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Written By: Benjamin Pipicelli, Lexx Thomson, Dorje Gyaltsen, & Gordon Huynh
Economics Newsletter – Apr 4, 2024
Canada’s Economy at a Glance
Author’s Commentary
Canadian CPI
On a monthly basis, the headline index rose by 0.1% SA, reflecting some mixed readings on volatile underlying components. Gasoline prices rebounded, along with airfares, while grocery store price inflation, at 2.4% y/y, is running at the slowest pace seen since mid-2021, as prices fell by 0.5% m/m SA. Shelter prices were up by 0.6% m/m SA as natural gas and fuel oil prices rebounded, although rent and mortgage interest costs decelerated in monthly terms, and are running at 8.2% and 26% y/y, respectively. The Bank of Canada will look through the volatile categories mentioned above, with other core measures providing a better signal of inflation stemming from underlying demand. On that score, virtually every core measure looked more encouraging. Services ex. shelter inflation slowed to 1.6% y/y, showing that the sluggishness in consumer demand is working to tame inflation in that area, which also suggests a further slowdown in wage inflation ahead, something that the Bank is looking for in order to trim interest rates.
News and Noteworthy
Canada’s new immigration caps to put pressure on inflation
The Canadian government’s plan to reduce the proportion of non-permanent residents (NPRs) is expected to lead to more frequent interest rate cuts by the Bank of Canada, though it could also have adverse economic consequences. While higher productivity growth may result in stronger real GDP per capita growth, the overall GDP growth is likely to decline due to reduced population growth. Employment growth may slow down, potentially leading to a rise in the unemployment rate, while lower inflation could prompt faster interest rate cuts and offer modest relief to real earnings growth. Read more.
Ballard Power stock leaps more than 17% on biggest-ever fuel cell order
Ballard Power Systems’ shares surged more than 17% after announcing a supply deal with a European bus manufacturer and securing a US$54 million tax credit under the US Inflation Reduction Act. Despite recent challenges, including a decline in stock value due to a shrinking order book, Ballard clinched its largest order from Poland’s Solaris Bus & Coach. With plans to utilize the tax credit for a new fuel cell Gigafactory in Texas and a growing focus on the US market, Ballard aims to capitalize on federal funding opportunities and leverage partnerships to drive growth in the decarbonization trend in transportation. Read more.
Why Canadian investors are shifting to the offensive in 2024
Canadian investors are shifting from cash to stocks and bonds as interest rates decline, with experts recommending a repositioning due to changing economic conditions. With inflation starting to normalize and cash yields expected to decrease, investing in traditional 60/40 portfolios is gaining traction again. Despite challenges faced in 2022, these portfolios, comprised of stocks and bonds, are seen as resilient through different economic outcomes, providing potentially higher returns for long-term investors. Emphasizing diversification, experts suggest allocating investments across different markets and asset classes to mitigate risks and capitalize on varied opportunities. Read more.
Taxes 2024: Invest or splurge? What to do if you get a big tax refund
With tax refunds rolling in, Canadians are contemplating how to best utilize this windfall, which averaged $2,134 for over 3.9 million recipients. Financial planners emphasize aligning spending with individual financial goals, suggesting strategies like debt repayment, bolstering emergency savings, and contributions to accounts like the First Home Savings Account (FHSA) and Registered Retirement Savings Plan (RRSP). While splurging is tempting, experts advise ensuring a strong financial foundation before indulging and recommend adjusting tax deductions to prevent large refunds in the future, promoting consistent financial planning throughout the year. Read more.
Amazon ranked the #1 corporate clean energy buyer in 2023
Amazon.com (AMZN) maintained its position as the top corporate buyer of renewable power in 2023, with a record number of deals, according to S&P Global. These power purchase agreements (PPAs), primarily for solar or wind-generated electricity, have surged in popularity globally as companies face pressure to reduce emissions. Despite a slight decrease in capacity contracting, solar remained the dominant electricity source for these deals, followed by hybrid and onshore wind projects. Europe led the growth in corporate procurement markets, while North America experienced a slowdown due to various factors including high interest rates and project delays. Read more.
Economics Society News, Events, and Articles
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