How our prices rank in the world: Montreal (rising), Toronto (stable), Vancouver (easing, but ouch)
- How Canadian costs compare
- Markets at a glance
- China names central bank chief
- EDC wins order to ground Gupta jet
- Feds, provinces invest in 5G labs
- A telling week for the loonie
- What to expect from the Fed
- What else to watch for this week
How we rank
Canadian cities are hardly cheap – Vancouver's costly and Montreal's getting pricier – but they're stable and far less expensive than many other cities around the world.
The latest ranking by the Economist Intelligence Unit shows Montreal growing more expensive, up three spots from last year's survey, while Vancouver dipped a couple of notches and Toronto held steady as the 86th-most-expensive city among 133 measured in more than 90 countries.
In the Americas, Montreal is now as pricey as Miami, and Vancouver as costly as Chicago, while Toronto sits between Rio de Janeiro on the high side and Costa Rica on the low.
"We have seen Canadian cities become relatively more expensive in recent years," said Roxana Slavcheva, editor of the biannual study of goods and services from food, clothes and home supplies to rents, transportation and private schools.
"But over all in the past 12 months the three cities surveyed have stayed relatively stable, with only Montreal moving three places up the ranking to joint 59th place (shared with Miami and Mexico City)," she added in a statement.
"Canada still represents comparatively good value for money, with Toronto, ranked 86th, offering better value for money than eight of the 14 Latin American cities surveyed."
New York, which actually slipped in the rankings to drop out of the top 10, is the index base city. Prices from across the globe are converted to U.S. dollars at current exchange rates, and weighted by the EIU, which is part of The Economist Group related to the well-known magazine.
The 10 most expensive cities in the world, the EIU found, are, from the top, Singapore, Paris, Zurich, Hong Kong, Oslo, Geneva, Seoul, Copenhagen, Tel Aviv and Sydney.
The 10 cheapest, from the bottom, are Chennai, India, Algiers, Karachi, Bangalore, Lagos, Almaty, Kazakhstan, Caracas and Damascus.
"With the dollar weakening against other currencies, no North American city ranks among the 10 most expensive cities, although New York and Los Angeles remain highly ranked in 13th and 14th place, respectively, compared with ninth and 11th position last year," the EIU said.
"Despite a rise in recent years in the relative cost of living in U.S. cities, the latest survey reflects a fall in ranking for all but one (Boston) of the 16 cities surveyed."
The Canadian dollar, of course, has seen some mighty turmoil. We tend to look at the loonie against its U.S. counterpart, but there are other ways of looking at it:
Here's a look at some costs, in Canadian dollars:
Or buy at a supermarket if you want to be thrifty:
Of course, if you live in Vancouver, Toronto or Montreal, you won't much care about the cost of living in Singapore, Paris or Zurich. And uprooting to Chennai, Algiers or Karachi is, no doubt, not the answer.
The EIU said its prices take in 160 items in every city measured.
"These are not recommended retail prices or manufacturers' costs; they are what the paying customer is charged," the group said, noting it covers grocery outlets, mid-priced shops and those at the higher end.
"Prices gathered are then converted into a central currency (U.S.) dollars using the prevailing exchange rate and weighted in order to achieve comparative indices. The cost-of-living index uses an identical set of weights that is internationally based and not geared towards the spending pattern of any specific nationality. Items are individually weighted across a range of categories, and a comparative index is produced using the relative difference by weighted item."
The truth is, many Canadians are stretched, buried in debt and fretting over interest rates on the rise.
Having said that, income growth is now outpacing the rise in borrowing costs, chief economist Beata Caranci and her group at Toronto-Dominion Bank noted in a recent forecast.
"With disposable income set to grow 5 per cent this year, this trend should continue," the TD economists said.
"The result is a bit of a sweet spot: modest spending growth alongside an uptick in savings."
But hold that thought.
"As we move into 2019, however, borrowing costs will play a more limiting role on spending: Interest rates are projected to continue their gradual ascent, and as mortgages come up for renewal, more and more households will face increased borrowing costs – in many cases for the first time."
For the record, TD projects consumer prices will rise in B.C., Ontario and Quebec this year by 2.1, 2.2 and 1.7 per cent, respectively, and next year by 2, 2.1 and 1.9 per cent.
As David Madani sees it, middle class families are "still struggling" in Canada, based on the latest income survey for 2016.
"Although the unemployment rate has fallen and aggregate wages and salaries grew in 2016, the average inflation-adjusted, after-tax household income fell by 0.7 per cent, while median incomes rose by only 0.5 per cent," the senior Canada economist at Capital Economics said in a report.
