Fall Fiscal Update Articles: 1) Inflation Rate Slows to 3.1%; 2) Link to Fall Fiscal Update, 3)Freeland To Present Fall Fiscal Update Tuesday As Cost-Of-Living Dominates Politics
1) October Inflation Rate Slows To 3.1%
GAS PRICES WERE LOWER; MORTGAGE AND RENTAL COSTS HIGHER
Courtesy of Barrie360.com and Canadian PressPublished: Nov 21st, 2023
Ottawa
The annual inflation rate in October cooled to its slowest pace since June as the price of gasoline tumbled compared with a spike higher a year earlier, Statistics Canada said Tuesday.
The agency said its consumer price index in October was up 3.1 per cent on a year-over-year basis compared with 3.8 per cent in September.
Economist Tu Nguyen at tax and consulting firm RSM Canada said the report was encouraging and it suggests the Bank of Canada is likely done raising interest rates.
“The Bank of Canada, I believe, is seeing plenty of signs that the economy is cooling,” she said.“The economy is no longer overheated. Other signs of a cooling economy, in addition to inflation, include a slowdown in hiring — companies are not going out to hire as much anymore — as well as just overall lower consumer demand.”
The price of gasoline fell 7.8 per cent from a year earlier, though the drop was driven partly by the wider-than-usual difference between prices this fall compared with last October, when gas prices spiked after an OPEC production cut. It compared with a 7.5-per-cent year-over-year increase in gas prices during September.
Excluding gasoline, Statistics Canada said the consumer price index was up 3.6 per cent for October, following a 3.7-per-cent increase for September.
The Bank of Canada, which is working to bring inflation back to its target of two per cent, opted to hold its key interest rate steady at five per cent at its last rate decision, but it has said it is prepared to raise rates again if needed.
In its summary of deliberations released earlier this month, the central bank said some members of its governing council felt it was more likely than not that its policy rate would need to increase further to return inflation to the target level, while others viewed the most likely scenario as one where the current rate would be enough, provided it was maintained long enough.
Bank of Montreal chief economist Douglas Porter also said the inflation report underscored expectations that there would be no need for further rate hikes by the Bank of Canada, especially with the economy already struggling to grow at all and underlying inflation calming. “However, before the bank can even begin seriously considering rate relief, we’ll need to see more evidence that services inflation is also moderating — that could be at least another six months down the road,” Porter wrote in a note to clients.
Nguyen said she expected the Bank of Canada wouldn’t start cutting its key interest rate until the second quarter of next year and then would proceed with rate cuts at only a modest rate.“Even though I don’t think there’s any need to hike further, they need to see evidence of sustained disinflation for several months before they can feel comfortable scaling back,” she said.
“Once they start cutting interest rates in the second quarter of next year it is going to be a slow and gradual decline. We might end 2024 at four per cent.”
The October inflation report found prices for goods were up 1.6 per cent, while prices for services were up 4.6 per cent, largely due to higher prices for travel tours, rent and property taxes and other special charges.
Statistics Canada said the largest contributors to inflation continued to be mortgage interest costs, food purchased from stores and rent.
Mortgage interest costs were up 30.5 per cent compared with a year ago, while the cost of rent was up 8.2 per cent.
While grocery prices rose faster than overall inflation, Statistics Canada said the pace continued to slow. Grocery prices were up 5.4 per cent year-over-year in October compared with a 5.8-per-cent move higher in September.
Bank of Canada governor Tiff Macklem is scheduled to give a speech on Wednesday to the Saint John Region Chamber of Commerce on the high cost of inflation, while the central bank’s final interest rate decision for the year is set for Dec. 6.
2) Link to Fall Update: Courtest of CP24:
3) Freeland To Present Fall Fiscal Update Tuesday As Cost-Of-Living Dominates Politics
Coutesy of Barrie360.com and Canadian PressPublished: Nov 19th, 2023
By Nojoud Al Mallees in Ottawa
Finance Minister Chrystia Freeland will table the fall fiscal update on Tuesday, which is expected to focus on housing and affordability as the Liberal government struggles to regain favour with Canadians feeling overwhelmed and angry about the rising cost of living.
But with little money to spend, Freeland has tried to temper expectations.
“We have to be sure that we make the investments Canadians need, provide them with the support they need, but do it within a fiscally responsible framework,” Freeland told reporters in Toronto on Thursday.
“We won’t be able to do everything.”
The finance minister has been relatively tight-lipped on the contents of the fall economic statement, but has repeatedly said measures will be geared toward addressing housing and affordability.
Prime Minister Justin Trudeau publicly renewed his government’s focus on these two issues after the Liberal caucus retreat in London, Ont., in September at the end of a rough summer for the party that saw the Conservatives surging in the polls.
Since then, the government has announced a trickle of new measures meant to boost housing supply, including lifting GST charges on rental developments, unlocking more low-cost financing for projects and making more federal real estate available for housing.
Freeland has signalled the government is looking at making more public land available and trying to address the strain short-term rentals are putting on housing supply.
