Asian shares mostly fall amid worries about slowing economy - CityNews Toronto

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Asian shares mostly fall amid worries about slowing economy  CityNews Toronto
Asian shares mostly fall amid worries about slowing economy - CityNews Toronto
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Asian shares mostly fall amid worries about slowing economy - Windsor Star

Canadian dollar seen up in one year if economy avoids hard landing: Reuters poll - Reuters

TORONTO, April 5 (Reuters) - The Canadian dollar is set to rally over the coming year, after a period in which it consolidates its recent gains, as an expected slowdown in economic activity stops short of a hard landing for the economy, a Reuters poll showed on Wednesday.

Since early March the Canadian currency has rallied about 3% against its U.S. counterpart as worries the global banking crisis would lead to a credit crunch eased and the U.S. dollar lost ground against a basket of major currencies.

A surge this week in the price of oil, one of Canada's major exports, has added further momentum for the currency. It touched on Tuesday its strongest intraday level in almost seven weeks, near 1.34 per U.S. dollar, or 74.63 U.S. cents.

The median forecast of nearly 50 currency analysts was for the loonie to weaken to 1.35 per U.S. dollar in three months' time, compared to 1.34 expected in last month's forecast. But it was then expected to rally to 1.30 in a year, which is a gain of 3.5%.

"It's basically a reflection that you get the moderation in (economic) growth ... more of a soft landing than a hard landing, and so the CAD can do okay in that environment," said Mazen Issa, senior FX strategist at TD Securities.

"But if the U.S. (outlook) becomes particularly precarious, if lending conditions tighten significantly ... then we could have a little more problems globally."

The Bank of Canada is ready to step in with support if the banking system comes under severe strain, but now it is not even close to being worried about the health of the financial system, Deputy Governor Toni Gravelle said last Wednesday.

Next Wednesday, the central bank is due to make an interest rate decision and update its economic forecasts. Money markets and economists expect the benchmark interest rate to be left unchanged at a 15-year high of 4.50% after the BoC paused its hiking campaign last month.

Other central banks, such as the U.S. Federal Reserve, may also soon pause.

"I think it's an environment where the (U.S.) dollar loses a bit of its edge," Issa said. "It will give up some ground on the rate differential side."

The gap between Canada's two-year yield and its U.S. equivalent was trading on Tuesday at 27 basis points in favour of the U.S. bond, its narrowest gap since early January.

(For other stories from the April Reuters foreign exchange poll:)

Reporting by Fergal Smith; polling by Indradip Ghosh and Prerana Bhat; Editing by Sharon Singleton

Our Standards: The Thomson Reuters Trust Principles.

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Canadian dollar seen up in one year if economy avoids hard landing: Reuters poll - Reuters
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Bank of Canada surveys find weakening business outlook ahead of next week's rate decision - The Globe and Mail

The Bank of Canada wording on a Canadian $50 bill is pictured in Ottawa on Wednesday, Jan. 11, 2023.Sean Kilpatrick/The Canadian Press

Business sentiment in Canada continues to worsen with companies expecting sales growth to slow over the coming year and inflation to remain elevated until at least 2025, according to the Bank of Canada’s quarterly business survey.

At the same time, companies are reporting improvements in labour shortages and other supply constraints, while many expect wages to keep rising quickly.

The Business Outlook Survey and its companion Survey of Consumer Expectations, both published Monday, show Canadians remain nervous about the economy, despite stronger-than-expected growth at the start of 2023.

This should reinforce the Bank of Canada’s decision to pause further interest-rate hikes, and sets the central bank up to keep its benchmark rate at 4.5 per cent at the next monetary policy decision meeting on April 12.

Around half of the respondents to the business survey expect a mild recession this year, as higher interest rates curb consumer spending. Almost 60 per cent of the respondents to the consumer survey expect a “small” or “significant” economic decline over the next 12 months.

This aligns with the central bank’s forecast of near-zero growth over the first three quarters of 2023.

The bank is actively trying to engineer an economic slowdown to bring high inflation back under control. So far, however, the Canadian economy has proven surprisingly resilient in the face of eight rate hikes since March, 2022.

Statistics Canada reported last week that GDP grew 0.5 per cent in January compared with the previous month, and a preliminary estimate showed a further 0.3-per-cent growth in February. This was more than the central bank or Bay Street analysts were expecting.

“Today’s releases should encourage the Bank of Canada to remain on hold at its policy announcement next week,” James Orlando, Toronto-Dominion Bank’s director of economics, wrote in a note to clients Monday.

“Granted, GDP growth, employment data, and consumer spending have surged recently. But, if consumers and businesses adjust their behaviour in preparation of a slowdown, it becomes a self-fulfilling prophecy. This implies that the string of positive surprises won’t last much longer.”

