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Delivery vehicles are parked at the post office in Halifax on Saturday, May 28, 2011 (Andrew Vaughan/Andrew Vaughan/The Canadian Press)
Delivery vehicles are parked at the post office in Halifax on Saturday, May 28, 2011 (Andrew Vaughan/Andrew Vaughan/The Canadian Press)

Top Business Stories

Would anyone care if postal workers strike on Thursday? Add to ...

These are stories Report on Business is following Monday, May 30. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Postal union sets strike deadline How many people would be overly exercised if postal workers strike on Thursday night?

True, some important things still come through the post office - government cheques, customer payments to and shipments from small businesses, etc. - but a walkout can't have the same widespread impact it once did in this era of e-mail, Facebook, Twitter and instant messaging.

I'm not commenting here on who's right and who's wrong in negotiations between Canada Post and the Canadian Union of Postal Workers, only pointing out that bargaining power on the labour side isn't what it used to be as mail delivery declines.

The union said today that it presented a final offer to Canada Post, and issued a strike notice, pointing out it's in a legal position to walk out just before midnight on Thursday.

Canada Post's last offer called for a four-year labout pact, with annual increases of 1.9 per cent in each of the first three years and 2 per cent in the final year for existing employees. The union, which represents some 50,000 urban workers, says it wants certain rollbacks and demands off the table.

The two sides have been negotiating for months, and federal Labour Minister Lisa Raitt is urging the two sides to settle.

This is not to say there wouldn't be any business impact - indeed, one reader notes that many of her customers pay her small business via the mail, another cites the lower cost of Canada Post's Xpressport compared to competitors - just that it would be muted compared to many years ago.

I remember covering postal strikes early in my reporting career - yes, a long time ago - when the threat of a walkout sparked fear and loathing across the country. Of course, I didn't have a BlackBerry then.

In its latest report, for 2009, Canada Post cited its plunging traditional mail volume, noting that overall volumes slipped 7.8 per cent, a decline hastened by the recession. Having said that, its profit jumped by more than $190-million to $281-million.

"The biggest challenge facing Canada Post is managing our declining mail volumes, particularly in our mature transaction mail business, which faces continued threat from the Internet and changing customer preferences," it said.

"This business accounted for 54 per cent of revenue in our Canada Post segment in 2009. Our challenge is compounded by the fact that we have served, on average, approximately 200,000 new points of delivery per year for the past several years. Over the past four years, the number of pieces of transaction mail per point of delivery has declined at an increasingly rapid pace, falling to 334 pieces in 2009 from 377 in 2005. During that same period, the number of points of delivery we serve increased by approximately 800,000 at an added cost to the corporation to serve them. It costs us more each year to deliver less transaction mail per point of call."

Just to drive home that point, Canada Post warned in a statement today that "with in excess of 17-per-cent lettermail volume decline since 2006, Canada Post's challenges are well understood."

Union president Denis Lemelin, in turn, says that after seven months of talks "Canada Post continues to demand major concessions, including unsafe work methods, a 22-per-cent wage reduction for new hires and the elimination of a sick-leave plan that members have had for over 40 years."

This comes in a difficult economic environment. In Canada, both the number of work stoppages, and time lost as a result, dropped markedly in 2008 from a year earlier, as you'd expect, given the recession. Both picked up over the past two years but remain well down from historical levels.

That's because times are still uncertain, and gains in the workplace aren't what they once were.

And when you're known as "snail mail," you've really got to question your bargaining power. For many of us, a postal strike would be a minor inconvenience.

Economy expands at healthy pace Canada's economy grew at the fastest pace in a year in the first quarter, but consumers are clearly flagging, spelling slower growth going forward.

Increased activity in manufacturing and business investment outweighed faltering consumer spending in the first three months of the year as the economy grew at an annualized pace of 3.9 per cent, The Globe and Mail's Tavia Grant reports.

Broad gains fuelled the growth, led by the goods-producing side of the economy.