"Furthermore, after-tax incomes were buffered by increases in government transfers and lower income taxes, which compensated for the 1.6-per-cent and 1.4-per-cent declines in average and median market incomes."
According to Statistics Canada, median family income rose in the three years ending in 2016 by 2.3, 3.5 and 1.5 per cent, respectively, in B.C., Ontario and Quebec, and in 2016 alone eroded by 3.1, 0.2 and 1.3 per cent.
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Markets at a glance
Beijing names new central bank chief
China has a new central bank chief, but "his hands are tied."
Yi Gang, who has 20 years behind him at the People's Bank of China, succeeded Zhou Xiachuan as governor today.
"Yi has been a strong proponent of Zhou's efforts to tackle financial risks and push ahead with market reforms," said Julian Evans-Pritchard, senior China economist at Capital Economics, noting Mr. Yi's "hands are tied" and that he will face a greater struggle than the last governor is pushing through his policies because his powers are limited in the way Beijing works.
"For a while, it looked like this was starting to change as policy making became more institutionalized," Mr. Evans-Pritchard said.
"But Xi has reversed this trend and reasserted the supremacy of the party over the state. Given that Zhou, despite his best efforts and greater independence, failed to avert an unsustainable surge in debt levels, we suspect that Yi will also struggle to push back against poor policy choices dictated from above."
What to watch for this week: The loonie
This could be a telling week for the wounded Canadian dollar.
At play are two central banks amid an already dim market view of the loonie. And, of course, whatever alternative trade facts President Donald Trump happens to spout because, by his own admission, he doesn't know if they're even real.
The loonie sits at a depressed level of about 76.5 US cents, weighed down by a few factors, notably the diverging paths of the Bank of Canada and the Federal Reserve.
Both central banks are on show this week, the Fed on Wednesday and the Bank of Canada one day later, which could set the path for the loonie.
The U.S. central bank is widely expected to raise its benchmark federal funds rate by one-quarter of a percentage point – to a target range of 1.5 to 1.75 per cent – in what would be the sixth increase since late 2015.
Markets will watch for how aggressive the Fed could be after that, specifically whether the views of individual Fed officials, released at the same time, point to three more rate hikes this year, or just two.
Then on Thursday, the Bank of Canada's senior deputy governor, Carolyn Wilkins, takes the stage with an afternoon speech at the Rotman School of Management in Toronto.
Ms. Wilkins, governor Stephen Poloz and their colleagues have already sounded a cautious note after one rate increase this year, as a slowing economy, trade relations with the U.S. and heavily indebted consumers cloud the outlook.
Analysts have, thus, scaled back their view of how aggressive the Bank of Canada will be this year, and markets should expect Ms. Wilkins to "echo the governor's cautious tone," said CIBC World Markets economist Royce Mendes.
The Bank of Canada's key overnight rate now stands at 1.25 per cent.
Stronger expectations from the Fed and weaker ones from the Bank of Canada – hawkish versus dovish – are less friendly for the Canadian dollar against the U.S. currency.
And much of this is already priced into the market. That's why the loonie is worth just a bit more than three-quarters of a U.S. dollar.
JPMorgan Chase, for example, just cut its forecast for the loonie "on BoC dovishness and trade tensions," said currency strategist Meera Chandan.
The JPMorgan analyst now sees the currency at about 76.3 US cents by mid-year, down from an earlier projection of just over 82.5 US cents, and at about 80.5 cents, compared to 84 cents, by the end of 2018.
That's just one forecast. There's a wide range of them, some of them lower.
Then there are those irritating trade issues – as in, they've been irritating the loonie – which come as Canada, the U.S. and Mexico renegotiate the North American free-trade agreement.
Many observers expect those talks will succeed in the end, with a different-looking trade pact, but they warn at the same time that it could all collapse.
The Fed decision and whatever Ms. Wilkins says are, indeed, risks for the loonie, but "the key remains the global trade backdrop," said Bipan Rai, North American head of foreign exchange strategy at CIBC.
"Put simply, negative trade headlines are hurting commodity currencies at the moment, including the Canadian dollar. Given Canada's status as a small, open economy that is heavily reliant on trade, the markets will continue to pressure the loonie if the threat of a trade war escalates."
Then there's the freewheeling President Trump, who boasted last week that he, well, just made up trade facts in a meeting with Prime Minister Justin Trudeau.
"The bizarre and somewhat unseemly spectacle of the U.S. and Canada debating over who has a trade deficit with whom simply further fuelled the negative sentiment [surrounding the loonie], which already had a plentiful supply of existing economic fuel stock," Bank of Montreal chief economist Douglas Porter said in a report.
"(For the record, there are more bilateral measures of trade than you can count on one hand, so while figures don't lie, liars can run riot. We would assert that the big picture is that trade is very well balanced overall between the two countries, given the massive size of the back and forth flows.)"
