.5 per cent in the face of Friday’s data, up from 0.8 per cent earlier.
CIBC senior economist Andrew Grantham said in a note to clients shortly after the GDP release on Friday that the second quarter of the year is tracking for annualized growth of 1.4 per cent, just above the Bank of Canada’s forecast of 1.0 per cent in the period.
Brown noted that surging population growth is responsible for much of Canada’s GDP strength. The country set a record for immigration in the first quarter of the year, which is helping population growth outpace GDP growth, he says.
That’s a sign that the Bank of Canada’s efforts to slow demand in the economy is having an impact on a per capita basis — affecting individual households — but not weakening the overall economy as much as expected, Brown argues.
“We are seeing weakness. The economy is weakening on a per person basis,” he says.
“It’s just because the aggregate is growing by so much because so many people are coming into the country. But that’s what’s determining the overall GDP picture.”
Tuan Nguyen, economist with RSM Canada, said in a note on Friday that the economic strength in the first two quarters of the year will push the predicted recession to the latter half of 2023.
Brown says that the economy keeps surprising analysts, and as a result, recession calls keep being delayed quarter-by-quarter.
The signs of growth in the May flash estimate will likely push these forecasts out further, he adds, with his call for a recession now timed to begin no sooner than the fourth quarter of the year — if it happens at all.
“The chance of a recession looks a lot lower than it did nine months ago,” Brown says.
Fewer businesses, consumers expect recession
The Bank of Canada, meanwhile, released another pair of reports on Friday morning that provide insights into sentiments around the economy: the business outlook survey and its survey of consumer expectations.
The Bank of Canada’s business outlook sentiment marker declined for the sixth consecutive quarter, according to the survey. The central bank says the drop suggests an overall decline in business confidence but also signals less inflationary pressure.
Businesses are expecting weaker wage growth in the next 12 months, the first time the survey has shown an expected slowdown here since the start of the pandemic.
Although cost pressures on business owners are showing signs of easing, businesses have not returned to their pre-pandemic price-setting behaviours, the Bank of Canada noted.
“Several firms are still planning to make larger and more frequent price increases in the coming year than they usually would. The continuation of higher-than-normal price growth is tied mainly to lags in the pass-through of previous increases in input prices, which is not yet complete,” the Bank explained.
Despite indications that businesses are largely expecting slower growth and plan less investment in the months ahead, the Bank of Canada surveys also show fewer business owners are expecting a recession to hit the economy.
Roughly a third of all respondents to the business survey said they are planning for a recession, down from half in the previous quarter.
Businesses expect consumer demand will pick up with more certainty in the Bank of Canada’s interest rate path — though it’s key to mention here that the surveys were done in May, before the central bank’s June 7 rate hike.
On the consumer side, households remain concerned about the cost of living — especially those with mortgages set to renew in the months ahead amid the higher interest rate environment.
Half of respondents to the consumer survey still expect a recession in the coming year — that sentiment is down slightly from the previous quarter — while their confidence in the economy’s future overall has improved, the Bank of Canada notes.
“Some households are starting to think the worst is behind them,” the Bank noted in its survey.
Short-term inflation expectations were also lower in the latest surveys, but remain above the Bank of Canada’s two per cent target.
What will the Bank of Canada do next?
The central bank will be parsing the GDP data and the outlook surveys closely for signs of an expected slowdown as it mulls its next interest rate decision on July 12. The Bank of Canada surprised most observers with a 25-basis-point hike earlier this month, with some economists saying one increase won’t be enough to bring inflation back down to two per cent.
Benjamin Reitzes, BMO’s managing director of Canadian rates and macro strategist, said in a note Friday that the business outlook survey showed clear signs of softening in pressures facing business such as labour constraints and supply chain kinks.
Taken together, Reitzes said there “doesn’t appear to be as much urgency to hike rates again in July,” with the final decision likely coming down to the June jobs figures released in a week.
Grantham said in his note that, barring surprises in next week’s June jobs report, CIBC is calling for a rate hold in July followed by a final quarter-percentage-point increase in September.
RBC economist Claire Fan said in a note Friday that signs of progress in the Bank of Canada surveys won’t be enough to put the central bank back on the sidelines, however.
