 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 | | |  | GDP numbers will flesh out the Bank of Canada's picture of the economy this week. (chayanuphol/Shutterstock) | | | There is one last piece of the puzzle that needs to land before the Bank of Canada decides what to do about interest rates.
GDP numbers this week will tell us how the Canadian economy performed through the first quarter of the year.
It will probably be a pretty mixed picture. Month over month, economists believe the economy stalled in March. But taken as a whole, the first three months of 2024 should post a modest gain of about 0.6 per cent.
But remember: the central bank is looking for evidence that any "slack" in the economy has been removed. When inflation started roaring, we were told (repeatedly) that the economy was running too hot.
The economy has largely been sitting around zero per cent growth for months.
When you calculate growth on a per-capita basis, the numbers get downright ugly.
On the upside, things are forecast to turn around this summer. | | |  | | | Weak economic growth is a feature of the last two years, not a bug.
The whole idea was that if the economy cooled, supply and demand could come back into balance and inflation would work its way back to target.
The Bank of Canada was hoping to thread a pretty slim needle. It wanted to cool the economy just enough to tame inflation but not so much that it sparked a recession.
That's the so-called "soft landing" scenario everyone has been talking about.
And if you look at the forecast, it looks like that soft landing is emerging as the most likely path.
Just about every private sector forecast shows Canada returning to growth through the second half of 2024.
This year isn't going to be something to write home about, but Canada's looking to grow faster than most advanced Western economies.
The IMF's world economic outlook has only the U.S. (which is awash in trillions of dollars in government stimulus right now) and Spain growing at a faster pace than Canada. | | |  | | | So, Canada is in decent shape comparatively.
But much of that projected return to growth hinges on interest rates coming down.
So the real question this week will be how the Bank of Canada views the GDP numbers.
Last week, the inflation numbers came in better than expected. Most experts believed that will put pressure on the central bank to cut rates when it meets next week.
But retail sales figures on Friday were also weaker than expected.
Dominique Lapointe, director of macro strategy for Manulife Investment Management, says that could weigh on GDP growth.
"Barring any major upside surprise to this [GDP] print, the Bank of Canada should be in a position to deliver a first rate cut at its next meeting," wrote Lapointe in a note to clients.
How do you think the Bank of Canada will view the GDP release?
As always, send me a note.
My email is: peterarmstrong@cbc.ca | | |  | | Canada's economy probably came in flat in March, but the first quarter should post decent gains. GDP numbers will be released on Friday. | | | | | | We will get a deep dive into the state of Canada's jobs market on Thursday. The Survey of Payroll Employment and Hours will look back at data from March. | | | | | | Canada's banks will be in the spotlight this week as earnings are released. The Bank of Nova Scotia releases on Tuesday. BMO follows on Wednesday. RBC, CIBC and Laurentian come in on Thursday. | | | | | Three things to read, watch and listen to this week | | |  | Why is it so hard to get a restaurant reservation? Blame scalpers. (Stokkete/Shutterstock) | | | 1. Reservation scalpers | | | Have you noticed it's hard to get a reservation these days? I'm talking primarily about restaurants, but the idea extends all the way to getting an appointment to renew a driver's licence.
Well, the cause of and solution to many of these problems just may come in the form of reservation scalpers.
This amazing New Yorker article features a bunch of people who are acting as a sort of middle man for people who can't get a reservation.
As the piece points out, most of us simply don't know what we're up against.
"The average diner in New York City is massively disadvantaged, and they don’t even know it. It’s as if they’re bringing a knife to a gunfight," Ben Leventhal told the New Yorker.
Leventhal built a restaurant reservation app called Resy. American Express eventually bought the app.
He serves as a sort-of guide to the opaque world of reservations in the New Yorker article. At one point, he doodles on a cocktail napkin to map the "reservations ecosystem."
And it needs a map.
The article introduces a 33-year-old software engineer named Jonas Frey.
"Frey launched Appointment Trader, an online marketplace for people to buy and sell reservations — everything from private shopping experiences (the Hermès store in Paris), doctors’ appointments (a hot commodity in Miami and Beverly Hills) and tables at restaurants all over the world," writes the New Yorker's Adam Iscoe.
