4 Articles: Rates & Prices Update: 1)Gas Prices, 2) Grocery Prices; 3)Mortgages, and 4)Unemployment

1) Price Of Gas Falls; May Fall Some More

Dan BlakeleyPublished: Oct 6th, 2023

The price of gas is down about 6 cents a litre this morning compared to yesterday.

And it could slide some more in the coming days.


Because there’s concern about a slowing global economy, which would mean a drop in demand.
As a result, the price of benchmark American crude oil has fallen more than 12 per cent in just over a week. And for every dollar decline in the price of crude, the price at the pump falls nearly a penny a litre.
Gas price watchers say that could bring an overall decline of around 11 cents a litre.

While that’s good news for drivers, it may be better on a broader basis.

Pedro Antunes, chief economist at the Conference Board of Canada, told the Toronto Star it could positively impact inflation.

2) Grocers To Offer Discounts, Price Freezes On Food, But Champagne Offers Little Detail

Courtesy Barrie360.com and Canadian PressPublished: Oct 5th, 2023

By Nojoud Al Mallees in Ottawa

Industry Minister François-Philippe Champagne says grocers will offer discounts, price freezes and price matching as an initial step to stabilize grocery prices.

But the minister did not provide any other details, including what products will be subject to promotions. 

“Starting soon, Canadians will be able to see rollout of actions, such as discounts across a basket of food products, price freezes and price-matching campaigns, to name a few,” Champagne said, adding that he has already started to see some of these promotions being offered.

When pressed by reporters on how Canadians will know these promotions are any different than the ones regularly offered by grocers, Champagne said he does not want to disclose what each company has pledged to do.

“I’m saying those are examples of what we see in the plans, because I want the market to compete. I cannot say I received that from Loblaws, I received that from Metro, I received that from Costco, I received that from Walmart,” he said. 

“Each grocer has different actions. So it will be up to Canadians to judge them.”

The Liberal government called on Canada’s major grocers last month to present a plan to stabilize prices by Thanksgiving, or face consequences,including potential tax measures.

Champagne said Thursday that the federal government is still ready to act on that threat if grocers do not take sufficient action.

Rising grocery prices have been a major pain point for Canadians and tend to disproportionately affect lower-income families who spend more of their income on food. Grocery price inflation has slowed recently to 6.9 per cent in August. 

But food prices continue to accelerate faster than the rate of overall inflation, which came in at four per cent last month. 

Champagne announced other steps the government is taking, including tasking the Office of Consumer Affairs to establish a “grocery task force” that would monitor the implementation of the grocers’ plans.

The industry minister acknowledged, however, that the long-term solution for grocery prices is to promote competition in the sector. 

“Hopefully even we can have international (companies), which may want to come to Canada. And I’m going to talk to them and say, ‘listen,  Canada is a great place to do business.’ If we have more people in the market, Canadians will benefit from that,” he said. 

The Liberals recently introduced legislation that would make several changes to the country’s competition law, aimed at cracking down on anti-competitive behaviour and making it harder for harmful mergers to be approved. 

The federal government has also promised to carry out a bigger overhaul of the Competition Act, but no timeline has been given for this modernization. 

A former Competition Bureau commissioner Melanie Aitken slammed the federal government for the approach it has taken with grocery prices. 

Speaking at a conference hosted by the Competition Bureau on Thursday, Aitken said the federal government is choosing to ignore more glaring problems affecting grocery prices, such as the supply management system. 

“Supply management is one of the ones that really gets my goat. Candidly, I think it’s a disgrace. Think of what this state-sponsored cartel has done to … food prices,” Aitken said. 

“Instead, it’s better to have a perp walk of the grocery execs, bang their heads together and demand the plan by Friday before Thanksgiving dinner, no less.” 

Canada’s supply management system controls the supply of dairy, poultry and eggs through price and import controls. 

Other ministers provided updates on their files during the news conference, too. 

Finance Minister Chrystia Freeland announced the launch of public consultations on lowering the criminal rate of interest. 

The spring budget announced the federal government was cracking down on predatory lending by lowering the criminal rate of interest to 35 per cent from 47 per cent. These consultations will look at whether that rate should be further decreased. 

Meanwhile, Treasury Board President Anita Anand announced a new managers’ guide for public servants on when to contract professional services and when to use internal resources. 

3) Mortgage Payment Shock Amid Higher-For-Longer-Rate Outlook

Courtesy of Barrie360.com and Canadian Press Published: Oct 2nd, 2023

By Ian Bickis in Toronto

From ultra-low interest rates that led to a huge spike in real estate demand to the speed with which interest rates shot up to levels not seen in a generation, it’s been hard to keep up with the shifting landscape for mortgage holders.

Now, with interest rates increasingly expected to stay higher for longer, many of the homeowners who locked in low rates years ago are likely bracing themselves for financial pain as their mortgage comes up for renewal.

