These are stories Report on Business is following Wednesday, April 30, 2014.
What about NFL, MLB?
As we applaud the NBA for rightly moving against racism in its ranks, we should remember that the ugly, racist side of pro baseball and football persists.
And it does so openly, for all to see, in names and logos that are offensive to First Nations. It’s just that few seem to care.
(If you’re wondering why this is a business column, I’ll get to that. And these are, after all, businesses.)
To recap, the National Basketball Association won justifiable praise this week when it banned Donald Sterling, the owner of the Los Angeles Clippers, for racist comments about African Americans in a private conversation caught on tape and made public.
This wasn’t lost on First Nations, who have long suffered open racism as society tolerates pro club names like the Washington Redskins, the Atlanta Braves and the Kansas City Chiefs.
Not to mention the Cleveland Indians and their repugnant caricature of a smiling Chief Wahoo. The club has now playing up a new logo – a big C – but reportedly the other will still exist.
There is pressure on Washington to change the club’s name, but there’s no sign of that happening. Indeed, owner Dan Snyder has reportedly said he won’t.
“In taking such appropriate disciplinary action, the NBA has shown leagues like the NFL that they have a moral responsibility to take disciplinary action against people like Dan Snyder, who also continues to proudly promote bigotry with the use of a dictionary-defined racial slur as his team's name,” Oneida Indian Nation Representative Ray Halbritter said after the move by pro basketball.
Nowhere – absolutely nowhere – else would this be tolerated.
But if pro sports won’t listen because it’s the right thing to do – it’s the only thing to do – then perhaps money will talk.
A recent study by professors Michael Lewis and Manish Tripathi, of Emory University’s Goizueta Business School in Atlanta, found that the use of First Nations mascots is costing pro sports clubs millions of dollars.
The researchers use complex formulas to come to the conclusion that the NFL’s Washington and Kansas City franchises are losing $1.6-million (U.S.) a year, and baseball’s Cleveland and Atlanta clubs some $2.6-million.
“In the case of MLB, the model results suggest that having a Native American is also driving lower box office revenues over time,” the researchers said.
“Despite the limitations inherent to our analyses, the consistency between the NFL and MLB findings is in accordance with a trend of growing opposition to these mascots,” they added, acknowledging that much of that is based on anecdotal data.
“Our results imply that fans are also becoming less enthusiastic about these mascots,” they said.
“To be blunt, the implication is that the trends suggest that keeping a Native American mascot is reducing financial performance and harming team brand equity.”
- Cathal Kelly: NBA punishment for Sterling little more than a soft tap
- Margaret Wente: Black and white and Donald Sterling's green
- Clippers owner Donald Sterling banned from NBA for life
- Oprah Winfrey in talks for potential Clippers bid
- Read the Emory study
Winter has taken its toll on Canada’s economy.
The economy expanded in February by 0.2 per cent, shy of January’s pace, which in turn followed a winter-related dip in December.
Output in goods-producing industries increased 0.5 per cent in February, led by the mining and energy industries, while that of the services sector inched up just 0.1 per cent, Statistics Canada said today. Manufacturing climbed 0.6 per cent, a slower pace than the 1.6 per cent in January.
Canada’s economy had picked up marked in January as it rebounded from the icy days of December, but February’s weather appears to have kept things in check.
That growth of 0.2 per cent in February was about what economists had expected.
And, according to senior economist Krishen Rangasamy of National Bank, it puts the economy on track for first-quarter expansion of about 1.5 per cent at an annual pace.
“We expect growth to pick up over the balance of the year in synch with a U.S. rebound,” he said.
And take note of the 5-per-cent contraction in arts and entertainment, which chief economist Douglas Porter says was the result of the two-week absence of the National Hockey league during the Olympics, and which proves, again that “hockey matters to this economy.”
The Bank of Canada forecasts average economic growth of 2.5 per cent this year and next, and then a dip to 2 per cent.
There’s little here to change the Bank of Canada’s course as it unfolds largely as expected.
“Today's GDP data confirms that the first quarter's weak showing was more a reflection of poor weather than any slowing in the economy's underlying momentum and provides no support to the case for the bank to cut the policy rate,” said assistant chief economist Dawn Desjardins of Royal Bank of Canada, referring to speculation that Mr. Poloz could trim his benchmark rate from its current 1 per cent.
“Rather, it sets up for the bank to maintain the overnight rate at 1 per cent in the near term. As the anticipated snapback in activity materializes, the downside risks to inflation will diminish opening the door to the bank transitioning its policy stance to a tightening bias.”
U.S. growth slows markedly
But – ouch – the U.S. economy turned in a bleak first quarter.
According to numbers released today by the U.S. Commerce Department, gross domestic product grew at an annual pace of just 0.1 per cent in the first quarter of the year. The U.S. economy, too, was hurt by winter.