Another middle man is making serious money using apps to take out a reservation and then resell that same reservation at a huge mark-up.
The examples Iscoe gives are "a lunch table at Maison Close, which he sold for eight hundred and fifty-five dollars, and a reservation at Carbone, the Village red-sauce place frequented by the Rolex-and-Hermès crowd, which fetched a thousand and fifty dollars."
Iscoe reports that last year, this individual "made seventy thousand dollars reselling reservations."
Like most New Yorker articles, it starts from a place you find slightly interesting and by the end becomes the thing you spend the next two weeks telling everyone about.
One character in the story makes dinner reservations the way most people play Wordle.
“It’s, like, some people play Candy Crush on their phone. I play 'Dinner Reservations,'" he told Iscoe. The piece noted that same user made nearly 2,000 reservations that never sold — "a restaurateur’s nightmare."
The whole piece is great.
Check out the New Yorker article here. | | | 2. Business exodus? | | | Ask one of Canada's best-known entrepreneurs what people are saying about the state of this country's investment landscape and you'll get a pretty blunt answer.
"Lots of anger," former Wattpad CEO Allen Lau told BNN.
At the heart of that anger lies the federal government's plan to increase the "inclusion rate" on capital gains taxes.
Under the new plan, 66 per cent of capital gains would be eligible for taxation (instead of the current 50 per cent).
There are plenty of exceptions. The biggest ones are that your primary residence is exempt and the new inclusion rate would only apply to capital gains above $250,000.
So, for the vast majority of Canadians, nothing changes.
But for investors and entrepreneurs, it's a different story.
"Higher taxes means less capital available, diminishing ownership and less economic benefit, period," said Lau said in an interview on BNN Bloomberg.
Wattpad is one of Canada's great business success stories. Lau co-founded the platform in 2006 as a place to connect writers and readers.
It soared to more than 500 million users and Lau sold the company in 2021 for $754 million.
He says taxation policy is driving the next generation out of Canada.
"Canadians should own a significant piece of great Canadian companies. But now we are giving away our grand prize to foreign investors," said Lau.
The federal Liberals say the tax changes will generate $19.4 billion over the next five years.
Watch Allen Lau's interview on BNN here. | | | 3. Broomgate | | | I love stories about entrepreneurs finding a solution to a problem and changing the world along with it.
Some of my favourite movies of the past few years have been about creative people changing an existing product and setting a new standard along the way.
Air chronicled the rise of Nike's Air Jordan. Blackberry told the story of how Mike Lazaridis and Jim Balsillie built the best smartphone the world had ever imagined.
Well, what about the inventions that went wrong?
That's the story behind the podcast Broomgate: A Curling Scandal.
In 2015, a new curling broom was introduced to the sport, a broom the podcast creators say "almost destroyed curling."
Former semi-pro curler John Cullen retells this fun, weird, sometimes shocking story through six episodes.
The story begins as the Grand Slam of Curling in 2015 is getting underway.
One of the best-known figures in professional curling, John Gushue is trying something new. Instead of using two "sweepers" to help move the curling stone down the sheet of ice, Gushue's team is using one. But keen-eyed observers noticed something else.
His team was using a different kind of broom.
"A new super-broom made of a mysterious material never used before. And that broom, combined with a one-sweeper technique, would lead to the biggest scandal in curling history," says Cullen in the first episode.
Check out Broomgate: A Curling Scandal here. | | | How the economy looks beyond Bay Street | | | Capital flight | | | As I was listening to Allen Lau's interview in the section above, I began to wonder what has been happening with foreign investment in Canada.
These past few years have been tumultuous and there have been some pretty wild swings in various trends. So It's been harder than usual to keep some of these stats straight. But I recalled a surge in foreign investment here in 2022, so I started looking.
A post by the Wall Street Journal's Paul Vieira made it abundantly clear how much of a blip that surge really was. | | |  | That data here comes via Omnigence Asset Management.
The report makes it clear there is a real issue with what economists call capital flight. The basic breakdown here is that more investment is leaving the country than coming into it. And more to the point, Omnigence finds this is not a recent problem.
"Canada is experiencing material capital flight — capital that is vital for investment in productive assets and consequently the life blood of domestic growth," write the authors. | | | Share this newsletter | | or subscribe if this was
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