Tim Richter, the co-chair of the National Housing Council that advises the federal housing minister, said he expects the Liberals to leave a lot of their major policies for the spring budget.
“My sense is they’re going to be making a bunch of announcements between the fall economic statement and the budget, leading to the budget being their big housing and homelessness document,” Richter said, adding that Tuesday may foreshadow some of the policies to come.
Housing Minister Sean Fraser has previously vowed to roll out new policies as soon as they’re ready instead of waiting for a specific date.
Richter, who also heads the Canadian Alliance to End Homelessness, was one of the co-authors of a report this summer that offered the federal government a blueprint for tackling the housing crisis. Among its recommendations is the creation of an industrial strategy for housing construction.
The Canadian Housing and Mortgage Corp. estimates Canada needs to build 5.8 million homes by 2030 to restore affordability, a goal that economists at CMHC have conceded will be very difficult to achieve.
Richter said the federal government’s window of opportunity to tackle the crisis is closing.
Federal opposition parties have laid out some of their expectations for the fall economic statement already.
On Friday, Conservative Leader Pierre Poilievre called on the Liberals to end the carbon price and “bring down interest rates and inflation by balancing the budget.”
He also wants the government to adopt his proposal of tying federal dollars to municipal housing results, rather than pursuing agreements with cities through the Housing Accelerator Fund program.
That program invites municipalities to apply for federal funding based on their plans to boost housing development by making changes to bylaws and regulations, including allowing denser housing construction.
Meanwhile, NDP Leader Jagmeet Singh has said he wants to see more action on affordable housing and grocery prices.
Cost-of-living issues have dominated federal politics as the rapid rise in inflation was followed by historic interest rate hikes from the Bank of Canada.
Both mortgage interest costs and rent prices have risen dramatically. These conditions have made it even harder for low-income Canadians to make ends meet and advocates have been warning about people being pushed into homelessness.
Richter said he’s been pushing for a rent supplement for people at risk of becoming homeless, and said the cost of homelessness on governments would exceed the cost of offering such a benefit.
Ray Sullivan, executive director of the Canadian Housing and Renewal Association, wants to see spending that expands the social housing stock for low-income Canadians.
But he’s not necessarily expecting big-ticket items Tuesday.
“I’m going to be watching for which things are addressed toward solving a housing problem, and which things progress toward solving a political problem whose theme is housing,” said Sullivan.
The Canadian economy is showing clearer signs of a slowdown, which ultimately affects federal finances as well.
Preliminary data from Statistics Canada suggests the economy shrank in the third quarter, the second consecutive contraction.
And while high interest rates have already begun to restrain the economy, more Canadians are expected to feel the squeeze as mortgages come up for renewal.
The federal government is also facing calls to restrain spending in order to avoid fuelling inflation and to help the Bank of Canada reduce interest rates faster.
Rebekah Young, an economist at Scotiabank, said the federal government’s priority should be to get inflation down, given that is the immediate challenge for people.
“We think right now that has to take priority over everything else. The fiscal authorities, federally and provincially, need to be part of the team that gets inflation under control,” Young said.
The federal government followed through with a promise from the spring budget to cut spending in the public service and recently announced $500 million in travel and professional services funding has been “refocused and removed” across 68 departments this fiscal year.
Bank of Canada Governor Tiff Macklem recently warned that government spending over the next year risks fuelling inflation and urged for fiscal policy to row in the same direction as monetary policy.
Tyler Meredith, a former head of economic strategy and planning for Freeland, said the government will want to signal to Canadians and financial markets that it’s restraining spending to do just that.
“That would probably be the quickest and fastest thing that would assist Canadians who are struggling with tough times right now,” he said.
At the same time, Meredith there are some things the Liberals could do to help alleviate the immediate affordability crunch.
“I think that we potentially could see some more action around competition in the grocery sector,” he said, adding it will be interesting to see whether the government follows through with any of its threats to tax grocers if they do not stabilize prices.
He also suggested the government could look at changing mortgage regulations to help Canadians facing higher interest rates upon renewal, and looking at ways to help with energy costs.
“The political challenge that the government faces isn’t so much about the question of who is best able to manage the economy. It’s a question of, are you making decisions that (are) in the best interest of me and my household?” Meredith said.
Patricia is the Business Mentor and owner of Grow Vantage and a Past President of the Barrie Chamber of Commerce. She applies over 30 years of business experience (from start-up to corporate) to mentor entrepreneurs. Since 2011, she has held over 6,500 coaching and training sessions in-person and online. Through Ask For Directions Training, her entrepreneurial training program (and parent company Grow Vantage), and as a business coach, she works with start-ups who are new (or who have lost traction) to design, launch and grow their businesses. Along with 20 other expert instructors she teaches strategies in marketing, sales, communications, and finance, as well as practical techniques to increase productivity, and manage their businesses. In other words, everything entrepreneurs need to learn to grow and run their businesses successfully, and avoid the costly mistakes they can't even see coming - that lead to delays in growth and getting stuck.
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