These are stories Report on Business is following Tuesday, Oct. 23, 2012.
Carney cites dollar
If we were Brazil, I wonder if we wouldn't be screaming "currency war" at this point.
Instead, Bank of Canada Governor Mark Carney is using exceptionally diplomatic language to describe how Canada is being hit by the strength of the Canadian dollar.
"Canadian exports are projected to pick up gradually but remain below their pre-recession peak until the first half of 2014, reflecting weak foreign demand and ongoing competitiveness challenges," Mr. Carney and his colleagues on the central bank's rate-setting panel said today.
"These challenges include the persistent strength of the Canadian dollar, which is being influenced by safe haven flows and spillovers from global monetary policy."
What he means there, though he didn't say it, is that other countries are following policies either designed to hold down their currencies or, in the case of the United States, may simply be the result of an extraordinary effort to juice the economy.
As The Globe and Mail's Kevin Carmichael writes, that line in today's Bank of Canada statement is new. And as our Tavia Grant reports, the Canadian dollar spiked, though then fell back, after the Bank of Canada held its benchmark rate steady at 1 per cent but continued to signal, albeit weakly, that the next move in rates will be up.
Countries like China hold down their currencies, a move aimed at bolstering exports. The Federal Reserve in the United States has launched several rounds of quantitative easing - the latest has been dubbed QE3. These are asset-buying programs meant to bolster America's recovery, but which are negative for the greenback.
Countries such as Brazil, battling with a strong currency, have spoken out repeatedly on weak-currency policies.
The Canadian dollar, known in Canada as the loonie, has been strong for some time, weighing on the economy, as the central bank noted today. That, economists believe, could prompt the bank to hold off for some time on pulling the trigger.
"The BoC mentioned today the Canadian dollar's persistent strength as resulting from safe haven flows and global monetary policy (read the Fed's money printing exercise)," said Paul-André Pinsonnault and Krishen Rangasamy of National Bank of Canada.
"Recall that in Governor Carney's recent speech in Nanaimo, he made that reference and pointed out that the BoC 'takes all of this into account when setting monetary policy.' So if the loonie stays strong, the resulting drag from trade could encourage the BoC to delay rate hikes."
There's another issue weighing on Mr. Carney's mind, that of record levels of household debt.
Mr. Carney has been warning for months that Canadians must get their household finances in shape as interest rates will inevitably rise, and to protect against financial shocks. Finance Minister Jim Flaherty has also made this a crusade as the ratio of household debt to disposable income holds at record levels, and is expected to rise further.
While Mr. Carney may be in no rush to hike rates, he warned he could do so to tame consumer debt. He didn't use that language, but that's what he suggested.
"Over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2-per-cent inflation target," the Bank of Canada said.
"The timing and degree of any such withdrawal will be weighed carefully against global and domestic developments, including the evolution of imbalances in the household sector."
That last piece is the warning.
"We think this addition can suggest two things," said Charles St-Arnaud of Nomura Securities in New York.
"First, the BoC considers that it will need to hike rates to contain imbalances in the household sector, as we have been recommending for almost two years. Second, that the BoC will need to be extra careful when hiking rates because the high level of household debt means that each rate hike has a much bigger impact on the consumer than previously. We continue to expect the BoC to hike in July 2013. However, today’s decision highlights that the BoC could hike quickly once the various sources of uncertainty dissipate."
- Bank of Canada softens rate stand, flags debt concerns
- Tavia Grant's Economy Lab: Why a high Canadian dollar is likely here to stay
- Kevin Carmichael's Economy Lab: Mark Carney's battle - household debt vs. growth
Feeling the pinch
Nearly three-quarters of Canadian households would feel a significant strain if they were to experience a modest increase in their monthly mortgage payments, a new survey by Bank of Montreal suggests.
As The Globe and Mail’s Tara Perkins reports, the BMO report indicates Canadians still have strong buying intentions when it comes to housing, with 46 per cent of homeowners saying they intend to buy a property in the next five years. But the number who would buy in the next five years drops to 36 per cent if house prices were to rise by 5 per cent, showing the sensitivity of the market to prices at a time when many economists expect them to soften.
Retail sales volumes dip
It’s not that Canadians are buying more. It’s that what they’re buying – in terms of food and gas – costs more.
Retail sales in Canada climbed 0.3 per cent in August, Statistics Canada said, but fell 0.3 per cent in volume terms when you remove the price effects.
“The largest increase in dollar terms among all subsectors was a 2.9-per-cent rise at gasoline stations, reflecting higher prices at the pump,” the federal agency said.
Global stock markets tumbled today, troubled by weak quarterly corporate reports and ongoing woes in Europe.
Tokyo’s Nikkei was effectively flat, but London's FTSE 100, Germany's DAX and the Paris CAC-40 fell by up to 2.2 per cent.
The S&P 500, Dow Jones industrial average and Toronto's S&P/TSX composite followed suit.
"After so many days where markets have struggled to get a sense of direction, this morning we saw a decisive move downwards," said market analyst Alastair McCaig.