There hasn’t been enough relief in the labour market data and this week’s inflation report for May, while it showed signs of cooling, has not seen price pressures return to pre-pandemic levels, Fan noted. RBC calls for a 25-basis-point hike on in July to bring the policy rate to 5.0 per cent before the Bank of Canada presses pause again for the remainder of 2023.
Brown says the business outlook and consumer surveys are “tricky to interpret” for members of the Bank of Canada’s governing council, and could be used to justify another hike or a pause depending on what data is being considered.
He agrees with Fan that there hasn’t been enough progress on the inflation front, especially among the Bank of Canada’s preferred core inflation figures, to warrant an end to rate hikes. And if the central bank policymakers are wont to raise rates again, he does not expect they will wait to September to do so.
After a busy week of economic releases, however, Brown says the latest data might have given the Bank of Canada more room to pause than first expected.
“My confidence in the view that the Bank will hike in July is certainly lower than it was this time last week,” he says.
NEW YORK (AP) — Teen smoking hit an all-time low in the U.S. this year, part of a big drop in the youth use of tobacco overall, the government reported Thursday.
There was a 20% drop in the estimated number of middle and high school students who recently used at least one tobacco product, including cigarettes, electronic cigarettes, nicotine pouches and hookahs. The number went from 2.8 million last year to 2.25 million this year — the lowest since the Centers for Disease Control and Prevention’s key survey began in 1999.
“Reaching a 25-year low for youth tobacco product use is an extraordinary milestone for public health,” said Deirdre Lawrence Kittner, director of CDC’s Office on Smoking and Health, in a statement. However, “our mission is far from complete.”
A previously reported drop in vaping largely explains the overall decline in tobacco use from 10% to about 8% of students, health officials said.
The youth e-cigarette rate fell to under 6% this year, down from 7.7% last year — the lowest at any point in the last decade. E-cigarettes are the most commonly used tobacco products among teens, followed by nicotine pouches.
Use of other products has been dropping, too.
Twenty-five years ago, nearly 30% of high school students smoked. This year, it was just 1.7%, down from the 1.9%. That one-year decline is so small it is not considered statistically significant, but marks the lowest since the survey began 25 years ago. The middle school rate also is at its lowest mark.
Recent use of hookahs also dropped, from 1.1% to 0.7%.
The results come from an annual CDC survey, which included nearly 30,000 middle and high school students at 283 schools. The response rate this year was about 33%.
Officials attribute the declines to a number of measures, ranging from price increases and public health education campaigns to age restrictions and more aggressive enforcement against retailers and manufacturers selling products to kids.
Among high school students, use of any tobacco product dropped to 10%, from nearly 13% and e-cigarette use dipped under 8%, from 10%. But there was no change reported for middle school students, who less commonly vape or smoke or use other products,
Current use of tobacco fell among girls and Hispanic students, but rose among American Indian or Alaska Native students. And current use of nicotine pouches increased among white kids.
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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.
WASHINGTON (AP) — An Alabama man was arrested Thursday for his alleged role in the January hack of a U.S. Securities and Exchange Commission social media account that led the price of bitcoin to spike, the Justice Department said.
Eric Council Jr., 25, of Athens, is accused of helping to break into the SEC’s account on X, formerly known as Twitter, allowing the hackers to prematurely announce the approval of long-awaited bitcoin exchange-traded funds.
The price of bitcoin briefly spiked more than $1,000 after the post claimed “The SEC grants approval for #Bitcoin ETFs for listing on all registered national securities exchanges.”
But soon after the initial post appeared, SEC Chairman Gary Gensler said on his personal account that the SEC’s account was compromised. “The SEC has not approved the listing and trading of spot bitcoin exchange-traded products,” Gensler wrote, calling the post unauthorized without providing further explanation.
Authorities say Council carried out what’s known as a “SIM swap,” using a fake ID to impersonate someone with access to the SEC’s X account and convince a cellphone store to give him a SIM card linked to the person’s phone. Council was able to take over the person’s cellphone number and get access codes to the SEC’s X account, which he shared with others who broke into the account and sent the post, the Justice Department says.
Prosecutors say after Council returned the iPhone he used for the SIM swap, his online searches included: “What are the signs that you are under investigation by law enforcement or the FBI even if you have not been contacted by them.”
