These are stories Report on Business is following Monday, Feb. 24, 2014.
Decline in dollar to hit spending
The rapid decline in the Canadian dollar won’t change the habits of so-called snowbirds, but will bite into spending in the United States, nonetheless, a new report suggests.
Canadians who head to the U.S. for short periods will drive the decline in shopping, rather than those who travel south for the winter, says the report released today by Toronto-Dominion Bank.
About 23.5 million Canadians travel to the U.S. annually and pump more than $22-billion into the American economy, Derek Burleton and Sonny Scarfone said in their study.
Mr. Burleton, TD’s deputy chief economist, and Mr. Scarfone, an economist analyst, forecast that the lower currency will keep some 3 million Canadians home in each of this year and next, reducing Canadian spending in the U.S. by a total $4.5-billion.
“While this reduced activity represents a rounding error for the U.S. economy as a whole, it will have more of an impact on the economies of cities by the border such as Burlington, Detroit or Seattle,” they said.
“On the flip side, Canadian retailers and communities stand to benefit as much of this ‘lost’ spending will likely take place within the domestic Canadian market.”
By the time all is said and done, according to their projection, the loonie, as Canada’s dollar is known, will have lost 15 per cent by mid-2014 since late 2012.
Short-term visits are sensitive to that, though “one aspect of Canadian tourism spending in the U.S. that is unlikely to be greatly affected is snowbird activity.”
More than 500,000 snowbirds head south for three to six months a year, they noted, with Florida the prime location.
“The growing flock of snowbirds is based more on an aging population and on lifestyle choice, which will insulate this activity against swings in the Canadian dollar,” they said.
“We anticipate both spending and long-term visits to continue to grow over the next few years in the snowbird destinations, albeit at a slower rate than in recent years.”
Many own property in Florida, they added. New purchases can be expected to slow “markedly” over the next few years given the dollar and U.S. prices, with renting becoming more attractive.
Speculative bets against the Canadian dollar, meanwhile, continue to climb.
According to the latest report from the U.S. Commodities Futures Trading Commission, the short position against the loonie, as the country’s dollar coin is known, grew last week to $6-billion.
“For CAD, this is historically extreme but gross shorts are still being added to, suggesting that momentum is strong and sentiment will continue to weigh on CAD,” said chief currency strategist Camilla Sutton of Bank of Nova Scotia, referring to the currency by its symbol.
Ukraine seeks aid
After the bloodshed, the focus in the Ukraine now turns to the economy.
Ukraine’s acting finance minister, Yuri Kolobov, said today the country needs $25-billion (U.S.) in aid over the next two years to head off what would be an economic collapse.
Ukraine had struck a hefty bailout deal with Russia, but that is now in doubt.
According to Reuters, a senior official of the European Commission said talks have already been held with Japan, China, Canada Turkey and the U.S., but it’s not likely the amount of money being sought will be forthcoming any time soon.
“Given the events in the last week, the Ukraine will likely need a new deal from the EU or IMF to remain solvent as the Russian deal will almost certainly be made obsolete under the current leadership, but the lack of clarity as to the country’s political path from here makes it very hard to strike up a deal that would be guaranteed to stick, which is likely to make markets pretty skittish, said senior sales trader Toby Morris of CMC Markets.
Obama to decide soon on Keystone XL
U.S. President Barack Obama has signalled he will decide on the long-delayed Keystone XL pipeline will come before summer, allaying concerns the administration would punt the controversial decision until after mid-term congressional elections in November, The Globe and Mail's Shawn McCarthy reports.
After a meeting between the president and several governors at the White House today, Oklahoma Governor Mary Fallin said Mr. Obama indicated a decision would be forthcoming once departments have had a chance to comment on the State Department’s environmental assessment that was released in late January.
“He did come back and say that he anticipates an answer one way or the other in a couple months,” Ms. Fallin said after the governors met with Obama.
Of pot holes and city taxes
I arrived at work today after my in-the-dark morning routine of trying to skirt more pot holes than I can ever remember in Toronto, only to find a new report in my inbox that tells me that Canadian cities have more money than they’re letting on.
Which got me thinking, of course, why can’t they fix the darn pot holes in the middle of the worst winter in recent memory.
First, the report.
In advance of a meeting of the country’s mayors in Ottawa this week, the Canadian Federation of Independent Business released a study today accusing municipalities of “consistently misrepresenting how much tax money ends up in their coffers.”
Municipal governments, said the association of small and mid-size businesses, say they get eight cents from every tax dollar collected in the country.
But the truth, the CFIB said, is that they get 15 cents because they’re not including “major sources of revenue,” such as federal and provincial transfers, in their tally.
“Municipalities do not have a revenue problem,” executive vice-president Laura Jones said in a statement accompanying the report.
“They have a spending problem. It’s one thing to ask for more money if it’s needed and another to spend like it’s going out of style, and then cry poor.”
Transfers are now at a record high, the CFIB said, adding inflation-adjusted civic spending climbed 55 per cent from 2000 to 2011.
The report does not mention pot holes – the CFIB just wants Canadian cities to “bring spending in line with inflation and population growth” – but that won’t stop me from ranting this growing blight.
As in, take that extra 8 cents and fix them.
Which, in fairness, Toronto, at least, appears to be trying to do.
As Bruce Laregina reported in mid-January, one city road crew can repair between 25 and 50 pot holes per day. And far more have been fixed this winter compared to last year.
Australia's Abbott urges reforms
Australian Prime Minister Tony Abbott told a group of senior Canadian politicians and business people today that their two nations must lead the Group of 20 countries by implementing reforms that will boost global growth, adding he hopes to visit Ottawa later this year, his first visit to Canada since taking office.
“If the G20 is to be more than a talk fest, at least some countries must show that their actions match their words,” Mr. Abbott told a high-profile crowd at the Australia-Canada Economic Leadership Forum in Melbourne, The Globe and Mail's Iain Marlow reports.
The remarks are Mr. Abbott’s first since Australia hosted a G20 summit of finance ministers and central bankers from the world’s largest economies over the weekend. As the host nation of the G20 this year, in a weary post-financial crisis era, Mr. Abbott has used his international podium to push a global agenda that is very close to what he wants to see implemented in Australia – an era where governments step back, cut red tape, reduce the size of government and enable businesses to invest and create jobs.
- Iain Marlow: Australia, Canada must lead G20 global growth efforts, PM Tony Abbott says
- G20 agrees on ambitious global growth plan
- Canada set to outperform 2% economic growth target, Flaherty says at G20 summit
- Sliding loonie signals growing U.S. momentum, Poloz says
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