These are stories Report on Business followed this week.
The fight over fracking
Matt Damon's new film Promised Land has sparked a fracking heated debate in the United States and Canada.
As The Globe and Mail's Kelly Cryderman and Carrie Tait reported, Canada's energy industry slammed the Hollywood film as it opened a week ago, complaining it's more about fear-mongering than fact. The industry in the United States has gone further, taking out ads in about three-quarters of Pennsylvania's theatres to "respond to the work of fiction with real facts and responsible conversation around the issue of natural gas development."
But as Bloomberg News reported, some folks in Pennsylvania, which is rich in natural gas, are counting on the film to highlight their water pollution issues.
“It should have had a little bit more of a punch,” Ray Kemble of Dimock, Pa., told the news agency, though he added that "it’s going to make people that have never seen or dealt with a land man come out of the theatre and go ‘ooh.’ And they’re going to have questions if a land man comes knocking on their door."
In the film, which Mr. Damon also co-wrote, he plays a so-called land man, who buys up drilling rights in a fictional region hit hard by the recession. But local residents fight back as the film shines a spotlight on the drilling practice known as fracking.
Fracking, short for hydraulic fracturing, busts up underground rock formations using water, sand and gases or chemicals, allowing trapped gas to rush to the surface.
The practice has sparked concerns over water pollution, and has been known to cause minor earthquakes, including in British Columbia.
- Energy industry slams Matt Damon fracking film as Hollywood fiction
- Bloomberg News: Matt Damon film cheers Pennsylvanians who say fracking pollutes
- Britain allows 'fracking' again (Did the earth move for you?)
- Fracking caused many low-level earthquakes in B.C., probe finds
We’re seeing signs of the air going out of the housing market on just about every front, signals that suggest real estate won’t be the driving economic force it has been.
This week alone, Canada Mortgage and Housing Corp. reported that housing starts fell to an annual pace just shy of 198,000 in December from the more than 201,000 rate of November, prompting observers to project a slower, though more sustainable pace, this year.
Separately, Statistics Canada reported that building permits, which are traditionally volatile and thus should be taken with a grain of salt, sank 17.9 per cent in November to their lowest level since last January.
That was followed Friday by a report from The Toronto Real Estate Board showing condo sales tumbled 23 per cent in the fourth quarter of 2012, while the average selling price of condominiums slipped 1 per cent to $332,410.
“This robust pace of homebuilding activity has provided a key support to the Canadian economic recovery to this point; however, concerns have been rising that the elevated levels of housing construction, particularly multiple-unit starts, is creating market imbalances that could pose risks to the housing market and the broader economy as a whole,” said economist David Onyett-Jeffries of Royal Bank of Canada, referring to the pace of housing starts last year.
“To that end, the moderating trend in homebuilding activity seen in the second half of 2012 is a welcome development. We expect that housing starts will continue to moderate gradually over the forecast horizon as housing market activity transitions to more sustainable levels.”
- Housing market headed for soft landing, agency, CEOs say
- Slowdown in home construction a 'welcome development'
- Canada's building permits slump to 10-month low
Pickup seen in mid-year
It's shaping up to be a middling year where the broader economy is concerned.
The Bank of Canada and many of the country's economists see a weak near-term, with a pick-up seen somewhere around mid-year.
"We continue to expect economic activity to pick up through 2013, but near-term momentum now appears to be slightly softer than previously anticipated," Tiff Macklem, the senior deputy governor of the Bank of Canada, told an audience in Kingston, Ont., this week.
"These and other developments will all be taken into consideration as we revise our economic projections, to be published on January 23 with the next interest rate decision. The strength and durability of the pick-up in growth through 2013 and beyond will depend critically on how successful we are in re-gearing our growth to exports, investment and innovation."
As senior economist Sal Guatieri of BMO Nesbitt Burns put it, economic growth of less than 2 per cent "appears to be the new norm" for Canada, given the slowdown in housing, soft exports and a consumer heavily in debt. There's also the issues of lower prices for base metals and the ever-widening gap between Alberta and global oil prices.
Some economists also expect the delayed cuts of more than $100-billion (U.S.) in the United States to shave some 0.5 per cent from Canada's economic growth.
"With fading domestic momentum, Canada’s economy is at the mercy of fickle U.S. lawmakers," Mr. Guatieri said.
"Sluggish U.S. demand and a strong Canadian dollar, coupled with moderating housing markets and debt-wary households and governments, are expected to restrain the expansion to a 1.8-per-cent rate in Q1," he said in a forecast.
