Welcome to Mind Your Business ! Consider this your weekly guide to understanding what’s happening in the worlds of economics, business and finance. By Peter Armstrong | | | Interest rates are expected to rise on Wednesday. (SewCreamStudio/Shutterstock) | | | All eyes are on the Bank of Canada this week as the central bank is expected to increase interest rates one more time.
The recent rate hikes have left a lot of Canadians gripping the wheel pretty tightly. Variable rate mortgage holders have suffered through nine interest rate hikes since last winter.
We've been told repeatedly that the economy is running too hot and that it's fueling inflation.
The Bank of Canada says interest rate increases should squeeze households just enough to slow demand. As the whole economy slows, price growth should come back to Earth.
The key measure here of course is CPI. Year-over-year inflation decelerated from 8.1 per cent last summer to 3.4 per cent in May.
GDP was booming to start 2022, when the rate increases began. It's fallen all the way to zero and remained pretty flat (without slipping into an actual contraction).
Jobs numbers released on Friday were a mixed bag of results. The economy added 59,900 jobs in June. That's way higher than expected.
At the same time, the unemployment rate ticked up to 5.4 per cent, the highest level since February 2022.
And just look at wage growth. | | | | At the beginning of this year, wages were growing at 5.4 per cent year over year. That's down to 3.9 per cent annualized.
Put all that together: GDP is flat, inflation is decelerating, the unemployment rate is climbing and you get the picture of an economy that isn't exactly bursting at the seams.
And yet, most economists believe the Bank of Canada is set to raise interest rates by another 0.25 per cent (or 25 basis points) on Wednesday.
"The big headline increase and ongoing strength in the labour market likely tilts the balance toward another 25 basis point hike," wrote BMO's managing director Benjamin Reitzes.
"The June labour market data was mixed but shouldn't be enough to prevent the Bank of Canada from following through with a second straight 25 basis point interest rate hike at the next policy decision," wrote Nathan Janzen, RBC's assistant chief economist, in a note to clients.
That prospect is brutal for a nation swimming in debt.
If the Bank of Canada goes ahead with another rate hike, it will be the 10th increase since March 2022. | | | | More rate hikes will mean more pain.
The Financial Consumer Agency of Canada says two-thirds of mortgage holders are already having trouble meeting their financial commitments.
"We’re dealing with a form of medicine that might kill the patient rather than cure the disease," said Armine Yalnizyan, an economist and the Atkinson Fellow on the Future of Workers.
CIBC's Andrew Grantham wrote a sharply critical take that's well worth a read.
He looks beyond the headlines of growth rates and finds demand has in fact cooled off since the Bank of Canada started increasing interest rates.
"If rate hikes have already been working to cool demand more than is apparent by simply looking at growth rates, history could show that the recent Bank of Canada rate hike (and any subsequent moves) was at best unnecessary, and at worst a mistake," he wrote here.
It will be a critical week, and it may well prove to be another difficult one for households trying to weather the storm.
What do you think the Bank of Canada will do on Wednesday?
As always, send me a note here: peterarmstrong@cbc.ca
A reminder of my on-again, off-again schedule this summer. I'll have another edition of Mind Your Business next Monday, then the newsletter will go on hiatus until September. I'll be around, filling in as host of some radio shows and reporting out of our bureau in London for a stretch.
So stay tuned to CBC News for my reports.
Or continue the conversation on Twitter here.
If you like this newsletter, spread the word. I'm trying to grow our community and would love your help. Just click on the share buttons below. | | | | The Bank of Canada will announce its latest interest rate policy on Wednesday. Most economists believe the central bank is poised to raise rates by another quarter point. | | | | The Canadian Real Estate Association will release national sales data on Friday. Real estate has rebounded in both sales volumes and prices in recent months. | | | | U.S. inflation numbers will be released on Wednesday. Canadian CPI data will follow suit on July 18. | | | | | Three things to read, watch and listen to this week | | | | Mission: Impossible – Dead Reckoning Part One opens this week. (Paramount Pictures) | | 1. Tom Cruise is saving the movie industry (again) | | Tom Cruise plays larger-than-life action heroes on the screen.
But increasingly that's the role he plays in the movie industry as well.
Cruise dragged moviegoers back to theatres last summer with his blockbuster Top Gun Maverick.
This summer, he's hoping to do the same with his latest instalment of the Mission: Impossible franchise.
So far, the summer season has been something of a disappointment.
The movies released so far just haven't delivered at the box office. Warner Bros' The Flash and Pixar's Elemental have done OK. They just haven't brought in as much money as the sector was hoping for.
This Bloomberg piece sums up the state of the industry heading into this week.
"Through the July 4 holiday, domestic theaters have rung up ticket sales of $4.61 billion, an increase of 17% from last year, researcher Comscore Inc. said Wednesday. But revenue remains 21% below the same period in 2019 and sales for the summer movie season are running about 2% below a year ago," wrote Caelyn Pender for Bloomberg.