An email seeking comment was sent Thursday to an attorney for Council, who is charged in Washington’s federal court with conspiracy to commit aggravated identity theft and access device fraud.
The price of bitcoin swung from about $46,730 to just below $48,000 after the unauthorized post hit on Jan. 9 and then dropped to around $45,200 after the SEC’s denial. The SEC officially approved the first exchange-traded funds that hold bitcoin the following day.
Google, Meta and TikTok have removed social media accounts belonging to an industrial plant in Russia’s Tatarstan region aimed at recruiting young foreign women to make drones for Moscow’s war in Ukraine.
Posts on YouTube, Facebook, Instagram and TikTok were taken down following an investigation by The Associated Press published Oct. 10 that detailed working conditions in the drone factory in the Alabuga Special Economic Zone, which is under U.S. and British sanctions.
Videos and other posts on the social media platforms promised the young women, who are largely from Africa, a free plane ticket to Russia and a salary of more than $500 a month following their recruitment via the program called “Alabuga Start.”
But instead of a work-study program in areas like hospitality and catering, some of them said they learned only arriving in the Tatarstan region that they would be toiling in a factory to make weapons of war, assembling thousands of Iranian-designed attack drones to be launched into Ukraine.
In interviews with AP, some of the women who worked in the complex complained of long hours under constant surveillance, of broken promises about wages and areas of study, and of working with caustic chemicals that left their skin pockmarked and itching. AP did not identify them by name or nationality out of concern for their safety.
The tech companies also removed accounts for Alabuga Polytechnic, a vocational boarding school for Russians aged 16-18 and Central Asians aged 18-22 that bills its graduates as experts in drone production.
The accounts collectively had at least 158,344 followers while one page on TikTok had more than a million likes.
In a statement, YouTube said its parent company Google is committed to sanctions and trade compliance and “after review and consistent with our policies, we terminated channels associated with Alabuga Special Economic Zone.”
Meta said it removed accounts on Facebook and Instagram that “violate our policies.” The company said it was committed to complying with sanctions laws and said it recognized that human exploitation is a serious problem which required a multifaceted approach, including at Meta.
It said it had teams dedicated to anti-trafficking efforts and aimed to remove those seeking to abuse its platforms.
TikTok said it removed videos and accounts which violated its community guidelines, which state it does not allow content that is used for the recruitment of victims, coordination of their transport, and their exploitation using force, fraud, coercion, or deception.
The women aged 18-22 were recruited to fill an urgent labor shortage in wartime Russia. They are from places like Uganda, Rwanda, Kenya, South Sudan, Sierra Leone and Nigeria, as well as the South Asian country of Sri Lanka. The drive also is expanding to elsewhere in Asia as well as Latin America.
Accounts affiliated to Alabuga with tens of thousands of followers are still accessible on Telegram, which did not reply to a request for comment. The plant’s management also did not respond to AP.
The Alabuga Start recruiting drive used a robust social media campaign of slickly edited videos with upbeat music that show African women smiling while cleaning floors, wearing hard hats while directing cranes, and donning protective equipment to apply paint or chemicals.
Videos also showed them enjoying Tatarstan’s cultural sites or playing sports. None of the videos made it clear the women would be working in a drone manufacturing complex.
Online, Alabuga promoted visits to the industrial area by foreign dignitaries, including some from Brazil, Sri Lanka and Burkina Faso.
In a since-deleted Instagram post, a Turkish diplomat who visited the plant had compared Alabuga Polytechnic to colleges in Turkey and pronounced it “much more developed and high-tech.”
According to Russian investigative outlets Protokol and Razvorot, some pupils at Alabuga Polytechnic are as young as 15 and have complained of poor working conditions.
Videos previously on the platforms showed the vocational school students in team-building exercises such as “military-patriotic” paintball matches and recreating historic Soviet battles while wearing camouflage.
Last month, Alabuga Start said on Telegram its “audience has grown significantly!”
That could be due to its hiring of influencers, who promoted the site on TikTok and Instagram as an easy way for young women to make money after leaving school.
TikTok removed two videos promoting Alabuga after publication of the AP investigation.
Experts told AP that about 90% of the women recruited via the Alabuga Start program work in drone manufacturing.
