Weekly Business Update – 8 September 2023

Welcome to our Weekly Digest – stay in the know with some recent news updates relevant to business and the economy.

StatsCan Reports Decline in Canada’s Economy during 2nd Quarter

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The Canadian economy, once known for its resilience, faced a significant setback in the second quarter due to a continuous decline in housing investment, particularly in new construction. Statistics Canada’s recent report revealed an alarming annualized contraction of 0.2%, sparking concerns among analysts and policymakers who were anticipating more positive results.

The decline in housing investment in Canada has had a negative impact on sectors such as construction and real estate, causing a slowdown in the housing market. This has led to a decrease in demand for materials, labor, and related services. The downturn has also affected employment rates and consumer spending as potential homeowners are cautious in an uncertain environment. The decline in housing investment raises concerns about the overall health and stability of the Canadian economy, as housing has traditionally been a key driver of economic growth. This decline, combined with global trade tensions and market uncertainties, has created a challenging landscape for businesses and investors. The recent economic contraction in the second quarter is particularly worrisome, as it is the first decline in over a year for Canada. This raises questions about sustaining past growth and managing future economic challenges. Policymakers and industry leaders are expected to explore measures to stimulate growth, revive housing investment, and guide the economy towards recovery.

Bank of Canada Expected to Maintain Interest Rates Following Unexpected GDP Contraction: Economists’ Insights

Economists are closely analyzing the recently released GDP data from Statistics Canada, which points to an economic contraction. This development has sparked discussions about the potential conclusion of the Bank of Canada’s ongoing rate hiking efforts. A contracting GDP suggests a decrease in the production and consumption of goods and services within the country, potentially driven by factors like reduced exports, business investments, and consumer spending.

The contraction in GDP is causing economists to closely monitor the economy, as it could indicate economic stagnation or a recession. This has raised concerns about the Bank of Canada’s decision to continue raising interest rates as part of their tightening monetary policy. Some economists argue that focusing on stimulating growth may be more appropriate at this time, as higher interest rates could worsen the economic downturn. If the Bank of Canada chooses to halt its rate hikes, it would signal a shift towards a more accommodative monetary policy, which could help revive the economy. However, managing the trade-offs between growth and controlling inflation would still be a challenge.

Is Trudeau’s Government on the Verge of Breaking the David Dodge Rule?

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Economists are dissecting the latest GDP data from Statistics Canada, revealing an economic contraction that has prompted discussions about the trajectory of the Bank of Canada’s interest rate increases. With the data suggesting a potential slowdown in economic growth, experts are questioning the rationale behind further interest rate hikes.

The decline in GDP indicates a decrease in the production and consumption of goods and services, potentially caused by factors such as reduced exports, business investments, and consumer spending. Economists are closely monitoring this contraction as it could lead to an economic standstill or recession, questioning the Bank of Canada’s decision to tighten monetary policy. The central bank has been raising interest rates to manage inflation and maintain economic stability. However, with the economy contracting, further rate hikes could hinder recovery by limiting consumer spending and business investments. The recent GDP contraction has prompted economists to reconsider the ongoing rate hikes, suggesting that stimulating growth may be more important than tightening monetary policy.

The Cost Disparity between Shipping from China and within Canada

Shipping packages from Canada to China can incur costs that are up to five times higher than usual, primarily due to the influence of the Universal Postal Union (UPU). While the UPU aims to promote global postal cooperation, its terminal dues system inadvertently results in exorbitant shipping expenses for Canadian businesses and individuals.

The terminal dues system, established by the Universal Postal Union (UPU), has a disproportionate impact on countries with high operational costs and limited population density. Certain countries, like China, receive significant shipping subsidies, creating an unfair advantage for their businesses and hindering Canadian businesses’ ability to compete globally. This disparity in shipping costs particularly affects small and medium-sized enterprises (SMEs) looking to expand into the Chinese market. The UPU’s policies also fail to address the challenges posed by e-commerce and cross-border shipments, imposing costly shipping rates on Canadian businesses. To address these issues, Canada should engage with the UPU to advocate for a fairer shipping system, rectifying terminal dues imbalances and eliminating preferential treatment for select countries. The UPU should also adapt its policies to accommodate the evolving e-commerce landscape and ensure equal opportunities for all member countries in international trade.