Enter Tom Cruise.
Mission: Impossible – Dead Reckoning Part One will be released this week.
Box Office Pro estimates it should generate more than $300 million US in North America. Other big- name releases, like Barbie and Oppenheimer, should also pad the bottom line.
That should put total industry-wide annual box office sales around $8.8 billion in North America. That’s down from $11 billion-plus logged annually before the COVID-19 pandemic.
Read the Bloomberg piece here. Check out the trailer for Mission: Impossible – Dead Reckoning Part One here. | | | 2. Do we really need to ruin the economy? | | I've had an idea turning over in my head lately that I haven't quite been able to pin down.
Well, leave it to Kyla Scanlon to take a bunch of different threads and pull them into a coherent thought.
She wrote a great piece last week in her newsletter with this as the title: We Don't Need to Destroy the Economy to Save It.
She riffs off an amazing piece in The Atlantic Monthly by Adam Ozimek, the chief economist at the Economic Innovation Group.
Ozimek begins his piece with this: "For some time now, prominent economists have warned that the only way to break the fever of inflation would be by pumping up unemployment — in other words, by triggering a recession."
Sound familiar? It's focused on the U.S. economy, but the exact same debate, and the exact same issues, are at play here in Canada.
Ozimek spends most of his piece poking holes in the economic orthodoxy.
Scanlon ties together a handful of speeches and articles and a general line of inquiry and she ends up with this thought:
"The general idea that we don’t need unemployment to rise to get a recession to sucker punch inflation is really good — we don’t need excessive pain to get progress," she writes in her newsletter.
I guess my point is that for all the bluster about what the experts seem to know for sure, there are an absolute pile of uncertainties out there.
The pandemic exposed just how little we know about how things work. And I'm not convinced things have changed very much since.
Check out Kyla Scanlon's newsletter here. Read Adam Ozimek's piece in The Atlantic here. | | | 3. Canadian media's very weird week | | It's been a tumultuous, weird, brutal and volatile month in the media industry.
CTV cut 1,300 jobs and closed two of its foreign bureaus. CTV's parent company, BCE, shut down nine radio stations.
Canada's largest newspaper by circulation, the Toronto Star, announced it was in merger talks with the National Post.
The federal government removed all advertising from Facebook and Google as its fight with the tech giants escalated.
Meanwhile, Facebook and Meta founder Mark Zuckerberg launched a new, Twitter-style application called Threads.
Twitter responded with the threat of a lawsuit.
Colleague Don Pittis weaves together the implications for Canadian media in this excellent piece.
You should read the whole column, but the thing I've been thinking about is a point made by former Calgary Herald publisher Peter Menzies, who also spent a decade on the Canadian Radio-television and Telecommunications Commission (CRTC).
Menzies told Pittis that people in and out of the industry seem to be singularly focused on finding a way to make the tech giants pay for news. And in doing so, they lose sight of the most important thing: actually providing Canadians with news.
Here's how Pittis puts it:
"While finding the money to pay for content is important, he said, something else must come first.
"'You have to have a national news policy,' Menzies said. 'It should have been done ages ago.'"
The piece does a great job of laying out the problems and offering some real ways to address them.
If you click on one link in this newsletter, make it this one.
The CBC Radio program The Sunday Magazine had an excellent segment this weekend looking at all these issues and what implications we can draw at this early date.
Guest host David Common spoke with former broadcaster Kevin Newman, Vass Bednar, the executive director of McMaster University’s Master of Public Policy Program, and former Wikimedia Foundation executive director and CBC journalist Sue Gardner.
Check out the Sunday Magazine segment here. Check out Don's column here. | | | How the economy looks beyond Bay Street | | | Canada's ranking in per capita GDP | | There are a bunch of ways to determine the economic health of a country.
You could look at GDP or household income. One of my favourite measures is to just look at what tax bracket most people fell into.
Check out that chart here. (Warning, it's fascinating.)
Well, the good folks over at Visual Capitalist have put together this chart of how countries compare to each other when using GDP per capita. | | | You'll notice Canada doesn't quite crack the top 10.
Depending on how you calculate it, Canada's GDP per capita is either $60,180 or $52,720.
The lower figure uses nominal calculations, the higher number comes via a purchasing power parity (PPP) index.
"One of the major drawbacks of using GDP per capita is that it doesn’t account for the strength of the local currency versus its exchange rate, the latter of which is heavily influenced by investment flows and demand for the national currency," writes Visual Capitalist.
Using PPP, Canada lands in third place in the Americas, after the United States and Guyana.
Using nominal calculations, Canada comes in second between the U.S. and Puerto Rico.
What do you think?
I'd love to hear from you. Drop me a line at peterarmstrong@cbc.ca. | | | Share this newsletter | | or subscribe if this was forwarded to you. | | | Share this newsletter | | or subscribe if this was forwarded to you. | | | |