The surveys were conducted in late January and February, which means they don’t capture any knock-on effects from the recent convulsion in the U.S. banking sector. However, follow-up interviews conducted by the central bank found that business conditions have not changed much as a result of the banking stress.

New surveys from the Bank of Canada suggest business and consumer expectations of future inflation are tracking down, but a potential recession continues to weigh on economic outlooks.Sean Kilpatrick/The Canadian Press

Canadian businesses and consumers continue to expect inflation to remain worryingly high, although these expectations have declined over the past several quarters alongside the actual fall in Consumer Price Index inflation. Annual CPI inflation was 5.2 per cent in February, down from a peak of 8.1 per cent last June.

The average respondent to the business survey expects inflation to be 3.9 per cent in two years’ time. That’s nearly twice the Bank of Canada’s 2-per-cent target.

Consumers, meanwhile, think that inflation will still be running at 4.27 per cent in two years. Most respondents blamed supply chain disruptions for high inflation, the Bank of Canada said, although many also pointed to high government spending.

The central bank cares about inflation expectations because beliefs about future prices can affect company price-setting decisions and employee wage demands in a self-fulfilling manner.

While many companies were downbeat about their future sales growth, business conditions have improved in several key areas. Crucially, labour shortages have become less intense and companies are less worried about meeting an unexpected surge in demand.

“Firms indicated that it has become easier to find the workers they need. They attribute this to less competition for labour and an improved labour supply,” the Bank of Canada said, pointing to increased immigration.

“For the first time in several quarters, businesses no longer expect labour costs to put upward pressure on their output price growth,” the bank added.

Even with less competition for workers, businesses still expect to raise wages quickly this year, by an average of 4.7 per cent. That’s down from a peak of 5.8 per cent in the second-quarter 2022 survey, but well above the prepandemic average of around 3 per cent.

Consumers remain upbeat about their job prospects, although they don’t think that their wages will keep up with inflation. They also reported feeling worse about their finances compared with previous periods of rising interest rates.

Canadians are being squeezed by a combination of rising prices and higher borrowing and debt-service costs. That’s leading some consumers to dial back spending plans.

“About one-third of consumers expect to travel less often, eat out less often and enjoy fewer paid entertainment or social activities in the next 12 months than they did in the previous 12 months. This is largely because of the high prices of these services and other essential purchases,” the bank said.

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OPINION: 'Green' recovery plans will impose substantial costs on economy - Toronto Sun

Rows of solar panels at the Toms River Solar Farm which was built on an EPA Superfund site in Toms River, N.J., May 26, 2021. Photo by DANE RHYS / FILES /REUTERS

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Many western governments including Prime Minister Justin Trudeau’s have shifted from a pandemic focus to a “green economic recovery.” According to advocates, these recovery plans allow countries to “build back better” by simultaneously improving the economy and reducing greenhouse gas emissions (GHGs).

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But a recent study published by the National Bureau of Economic Research (NBER) by noted economists Timothy Fitzgerald and Casey Mulligan found that green recovery plans in the United States will not improve economic growth but rather impose significant costs on Americans. Canadians should take note, since our green plans are actually more extensive, which means Canadians may suffer even larger costs than our southern neighbours.

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The study looks at several aspects of the U.S. green recovery plan including changes in fuel efficiency standards for all new vehicles, replacing fossil fuel-produced electricity with clean energy sources, and the creation of new electricity generation capacity (using wind and solar) to accommodate mandated increases in electric vehicles (EVs).

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It’s important to recognize how ambitious — some might say unrealistic — some of these initiatives are, particularly in terms of timing. Consider, for instance, that the Biden administration is requiring that 50% of all new vehicle sales by 2030 (only seven years away) be electric, hydrogen or plug-in hybrids. And that the U.S. establish an emissions-free power system — that is, the complete elimination of fossil fuels — by 2035.

Here at home, Ottawa has mandated the phase-out of conventional coal-fired electricity generation and wants renewable energy sources to achieve 90% of non-emitting electricity generation by 2030. The Trudeau government has also set a sales target requiring all passenger cars, SUVs and trucks sold in Canada in 2035 to be electric. In 2021, fully electric and plug-in hybrid vehicles comprised just 5.2% of new car registrations.

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The NBER study evaluates the economic costs of Biden’s green plan (described above) and concludes it “will require more inputs to produce the same outputs, resulting in recurring costs of up to $483 billion per year.” In other words, the U.S. economy will spend $483 billion more than it does now annually to produce the same level of output, which means it will be more expensive to produce the same amount of goods and services.

Those extra costs mean the U.S. economy will be less effective at producing goods and services people demand, and those goods and services will be available only at higher costs, resulting in lower living standards. According to the study, the green recovery plans in the U.S. will reduce the country’s Gross Domestic Product (inflation-adjusted) by 2% to 3%.