Transforming Eastern Ontario: $219 Million Investment in High-Speed Internet Access

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Canada and Ontario have embarked on a groundbreaking joint initiative, committing an impressive investment of C$219 million. This substantial funding aims to bridge the digital divide by providing high-speed internet access to more than 66,000 households across 300 diverse communities in Ontario. The initiative holds the promise of empowering households with seamless connectivity and unlocking a range of opportunities for growth and development.

This initiative aims to bring about positive change by addressing barriers that have hindered progress and prosperity in certain communities. The widespread availability of high-speed internet access is expected to improve education, economic opportunities, healthcare services, and social interactions. The initiative deserves praise for its focus on inclusivity, as it targets over 600 Indigenous households, recognizing the digital disparities that have affected Indigenous populations in the past. Additionally, the collaboration between federal and provincial governments demonstrates their commitment to addressing the urgent need for high-speed internet access and promoting digital inclusion. This partnership between Canada and Ontario highlights their shared determination to ensure equitable participation in the digital age.

Small Business Confidence and an Endless Stream of Challenges

The latest CFIB Business Barometer® has unveiled a disconcerting trend in Canada, as a notable 40% of businesses indicate hindered growth due to insufficient domestic demand – a figure that hasn’t been this high since February 2021. This revelation accentuates the gravity of the situation, casting its impact across various sectors and endangering the very foundation of the Canadian economy. The ongoing COVID-19 pandemic has only exacerbated matters, resulting in diminished consumer spending and heightened economic uncertainty, further exacerbating the challenges faced.

The CFIB’s findings highlight the challenges faced by small and medium-sized businesses. This information is valuable for policymakers, economists, and business owners in navigating these difficult circumstances. Governments should take action by implementing measures to stimulate consumer spending and boost confidence in the business ecosystem, such as providing financial support and tax incentives. Businesses need to adapt and evolve by diversifying their offerings, improving their online presence, and exploring new markets. Incorporating digital technologies and data-driven insights can help identify emerging opportunities. Collaboration between government bodies, industry associations, and businesses is necessary to revitalize the Canadian economy. A comprehensive strategy tailored to different sectors can lead to sustainable growth and a resilient economic future.

China’s Economic Slowdown Bolsters Canada’s Battle Against Inflation

closeup photography of plant on ground

In a recent interview, Jimmy Jean, the chief economist at Desjardins Group, engaged in a discussion with Larysa Harapyn from the Financial Post, shedding light on the noteworthy repercussions of China’s slowing economy and its potential worldwide ramifications. Jean emphasized the substantial impact of China’s economic deceleration, given its position as the globe’s second-largest economy.

The economic slowdown in China could have significant implications for global trade, investments, and overall market sentiment. Countries closely connected to China’s economy, such as Canada, could face substantial challenges. Reduced demand for commodities in China could lead to a decline in global commodity prices, exacerbating inflation concerns in regions like Canada. One possible solution discussed is China strategically using its foreign reserves, including Canadian dollars, to inject liquidity into the Canadian market, stabilizing the economy and alleviating inflation pressures. Overall, the insights provided highlight the complex relationship between China’s economic trajectory and its impact on the global stage, as well as the potential for China to support Canada’s efforts in managing inflation and fostering economic stability.

The Pros and Cons of Union Membership: Balancing Benefits and Costs

unknown persons using computer indoors

The non-profit Angus Reid Institute recently conducted a comprehensive study that delves into the multifaceted perceptions surrounding labour unions in Canada. This study explores the contrasting viewpoints held by union members and non-members, revealing divergent opinions on the significance and costs associated with organized work. The research by the Angus Reid Institute provides an in-depth analysis of perspectives across Canada regarding labour unions. The findings show a nation grappling with differing views on the value and cost of organized work, irrespective of individuals’ union affiliations.

The study examines the opinions of both union and non-union members in Canada regarding the role and impact of labor unions. It reveals a diverse range of perspectives among union members, with some strongly supporting unions for their protection of workers’ rights, while others raise concerns about the drawbacks and costs of membership. The perspectives of non-union members also offer interesting insights, with some recognizing the potential benefits of unions such as improved working conditions and fair wages, while others express reservations about increased expenses and reduced flexibility. The research emphasizes the need for a nuanced understanding of labor union perceptions in Canada, highlighting the varied attitudes towards the value and cost of organized work. The study’s findings can be valuable for policymakers, union leaders, and employers, enabling informed decision-making and promoting constructive dialogue to address the concerns of all stakeholders. Overall, the study provides a comprehensive exploration of Canadian perceptions about labor unions, showcasing contrasting viewpoints and reflecting the complexity of organized work.

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