For that matter, get ready as this week "could also bring the next salvo in President Donald Trump's trade war," said Michael Pearce, global economist at Capital Economics.
"Reports suggest his administration is preparing to unveil tariffs covering up to US$60-billion in imports from China, in response to a Section 301 investigation into alleged intellectual property violations."
The rest of the calendar:
Monday: 'Trade wars are bad'
G20 finance ministers and central bankers kick off a two-day meeting in Buenos Aires, discussing a wide range of issues that could include cryptocurrencies and trade, the latter coming as the U.S. administration amps up its protectionist agenda.
Don't expect much, though, because, as CMC Markets chief analyst Michael Hewson put it, he's not "really sure what else they can add, apart from a bland statement that trade wars are bad."
Tuesday: On time
There are a handful of quarterly corporate reports from the likes of Alimentation Couche-Tard Inc., Westshore Terminals Investment Corp. and FedEx Corp.
FedEx earnings for the third quarter "are likely to be affected by the recent U.S. tax changes, with some estimates suggesting that the cumulative effect of the changes could amount to a US$1-billion boost to annual profits," CMC's Mr. Hewson said.
"As far as its U.S. operations are concerned, the slowdown in retail sales towards the end of last year and beginning of this year might temper its numbers."
Wednesday: Happy anniversary
A couple of interesting tidbits for today's Fed decision: This will be Jerome Powell's first outing as chairman of the central bank, and it coincides with a key anniversary this year.
"Importantly, this will mark the 10-year anniversary of both the collapse of Bear Stearns and the last time the Fed's key policy rate was above the core PCE inflation rate," said Michael Gregory, BMO's deputy chief economist, referring to a measure of personal consumption expenditure prices that strips out volatile energy and food costs.
"Of course, the real fed funds rate will still be negative employing headline PCE inflation (by a tiny bit) or either of the [consumer price indices], but this nevertheless represents a critical milestone in the policy normalization process."
Watch Brazil, too, where trouble is compounded, and where Capital Economics expects the central bank to cut its key rate by one-quarter of a percentage point to 6.5 per cent.
Thursday: Snap, crackle and pop
The Bank of England follows the Fed with a rate decision that will be watched for what comes next.
"The Bank of England is expected to keep rates unchanged, however central bank thinking about the U.K. economy against the current Brexit backdrop could give important clues about the prospects for a May rate rise," Mr. Hewson said.
There are also several purchasing managers index readings from around the world.
Watch, too, for Dropbox's initial public offering, which would value the company at about US$7-billion, Mr. Hewson noted.
"The company plans to sell 36 million shares between US$16 and US$18 a share, and is hoping that it doesn't suffer from the same post-IPO hangovers as previous hyped-up technology stock launches have seen recently, Snap being a case in point," he added.
Some corporate results, as well, from Conagra Foods Inc., Eldorado Gold Corp., New Flyer Industries Inc. and Nike Inc.
Friday: Gas pains, in more ways than one
You get to see how much more you're paying for stuff when Statistics Canada releases its morning report on February inflation.
Economists expect to see a hefty 0.5-per-cent jump in consumer prices, and an annual inflation rate of between 1.9 and 2.1 per cent, up from January's 1.7 per cent.
"In part, that's because energy prices were up almost 5 per cent from a year ago by our calculation, compared to 2.4 per cent in January," Royal Bank of Canada economists, who forecast annual inflation at 1.9 per cent, said in a lookahead.
"Food price growth has also been drifting higher, though," they added.
"We expect year-over-year food price growth inched up to 2.5 per cent in February from 2.3 per cent in January and marking a sharp reversal from the 2.3-per-cent year-over-year decline posted in February a year ago. We also assume there will be more signs of firming in underlying price growth beyond energy and food price volatility."
Along with how much more we're paying, we get to see how much more we're spending.
Economists forecast Statistics Canada will report that retail sales rose by 1 per cent or more in January.
"Retail sales are expected to jump 1 per cent in January, rebounding from December's steep drop – that would be a similar pattern to what we've seen over the past two years," said Benjamin Reitzes, BMO's Canadian rates and macro strategist.
"Auto sales likely rose modestly in the month, lifting the headline a touch. Difficulty to properly seasonally adjust and the increasing prevalence of gift cards should support January activity."
Russia's central bank also meets, and Capital Economics expects a cut in the benchmark rate of at least one-quarter of a percentage point, to 7.25 per cent.
On the corporate side, Power Corp. and Power Financial Corp. report results.
Barclays analyst John Aiken recently lowered his price targets on the shares of both companies, to $33 and $37, respectively.
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