"A combination of poor company figures and Moody’s downgrade of five Spanish regions debt to 'junk' status has seen the wind taken out of markets' sails and a distinct 'risk off' attitude from traders. This action will prevent numerous investors from being able to hold it and although it might not force Prime Minister Mariano Rajoy into applying for EU bailout funds, it will certainly reduce any wiggle room that he might have had."
Apple unveils the mini
Apple Inc. today unveiled a mini version of its popular iPad, boasting a screen that's two-thirds the size of the original tablet.
It weighs just 0.68 pounds.
The 7.9-inch mini-version will compete against devices from Samsung, Amazon.com Inc. and Google Inc.
It will start at $329 for the 16GB model.
RBC strikes Ally deal
Royal Bank of Canada is buying Ally Financial Inc.’s Canadian auto finance and deposit business, for a net purchase price of $1.4-billion (U.S.), The Globe and Mail's Bertrand Marotte reports.
RBC said the business offers inventory financing to more than 580 car dealerships across the country. The consumer side offers retail financing to consumers through roughly 1,600 dealerships; it has about 450,000 consumer loans.
TD in credit card deal
Toronto-Dominion Bank is acquiring the existing U.S. credit card portfolio of Target Corp. in a seven-year deal that comes about five months before the giant discounter is set to open its first stores in Canada, The Globe and Mail's Marina Strauss writes.
The agreement, announced this morning, involves a credit card portfolio with a current gross outstanding balance of $5.9-billion (U.S.). TD would become the exclusive issuer of Target-branded Visa and private-label consumer credit cards to Target’s U.S. customers.
Canada in top ranks for small business
Canada ranks among the world’s top 20 countries for running small and medium-size businesses, a new study finds, and is No. 1 when it comes to getting through red tape to launch an operation.
The 10 annual study by the World Bank and International Finance Corp. ranks Canada at No. 17 in the overarching category of ‘ease of doing business.’ The top five include Singapore, Hong Kong, New Zealand, New Zealand, the United States and Denmark.
“According to a recent review, evidence from several studies shows that reforms making it easier to start a formal business are associated with increases in the number of newly registered firms and sustained gains in economic performance, including improvements in employment and productivity,” the report says.
“For example, in both Canada and the United States empirical research finds that economic growth is driven by the entry of new formal businesses rather than by the growth of existing firms.”
Canada holds the No. 3 spot when it comes to the ease of starting a new business, and top spot in terms of having the fewest procedures necessary to do that.
Canada ranks No. 2 for making exporting easy, and No. 4 for investor protection.
“Each indicator set measures a different aspect of the business regulatory environment,” says the report.
“The rankings of an economy can vary, sometimes significantly, across indicator sets … These correlations suggest that economies rarely score universally well or universally badly on the indicators … Consider the example of Canada. It stands
at 17 in the aggregate ranking on the ease of doing business. Its ranking is 3 on starting a business, and 4 on both resolving insolvency and protecting investors. But its ranking is only 62 on enforcing contracts, 69 on dealing with construction permits and 152 on getting electricity.”
I’ll just point out, too, that Canada scores well in the category of ‘making it easy to pay taxes,’ at No. 8. I think we all know that goes well beyond small business.
Where the money is
Jobs in the tech sector will command the highest pay increases next year, according to a new survey of salary trends, but it won’t be too shabby for office dwellers either.
The study released today by Robert Half International projects starting salaries in the tech industry will climb by 4.5 per cent.
“Mobile applications developers will see the highest increases (an average of 9 per cent), as companies look for people to help them build business using mobile media,” the company said in a statement.
“Network engineers, business intelligence analysts, and senior IT auditors also are in demand.”
Base pay for administrative and office support staff should rise by 3.9 per cent, and among accountants and finance professionals 2.2 per cent.
“Employers are refilling some roles and creating new ones to ready themselves for future growth. Positions in demand include executive assistants and customer service representatives. Above-average salary increases also are projected for select administrative positions in the health care industry and in human resources.”
In the finance field, there’s a notable need for analysts and senior accountants, Robert Half said.
“In the health care industry, financial professionals with knowledge of health informatics and those who maintain and provide financial data, are being hired to handle initiatives related to the collection of electronic medical information. In financial services, there is demand for risk and compliance professionals who can interpret evolving regulatory requirements.”
- Rob Carrick: How car loans help drive affordability delusion
- Rob Carrick on money: My brain is a lame investor
|DJIA-I Dow Jones Industrials||16,126.75||
|Add to watchlist|
|SPX-I S&P 500||1,848.87||
|Add to watchlist|
|TSX-I S&P/TSX Composite||14,266.59||
|Add to watchlist|
|RY-T Royal Bank of Canada||71.52||
|Add to watchlist|
|TD-T TD Bank||51.41||
|Add to watchlist|
|Add to watchlist|
|CAD/USD-I Canadian Dollar/U.S. Dollar||0.902||
|Add to watchlist|