"Only if U.S. growth strengthens, as we anticipate, will Canadian growth firm in the second half of the year. Further assistance should emerge from a pickup in business investment, as improved global demand (notably in China) bolsters commodity prices. Still, less spare capacity and pent-up demand in Canada than in the U.S. suggests the latter will outrun the former for a while, if only to catch up to the higher levels of activity in Canada."
- Macklem warns Canada's outlook weak despite recent job growth
- Tavia Grant's Economy Lab: Economists see tepid first half of 2013, gains later
- Canada's trade deficit soars to fourth-highest level ever
- 'Rock-solid' Canadian dollar seen strong for at least two more years
- Canadians getting message on their personal debt bombs, but will it last?
Europe also expects pick-up
The European Central Bank also expects its region's economy to pick up around mid-year, so much so that it left its benchmark rate at 0.75 per cent this week and gave no signal of a cut at any time soon.
The euro zone is in recession, and unemployment is a staggering 11.8 per cent, according to the latest reading this week. But, as Kit Juckes, the chief of foreign exchange at Société Générale, put it after ECB chief Mario Draghi's policy announcement, the central banker sounded as though the battle had been won and now the "superhero departs, leaving unemployed to politicians."
Mr. Draghi noted after the ECB meeting that economic indicators are weak now, but several have stabilized and investor confidence has improved markedly.
“Later in 2013 a gradual recovery should start, as our accommodative monetary policy stance, the significant improvement in financial market confidence and reduced fragmentation work their way through to private domestic expenditure, and a strengthening of foreign demand should support export growth.”
While the ECB is an inflation-fighting bank, unemployment in some countries, such as Greece and Spain, is at exceptionally high levels, particularly among young people, promising further social unrest.
Some 26 million people across the European Union can't find work, almost 19 million of them in the 17-nation euro zone.
"President Draghi gave no impression at all that the ECB is about to provide additional policy support, conventional or unconventional," said Jonathan Loynes of Capital Economics.
"He also rejected the suggestion that the ECB should follow other central banks like the U.S. Fed and Bank of England in rethinking their policy objectives, insisting that the ECB has a mandate to preserve price stability and has 'shown how to meet it,'" Mr. Loynes added in a research note.
"... Over all, the strong message was that the ECB is content for now to use the breathing space provided by lower bond yields (which fell further in Spain and Italy on Thursday) to leave the onus firmly on euro zone governments to tackle their own problems through fiscal and structural reform."
- ECB, keeping rates on hold, sees recovery later in 2013
- Unemployment in euro zone hits record high
- Eric Reguly's Economy Lab: In Rome, economic reality grinds away at street life
- Europe faces another daunting year
This was a week for those who love hockey and want to love the Toronto Maple Leafs.
Sports aside, it's also an economic and business story.
First, the National Hockey League and its players' union ended hours of negotiations last Sunday with a tentative deal to end their lockout. As the puck drops again, that will put a tiny spark into Canada's stagnating economy.
"Since a bit less than half the season looks to have been lost, the economic damage will be contained at less than 0.05 per cent of GDP,” said deputy chief economist Douglas Porter of BMO Nesbitt Burns.
“That loss would have been fully absorbed by now, and we should see a slight bump in January growth – in the arts, entertainment and recreation category.”
No sooner had the deal been struck than the Toronto Maple Leafs on Wednesday fired their general manager, Brian Burke.
As James Mirtle and Grant Robertson report, executives of BCE Inc. and Rogers Communications Inc., who control the club, found him difficult to deal with.
- Breakout or break-even? The problem with pricing a puck drop
- New Leafs owners said to dislike Burke from get-go
1. If you're tired of your bridge club or bowling league, here's something with a bit more bite to it: The Florida Fish and Wildlife Conservation Commission is launching the 2013 Python Challenge this weekend, the idea being to get bounty hunters, and anyone else who may just need a change of pace, to hunt down Burmese pythons in the Everglades, follow the guidelines on "humane euthanasia," and drop each snake off in two pieces to be eligible for a big prize.
It's billed as a "competitive harvest," which means you lop off their heads after killing them "in a humane manner." There are instructions on how to do that before trying to claim prizes that include $1,500 (U.S.) for the most pythons caught, and $1,000 for the longest.
The commission says Burmese pythons are "an invasive species of constrictor snake that threatens the Florida Everglades ecosystem, including native wildlife." Thus, the grown-up version of hide-and-seek.
You have to follow the officials rules: "To be eligible for the longest Burmese python prize, the snake should be in no more than two pieces (e.g., the head removed from the body). However any snake submitted in more than two pieces still counts toward the total number of pythons captured." Which should be obvious, given that it would be difficult to measure an eight-metre snake in six or seven chunks.