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This is just one study on top of many published over the last few years showing the enormous costs green energy plans in the U.S. and Canada will impose on citizens, and yet politicians and advocates on both sides of the border continue to argue that these plans will improve the economy.

That’s not to say governments can’t respond to climate change, particularly with programs encouraging adaptation and risk mitigation. However, any action by government should be rooted in an empirical evaluation of the likely costs and benefits, and then transparently shared with the public.

— Elmira Aliakbari and Jason Clemens are economists with the Fraser Institute.

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More people living and working in Nanaimo, finds state of the economy report - Nanaimo News Bulletin - Nanaimo Bulletin

The City of Nanaimo reports that a bustling economy is keeping pace with a fast-growing city.

At a city council meeting Monday, April 3, the city’s economic development officer Amrit Manhas presented the annual ‘State of the Nanaimo Economy’ report, providing statistical information about population and demographics, development and housing, and jobs and employment levels.

Manhas noted the city is one of Canada’s five fastest-growing metropolitan areas, and the report mentioned that Nanaimo’s population growth rate between the 2016 census and the 2021 census was 10.3 per cent, higher than B.C.’s growth of 7.6 per cent and Canada’s growth of 5.2 per cent.

The report projects that the City of Nanaimo’s population is expected to grow from 102,000 to 140,000 by 2046.

“Our city continues to be a magnet for new residents as well as new businesses…” Manhas told city councillors. “Population growth is very important because it speaks to our attractiveness as a place to live, to work and to invest. It increases our consumer base; it expands the pool of workers that we have in our community.”

She said in 2021, nearly 2,200 people moved to the Nanaimo, with 71 per cent of them between the ages of 15-65. She noted that last year’s census showed that Nanaimo got younger, as the average age of a Nanaimo resident was 44.8 years old in 2021, compared to 45.5 years old in the previous census.

READ ALSO: Census shows Nanaimo is one of Canada’s fastest-growing metropolitan areas

Manhas mentioned the City of Nanaimo’s $410 million in building permit values in 2021 and said housing starts were up nine per cent in a year when some comparison cities showed a decrease in housing starts.

The report noted that average rent went up in Nanaimo from $1,198 in 2021 to $1,356 in 2022, though the vacancy rote also improved slightly from 1.6 per cent to 2.2 per cent.

Coun. Janice Perrino asked when the city’s pace of development might show impacts on the housing market, and general manager of development services Dale Lindsay replied that while nearly 1,400 units were created in the city last year, the city needs that number of new housing units every year just to keep up with growth.

“We’re hoping as these new units come online we’ll see things like the vacancy rate hopefully begin to ease up a bit,” he said. “We’ve seen a very low vacancy rate for a number of years now.”

On jobs and employment, Manhas reported that the number of jobs in Nanaimo grew 10.8 per cent between 2016-21, with nearly 1,500 new jobs in the health and social services, more than 700 in construction and close to 700 in educational services. Last year, there was “strong” growth in sectors such as accommodation and food services that had been “really decimated” during the early years of the pandemic, she said. Nanaimo’s labour force, in 2022, grew faster than the average for Vancouver Island and B.C.

“Historically Nanaimo’s labour force participation has always been lower than B.C. and Canada, but higher than Vancouver Island-Coast,” Manhas said. “But since 2017 we’ve been seeing that our participation rate is trending really close to B.C. and Canada and this is consistent with more younger people moving into our region, and it could partly be the face that more [retirement-age] people are also staying in the labour force.”

Job postings in Nanaimo were 38.7 per cent higher in 2022 compared with 2021, with Island Health and then Vancouver Island University the top employers by number of job postings. The unemployment rate in 2022 was 3.6 per cent, lower than the rate on the Island, the province or the nation. There had been discussion of the City of Nanaimo’s job openings earlier in the meeting Monday.

“I know it’s been a struggle for a lot of organizations just finding people to fill [positions],” said Coun. Ben Geselbracht. “We’re advertising at our council meetings now.”

READ ALSO: City of Nanaimo’s population reaches 100,000

editor@nanaimobulletin.com
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More people living and working in Nanaimo, finds state of the economy report - Nanaimo News Bulletin - Nanaimo Bulletin
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BoC surveys show economy softening, future inflation expectations falling - CityNews Vancouver

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1. BoC surveys show economy softening, future inflation expectations falling  CityNews Vancouver
2. BoC surveys show economy softening, future inflation expectations falling  CTV News
3. Bank of Canada surveys find weakening business outlook ahead of next week's rate decision  The Globe and Mail

BoC surveys show economy softening, future inflation expectations falling - CityNews Vancouver
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