Goods production - including factories, mining and energy - grew 1.8 per cent while the services side increased 0.7 per cent. Business investment rose for the fifth quarter in a row, suggesting firms are taking advantage of the strong Canadian dollar to invest in productivity-enhancing machinery and equipment.

Today's reading by Statistics Canada is only a shade below the 4-per-cent pace expected by economists. That marks a far faster pace than the 1.8 per cent in the United States in the same quarter, and is up from 3.1 per cent in the last quarter of last year.

But consumer spending was flat, highlighting the shift that had been expected in economic patterns. Consumers have driven the rebound from the recession, but that's changing now.

Today's report comes a day after Finance Minister Jim Flaherty said in a television interview that he's "quite worried" about the possibility of another global recession, and a day before the Bank of Canada is expected to hold its key rate steady again.

"After this robust result, we are looking for GDP growth to slow abruptly to little better than a 1-per-cent clip in Q2," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.

"There were no major surprises in today's raft of Q1 results, which confirmed that the Canadian economy started 2011 on a strong footing thanks to a surge in auto production," Mr. Porter said in a research note after the Statistics Canada report.

"Unfortunately, we already know that auto output has taken a big step back in Q2, and nothing has stepped up in a big way to keep growth on track. While we do look for somewhat firmer growth to re-emerge in the second half of the year, the Q1 results clearly show that the consumer recovery has largely run its course."

Charles St-Arnaud of Nomura Securities in New York agreed.

"Despite another very strong quarter of growth, we think that the details of Q1 GDP are generally on the weak side and suggest weak momentum for the coming quarters," he said, citing the pullback by consumers as they try to get their household budgets in shape.

"About two-thirds of growth is coming from inventory accumulation, which will not be sustained. In addition, it seems that the very high household debt burden is taking a bigger toll on household spending and seems to have removed much of the momentum seen in previous quarters."

It's not only debt, but also higher living costs as energy and food prices rise, added Diana Petramala of Toronto-Dominion Bank.

"Elevated food and energy costs are cutting into the amount of income households have left over for spending on other items," she said.

"Real personal disposable income fell by 0.1 per cent in the quarter, related to rising consumer price inflation. Second, the first quarter jump debt obligations underscore our view that the high level of household debt will be a constraint to consumer spending going forward. The household debt service ratio jumped to 7.8 per cent, up from 7.2 per cent - this the highest level since the first quarter of 2008, while interest rates are still at record low levels."

Russia hikes rate Russia's central bank surprised markets today with a hike of one-quarter of a percentage point in its deposit rate to 3.5 per cent, though it left other key rates alone.

Russia is grappling with an inflation rate of 9.6 per cent.

"The weekend's announcement that Russia is lifting its ban on grain exports is encouraging, and reflects expectations for a vastly improved crop," added economists Derek Holt and Karen Cordes Woods of Scotia Capital.

"That is not thought to be bearish for food prices that are grappling with depressed spring planting conditions in significant parts of North America, and soft global inventories. But it does signal that domestic price pressures in Russia may ease on the heels of a softening in domestic food price inflation that motivated the export ban in the first place."

Penthouse fetches $28-million The penthouse suite of the new Four Seasons Hotel and Private Residences Toronto has sold for a whopping $28-million to an international buyer, Globe and Mail real estate writer Steve Ladurantaye reports today.

The penthouse sits atop the 55-storey building, which is located at the corner of Bay Street and Yorkville Avenue in downtown Toronto. The suite is 9,038-square-feet, and has 12-foot ceilings, floor-to-ceiling glass and four corner terraces.

Rogers launching 24-hour news channel The 24-hour news channel market in Canada is about to get more crowded, Globe and Mail media writer Susan Krashinsky reports.

Rogers Communications Inc. is launching a new specialty network, CityNews Channel, in October.

The company already runs a 24-hour news radio station - 680 News - in markets such as Calgary, Toronto and Vancouver and broadcasts local TV newscasts across the country. It also publishes weekly news magazine Maclean's. All of those brands will contribute to the new channel.