“While the weak headline figure comes as somewhat of a shock, there remain signs within the composition that much of the slowdown was linked to adverse weather during the quarter, and as a result we continue to expect a sizeable gain in Q2 GDP will follow,” said Andrew Grantham of CIBC World Markets.
The Federal Reserve also pointed to better times ahead, saying “growth in economic activity has picked up” as it again trimmed its asset-buying program.
That helped drive the Dow Jones industrial average to a fresh high.
- U.S. economy stalls in first quarter, inventories and trade weigh
- Fed shows faith in U.S. economy with bond-buying reduction
- Follow our Inside the Market blog (for subscribers)
Barrick profit slumps
As The Globe and Mail's Rachelle Younglai writes today, Barrick Gold Corp.’s quest to turn itself into a leaner company is working.
The world’s biggest gold producer, whose deal to merge with Newmont Mining Corp. fell apart this month, reported a plunge in first-quarter profit due to weaker bullion prices and lower sales.
But Barrick said it spent $833 (U.S.) to produce an ounce of gold, $100 less than the previous year and below its $900-plus guidance as the Toronto-based gold miner slashes costs to deal with the depressed precious metal prices.
The company has sold more than $1-billion in non-core assets, including mines in Australia and a small stake in African Barrick, which helped buffet its cash position of $2.7-billion at the end of the quarter.
For the three months ended in March, Barrick said it earned $88-million or 8 cents a share compared with a year-earlier profit of $847-million or 85 cents.
Loblaw tops estimates
Loblaw Cos. Ltd.’s adjusted earnings and revenue rose slightly in the first quarter as the grocery giant deals with a tough competitive market and the negative impact of prescription-drug reform, The Globe and Mail's Bertrand Marotte reports.
The Brampton, Ont.-based company posted adjusted profit of $139-million or 49 cents per share in the first quarter, compared with $134-million or 48 cents in the year-earlier period.
On a non-adjusted basis, net profit fell 39.3 per cent to $103-million or 37 cents from $171-million or 61 in the previous year.
The adjusted earnings beat analysts’ consensus estimate of 46 cents.
The retailer also said it would increase its quarterly dividend by 2.1 per cent to 24.5 cents a share.
The gap between the rich and the rest is widening, with Canada’s top earners seeing one of the highest increases in income shares of any industrialized country.
A new OECD paper, which looks at changes in income distribution over the past three decades, finds the shares of the richest 1 per cent in total pre-tax income have grown in most advanced economies, The Globe and Mail’s Tavia Grant reports.
But they’ve grown faster in English-speaking ones. The top percentile of earners captured about 47 per cent of total growth in the U.S., 37 per cent in Canada and more than 20 per cent in Australia and the United Kingdom.
The responsible Canadian
The numbers certainly support the Bank of Canada’s expectations for heading off a housing meltdown. The question is, how long will that last?
And the answer – who knows? - is one of the reasons central bank chief Stephen Poloz is still concerned.
As The Globe and Mail’s Barrie McKenna reports, Mr. Poloz appears to be more troubled by Canada’s export showing than by still-high consumer debt levels, but he nonetheless flagged it late yesterday when he spoke to the Commons finance committee. He’ll speak to a Senate committee today.
The Bank of Canada governor said he still expects a soft landing in residential real estate, and that the debt burden among consumers will continue to stabilize. According to Mr. Poloz, we’re more responsible now.
But, the “imbalances” in the housing market are still elevated, he said, which means Canadians are vulnerable should we see another economic shock.
“We are observing, anecdotally at least, an increased awareness of this risk,” Mr. Poloz said.
“Consumers are showing responsibility; for example, homebuyers who opt to buy less than they qualify for so they don’t find themselves overextended if interest rates rise,” he added.
“Banks, as well, are underwriting loans more carefully, ensuring that people can service their debts if rates go up. So, while the risk could be significant, we are comfortable that it is not outsized.”
Interest rates will, of course, rise at some point. But not anytime soon. And when they do, it won’t be too far too fast.
The latest numbers from Statistics Canada support Mr. Poloz’s anecdotal evidence.
The key measure of household credit market debt to disposable income dipped in the fourth-quarter of last year to 163.97 from the record 164.2 in the third quarter. The measure of debt servicing is also falling.
And like Mr. Poloz, economists believe borrowers have got the message.
But remember that this doesn’t mean we’re borrowing less, only that the growth in credit is slowing.
Also remember that we’ve been here before, taming our appetite only to see it rise again.
Go back two decades, to late 1993, when that measure stood at 91.06. A decade later, it stood at 116.4, and then surged unrelentingly, even through the recession.
It dipped here and there, only to bounce again. So Mr. Poloz has good reason for his caution.
- Barrie McKenna: Canadian companies losing ground against global competitors: Poloz
- Follow our coverage of Canada's housing market by Tara Perkins
- Canadians score record wealth and a slightly easier time juggling debts
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