“Each month that passes, roughly two per cent of mortgage holders face renewal at sharply higher interest rates,” Royce Mendes, managing director and head of macro strategy at Desjardins, wrote in a Sept. 19 note to clients.

Borrowers with fixed rates are expected to see an average payment increase of between 14 per cent and 25 per cent next year compared with early 2022 costs, according to the Bank of Canada. In 2025 and 2026, payments should rise between 20 per cent to 25 per cent.

Those with full variable rates have already taken on the burden of higher rates, seeing their payments rise an average of 49 per cent as of this year.

Borrowers with variable rates but fixed monthly payments will face the greatest increases ahead as some have had their payments only cover the interest costs, or not even that. People with these products face an expected 44 per cent average rise in payments by 2026 as their mortgages reset.

Peter Routledge, head of Canada’s banking regulator, warned in September that this category of borrowers, which total about $369 billion of the $2.1 trillion of outstanding mortgage market, are “at risk of suffering a significant payment shock,” and that he hopes to see the option offered less.

Given the steep rises in payments, banks and other lenders have been responding in part by stretching out amortizations to reduce monthly payments.

More than 46 per cent of Canadian mortgages had payment schedules longer than 25 years as of the second quarter, according to the Bank of Canada, an amount that’s been steadily rising from around 32 per cent in the summer of 2020.

Many mortgage amortizations at Canada’s biggest banks now stretch past 30 years, from 24 per cent of mortgages at RBC to 30 per cent at BMO, with the vast majority going beyond 35 years. CIBC and TD Bank fall somewhere in between those two, while Scotiabank is notable for only having one per cent of mortgages run past 30 years.

The banking regulator has also been raising concerns about these extended mortgage terms, which slow how quickly people build equity in their home. Lenders in turn have also been looking to reduce lengthy mortgages, with most reporting last quarter that they had knocked a percentage point or two off their total of 30-year plus mortgages.

As extended amortizations fall out of favour, borrowers may have to come up with a lump sum or increase their monthly payments to bring their loans back in line, which the regulator suggests as the preferred options.

Coming up with the funds could prove challenging for many though, as cracks start to show in credit markets.

“Your auto loans, your credit cards, lines of credit, delinquencies in those products are going up,” said Seamus Benwell, a housing research specialist at Canada Mortgage and Housing Corp.

Borrowers that aren’t able to handle higher payments or don’t have the cash on hand for a lump sum will have to look at all of their options, according to Meaghan Hastings, chief executive of The Mortgage Coach brokerage.

She said she’s heard from clients who are surprised to learn just how high interest rates have climbed, especially since they have to pass the mortgage stress test if they want to switch lenders.

The test is pushing more borrowers into the alternative lending market, she said.

“They have great credit, they have great income. But it’s that qualification that pushes them into the alternative space.”

While alternative products generally cost more, there are a growing number of options in the space, said Hastings.

“Sometimes there’s solutions that will just get them through the next 18 to 24 months, you know, through the hardest area or the hardest time.”

Hastings said she does expect some housing investors to offload some condos because of the financial strain, but that overall, most homeowners will do what it takes to hold on to their property, whether it’s selling their car, taking a job or whatever else they can figure out.

“Canadians in general will do really anything possible to keep their home. We love being homeowners.”

3) Economy Adds 64K Jobs In September, Unemployment Rate Holds Steady At 5.5%

Courtesy of Barrie360.com and Canadian PressPublished: Oct 6th, 2023


The Canadian economy added 64,000 jobs last month as the country’s population continues to rapidly grow.

Statistics Canada released its September labour force survey Friday morning, which shows the unemployment rate continued to hold steady at 5.5 per cent for the third month in a row.

Canada’s labour market has cooled over the last year as interest rates have risen, but the unemployment rate remains below pre-pandemic levels.

The unemployment rate averaged 5.7 per cent in 2019, the year before COVID-19 upended economic trends.

Strong population growth has also been supporting larger monthly job gains, as more people enter the labour force.

The job gains last month were concentrated in part-time work, as total hours worked remained unchanged from August.

More people were working in educational services and transportation and warehousing. Meanwhile, jobs were shed in finance, insurance, real estate rental and leasing, information and recreation, and construction.

The Bank of Canada’s rate hikes since March 2022 are beginning to be felt in the Canadian economy as growth slows and job vacancies fall. The central bank’s key interest rate currently sits at five per cent – the highest it’s been since 2001.

Higher interest rates are expected to continue weighing on the economy and affecting businesses’ appetite for hiring.

Despite these conditions, however, wage growth has outpaced inflation this year, making up for previous losses to price growth.

Average hourly wages in September grew 5.0 per cent from a year ago, while inflation came in at 4.0 per cent in August.

Economists say wage growth can be a lagging indicator of economic conditions, given workers tend to ask for higher wages to compensate for past cost-of-living increases.

Patricia Dent

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