Rogers to launch 24-hour news channel

Home construction to 'stabilize' Home construction in Canada is expected to slow to levels that reflect the country's democraphic trends, Canada Mortgage and Housing Corp. said today.

It projected housing starts of between 166,600 and 192,200 this year, its "point forecast" being 179,500 units. For next year, it projects a range of 163,200 to 207,000, with the forecast at 185,300.

CMHC also projected sales of existing homes of 452,100 this year and resales of 461,300 next year.

"Modest economic growth, in conjunction with relatively low mortgage rates, will continue to support demand for new homes in 2011 and 2012," said the agency's chief economist Bob Dugan.

"Nonetheless, we are expecting new and existing housing markets to fall in line with demographic fundamentals, as changes to mortgage rules take hold."

Greece: From bad to worse Greece remains in the eye of the storm today as markets wonder and worry about its increasingly dim outlook.

Inspectors from the EU and International Monetary Fund are in Athens looking over the books, amid reports of a new deal taking shape to provide a further lifeline. But that deal, The Financial Times reports, could come with very tight strings attached.

The plan being negotiated by EU officials could see outsiders involved in tax collection and the privatization of government assets, and would include a voluntary extension of debt payments.

The Financial Times reports that up to half of the €60-billion to €70-billion needed by Greece through 2013 could come from amending the debt payment schedule, coupled with the money raised through asset sales. The EU and IMF would also have to float €30-billion to €35-billion more in loans to the government, an addition to the €110-billion bailout already arranged.

Markets increasingly believe Greece will have to restructure its debts, and that any further bailout only postpones the inevitable. As The Globe and Mail's Eric Reguly reports from Europe, unions are poised to fight the privatization effort, highlighted by the latest protest today.

The European Central Bank is fiercely opposed to a debt restructuring. Indeed, in an interview with The Financial Times, Lorenzo Bini Smaghi, an executive board member at the ECB, warned that "a debt restructuring, or exiting the euro, would be like the death penalty - which we have abolished in the European Union."

An orderly restructuring is a "fairy tale."

"Political posturing continues as we head into the conclusion of the IMF review of Greece's bailout (due this week)," said Elsa Lignos, senior currency strategist at Royal Bank of Canada in Europe. "... The ECB's Bini Smaghi repeated the ECB line that an 'orderly' restructuring is 'a fairytale' saying neither restructuring nor reprofiling can be done in an orderly way."

Chris Weston of IG Markets said traders appear confident, for the short-term, at least, that Athens will receive the fresh rescue funds it needs from the EU and IMF. But, he warned, if this is the case and they do receive the funds, expect a backlash from European taxpayers."

An IMF report on Greece this week is crucial to the next instalment for Greece that's pegged for late June.

"Part of the issue is whether or not the IMF highlights a potential funding gap," said Scotia Capital currency strategist Camilla Sutton.

"With Greek two-year yields at 25.6 per cent and 10-year yields over 16 per cent, it is increasingly unlikely that Greece will be able to fund its 2012 (approximately €25-billion) needs in the market, thereby introducing a funding gap," she said in a research report as rumours rippled through the markets.

"Should such a gap exist, it would imply that the IMF might not release the late June payment, which would throw Greece into greater turmoil. A potential solution would be for Greece to introduce new fiscal measures, which would need to be endorsed by EU leaders and the IMF. This leaves significant uncertainty over the near-term outlook for Greece."

Back in the money A Globe and Mail review of executive pay last year shows chief executive officers at Canada's 100 largest companies saw their compensation jump 13 per cent last year, led higher by a 20-per-cent increase in annual cash bonuses. Base salaries climbed 4 per cent, according to today's special report by Janet McFarland.

The 2010 gains for CEOs came on the heels of two years of weakness in 2008 and 2009 - when compensation fell by 5 per cent and rose less than 1 per cent respectively - and marks a return to the double-digit annual CEO pay increases seen commonly in the decade prior to the economic crisis.

Fortis strikes Vermont deal Fortis Inc. has struck a deal it says will allow the St. John's company to establish a "foundation" to build a utility business in the United States.