Also be aware that "road-killed Burmese pythons are not counted toward the competition."
And then there's this: "We suggest you carry all these documents with you, or be able to reference the Toolkit online, when you are harvesting Burmese pythons." So take your smartphone, laptop or iPad to the middle of the Everglades, and stop and check out what you need to do when you're staring a python in the face.
2. Tweet of the week, from @katie_martin_FX: "Isn't there some gag about how if Gartman sold a unit of silver and bought unit of VND, he'd be long dong/silver?" (VND is the symbol for the Vietnamese dong.)
3. From Canadian Heritage this week: "Today, the Honourable Steven Fletcher , Minister of State (Transport) and Member of Parliament for Charleswood-St. James-Assiniboia, accompanied by Joan Crockatt, Member of Parliament for Calgary Centre, on behalf of the Honourable James Moore , Minister of Canadian Heritage and Official Languages, announced the Harper Government’s investment in the Calgary Opera Association through the Canada Arts Training Fund.." God knows, they have enough people to stage their own production of La bohème .
4. Even the pope has something to say about Europe's mess, its politicians and bond spreads: "The European Union also requires farsighted representatives capable of making the difficult choices necessary to rectify its economy and to lay solid foundations for growth. Alone, certain countries may perhaps advance more quickly, but together, all will certainly go further! If the differential index between financial taxes represents a source of concern, the increasing differences between those few who grow ever richer and the many who grow hopelessly poorer, should be a cause for dismay. In a word, it is a question of refusing to be resigned to a 'spread' in social well-being, while at the same time fighting one in the financial sector."
5. From Ontario Lottery and Gaming this week: "If you’re a Lotto Max lottery player and may have purchased a ticket in the Cambridge area for the Nov. 30, 2012, draw, now is the time to head to your nearest retailer and check your numbers. It has been over a month since the draw and the $50-million winning jackpot ticket from Ontario is still unclaimed." Hey, really, if you need me to be from Cambridge, I can be from Cambridge.
6, The European Central Bank says it pulled 12.4 per cent fewer counterfeit euro banknotes out of circulation last year, though more in the second half than the first. Over all, the central bank said, "the proportion of counterfeits remains very low." Perhaps that's because counterfeiting the euro is a pointless exercise?
7. Not that it matters all that much now, but Statistics Canada said this week that average domestic air fares rose 4.5 per cent in 2011 from 2010, led by Calgary, at 6.5 per cent. Others that increased included Edmonton (5.7 per cent), Halifax (4.2), Montreal (1.6), Regina (5.8), Saskatoon (5.1), Toronto (4.7), Vancouver (3.8) and Winnipeg (4.6). Ottawa was the only city studied to see a decrease, of 0.6 per cent.
8. Quote of the week, from UBS chief Andrea Orcel, at a parliamentary hearing into the Libor scandal: “We all got probably too arrogant, too self-convinced the things were correct the way they were - I think the industry has to change,. There were certainly elements of our culture that were negative and that need to be rooted out and elements of our culture that we didn’t understand.”
9. Runner up quote of the week, from Kit Juckes, the chief of foreign exchange at Société Générale: "Really low bond yields and a strong currency despite a huge debt burden, sizeable budget deficit and chronic economic weakness. Yup, the Japanification of the euro zone continues apace."
10. Swedish authorities say they've cracked a massive garlic smuggling ring. The men accused in the plot to smuggle more than a ton of Chinese garlic allegedly drove the stuff across the border with Norway to escape hefty levies in 2009 and 2010, The Associated Press reports. Surprisingly, the case was cracked through old-fashioned police legwork, rather than by sense of smell.
Canada’s financial regulator has “serious concern” about the viability of a rising number of private pension plans, a sign that plans are struggling to meet obligations at a time of low interest rates and weak investment returns. Tara Perkins reports.
Canadian planes are fuller than ever, as the major airlines show they have mastered the art of setting airfares just low enough to get passengers to pack most every flight, Guy Dixon reports.
Diet gurus are spreading the idea that bread is bad for your health and waistline, but Canada Bread is fighting back. Susan Krashinsky reports.
Online retailers increasingly used relaxed return policies in the holiday season to wrest market share away from rivals, but they're now bracing for a potentially costly consequence – a heavy flow of unwanted gifts. Marina Strauss reports.
The smartest way to play a resurgent U.S. housing market is to buy into Ford Motor Co., David Berman suggests.