Fortis, which bills itself as the biggest publicly traded distribution utility in Canada, plans to buy Central Vermont Public Service Corp. for $35.10 (U.S.) in cash, or $470-million. Including debt, the deal's worth about $700-million.

The U.S. company is the biggest integrated utility in Vermont, with almost 160,000 customers in the state.

"The acquisition of CVPS represents the initial entry by Fortis into the U.S. regulated electric utility marketplace and establishes a foundation for Fortis to grow our utility business in the United States," chief executive officer Stan Marshall said in a statement.

"CVPS is a well-run utility whose operations are very similar to those of our Canadian regulated utilities, allowing us to use our collective competencies to further enhance service to customers and returns to our shareholders."

Analysts trim RBC Analysts are trimming their outlook for Royal Bank of Canada after its quarterly results and dividend hike last week, though they're still keen on Canada's biggest banks.

Analyst Peter Rozenberg of UBS Securities Canada cut his 12-month price target to $65 from $68, though held his rating at "buy."

As Globe and Mail banking writer Grant Robertson reported Friday, RBC hiked its dividend for the first time in almost four years, but its second-quarter earnings were lacklustre. RBC earned $1.51-billion, up 13 per cent, but an unexpected drop in profit at its capital markets division, caused by unexpectedly sluggish trading revenue, pushed down its shares after the results.

Mr. Rozenberg said RBC continues to be the leader "in every important segment with higher than average returns, capital and long-term growth."

Still, he said, he cut projected earnings per share by 2 per cent for this year and 4 per cent next "due to lower capital markets, lower margins and higher expenses."

Similarly, analyst Jason Bilodeau of TD Newcrest cut his price target to $66 from $68, also maintaining a "buy" recommendation.

"Q2 was a bit of a backslide for Royal after an impressive start to the year in Q1," he said in a research note.

"Much of the weakness can be explained by wholesale/corporate, and although we did trim our numbers, we still expect better results in [the second half of 2011]and decent growth in 2012. Royal is not the best fundamental story in the group, in our view, and we did trim our target price, but from current levels, returns still look good."

At CIBC, analyst Robert Sedran cut his target to $61 from $65, though maintained a "sector performer" rating.

"[Royal's]Canadian franchise continues to perform very well," he said. "However, overall earnings volatility remains high. We have taken our numbers down, but after the decline in the shares, we maintain our SP rating."

Husky eyes Hong Kong listing Husky Energy Inc. says it's looking at possibly also listing its stock on the Hong Kong exchange. Its primary base would still be the Toronto Stock Exchange, the Calgary-based energy company said today.

"The potential secondary listing of Husky's shares on the HKSE is under consideration as we believe it could potentially enhance investors' awareness of the company and its growth opportunities in one of the fastest growing financial markets in the world," chief executive officer Asim Ghosh said in a statement.

"The South East Asia region has been identified as a pillar of growth for the company and we are advancing several multibillion-dollar projects as part of our strategic plan. A Hong Kong listing could provide investors in this important capital market with easier access to participate in our business strategy."

Markets mixed World markets are mixed so far this morning amid holidays in Britain and the United States.

Tokyo's benchmark Nikkei dipped 0.2 per cent, while Hong Kong's Hang Seng gained 0.3 per cent. London's market was closed, though Germany's DAX and the Paris CAC 40 both rose.

In Economy Lab today

Warnings about population aging have been playing in the background of policy debates for two generations now, ever since the decline in the birth rate in the late 1960s made it inevitable. But the issue has now moved from being a problem of the future to being one of the present, Stephen Gordon writes.

In International Business today

Germany will shut all its nuclear reactors by 2022, parties in Chancellor Angela Merkel's coalition government agreed today, in a reaction to Japan's Fukushima disaster that marks a drastic policy reversal, Reuters reports.

In Personal Finance today

Most first-time buyers don't know how the system works or what questions to ask, Dianne Nice writes.

The easiest way to pay off your home faster is by breaking your mortgage to get a lower rate. Here's how to do it.

From today's Report on Business

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