Category: Economic

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Economic

Bank of Canada maintains overnight rate target at 1/2 per cent


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The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

Inflation in Canada is on track to return to 2 per cent in 2017 as the complex adjustment underway in Canada’s economy proceeds. The fundamentals remain in place for a pickup in growth over the projection horizon, albeit in a climate of heightened uncertainty.

In this context, the forecast for the global economy has been marked down slightly from the Bank’s April Monetary Policy Report (MPR). Global GDP growth is projected to be 2.9 per cent in 2016, 3.3 per cent in 2017, and 3.5 per cent in 2018. In particular, after a weak start to 2016 the US economy is showing signs of a rebound, with a healthy labour market and solid consumption growth. In the wake of Brexit, global markets have materially re-priced a number of asset classes. Financial conditions, already accommodative, have become even more so.

In Canada, the quarterly pattern of growth has been uneven. Real GDP grew by 2.4 per cent in the first quarter but is estimated to have contracted by 1 per cent in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires. A pick-up to 3 1/2 per cent is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray. Consumer spending will also get a boost from the Canada Child Benefit.

While the fundamental elements of the Bank’s projection are similar to those presented in April, the forecast has been revised down in light of a weaker outlook for business investment and a lower profile for exports, reflecting a downward adjustment to US investment spending. Real GDP is expected to grow by 1.3 per cent in 2016, 2.2 per cent in 2017, and 2.1 per cent in 2018. The Bank projects above-potential growth from the second half of 2016, lifted by rising US demand and supported by accommodative monetary and financial conditions. Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth.  Despite recent volatility, the Bank expects the underlying trend of export growth to continue, leading to a pick-up in business investment. Higher global oil prices are helping to stabilize Canada’s energy sector and household spending is expected to increase moderately.

The Bank forecasts that the output gap will close somewhat later than estimated in April, towards the end of 2017. Underlying this judgement is the downward revision to business investment, which lowers the profile for both real GDP and, to a lesser extent, potential output.  

While inflation has recently been a little higher than anticipated, largely due to higher consumer energy prices, it is still in the lower half of the Bank’s inflation-control range. Most measures of core inflation remain close to 2 per cent but would be lower without the impact of past exchange rate depreciation. The temporary effects of exchange-rate pass-through and past declines in consumer energy prices are expected to dissipate in late 2016, and the Bank projects that inflation will average close to 2 per cent throughout 2017 as the output gap narrows.

Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas. The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.

Information notes

The next scheduled date for announcing the overnight rate target is 7 September 2016. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 19 October 2016.

The Bank is streamlining the content of its MPRs. The reports will continue to provide an update on developments in the global and Canadian economies, as well as a discussion of the economic and inflation outlook for Canada, and will be based on full projections each quarter. The April and October MPRs will provide additional content on issues that warrant in-depth analysis, such as the Bank’s assessment of potential output or the yearly extension of the economic projection period.



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Economic Ft Mac Politics

Protectionist Measures Rejected by Wood Buffalo Council

Two proposals for bylaw amendments were rejected as protectionist measures by the Wood Buffalo council. The proposed amendments would set steep fees for demolition permits and use of the landfill for any contractors who were not already established in the area before May 3 when the wildfire hit. Councillor Allen Vinni proposed a bylaw amendment which would set a $2,000 charge for demolition permits to non residents while local contractors would only pay $200, but this was voted down after a lengthy debate. All of the councillors but Vinni voted against this specific amendment. Another proposed amendment was approved and this does include charging non residents more to use the landfill but the difference between resident and nonresident costs was much smaller. Vinni explained his defeated amendment by saying “To me this bylaw is fundamentally about creating a level playing field for local contractors.”

The initial landfill amendment also had protectionist measures but these were minimized by the Wood Buffalo council as well. As originally proposed the amendment stated that non residents would pay five times what residents would pay to use the landfill. A resident discarding mobile home remains would be charged $970 but a non resident contractor would pay $4,870 for the same debris. Instead of adopting the original amendment in this case the council determined that doubling the fee was sufficient and the changed amendment passed. Some non resident contractors were upset at the initial fees proposed because they felt like they were helping Fort McMurray out and that they were treated unfairly. Contractors can separate any recyclable demolition debris and this can be taken to the landfill at no charge for residents and non residents both. This step could significantly decrease the landfill fee paid.

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Economic Ft Mac

Centennial Trailer Park Warns Tenants to Clear Trailer Debris After Wildfire

Tenants of Centennial Trailer Park has sent out an email to tenants warning them that they are responsible for clearing any trailer debris left behind after the wildfire destroyed the trailers in the park, and some former tenants are upset about it. Doug Fitzgerald, who has called a trailer in the park home for 11 years and who lived there with his girlfriend Velma, is left with nothing but charred rubble and ashes where his trailer once stood. The thought that he should have to shell out money from his own pocket to remove debris upsets the 57 year old Fitzgerald, who said “Are they crazy? It is their land and it is the owner’s responsibility to clean up their own land themselves. Shouldn’t the insurance cover this? Shouldn’t they have told us we would be responsible for cleanup when we moved in? I’m not cleaning it and I’m not paying for it.”

Many tenants of the Centennial Trailer Park did not have insurance which would cover the removal of the trailer debris, and park owners sent an email on June 30 to the former tenants warning that trailer owners must pay for debris cleanup. The email stated that if plots are nt cleared of debris by July 15, 2016 the park owners will take care of the clean up and then bill the former tenant for the costs. 51 year old Ted McAllister is another former tenant who believes that this is wrong. Ted explained “If you have a tenant in the basement, you don’t charge them for clearing out the debris that fell in the basement. They sent it just before the long weekend, too. So that means a lot of people lost four days of cleaning time.”

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Alberta Economic Entertainment Ft Mac

Fire Aid Event Wood Buffalo Rocks Raises Around $2 Million, Proceeds Go To United Way

The Fire Aid event Wood Buffalo Rocks was a smashing success, and the United Way can definitely use the proceeds to help out members of the community in need and those who have lost most if not all of their property and belongings because of the wildfire that swept through Wood Buffalo. Many who were evacuated came home to nothing, with everything destroyed or turned into ash. Fire Aid for Fort McMurray was a benefit concert held on June 30, 2106 in Edmonton at the Commonwealth Stadium. Wood Buffalo residents could watch the entire event for free though, right at MacDonald Island Park. The event sold over 30,000 tickets and the United Way is expected to receive around $2 million as a result.

After the Wood Buffalo Rocks Fire Aid event the local director for the United Way, Diane Shannon, expressed her patriotism and pride in her country, saying “The spirit of Canada has never been stronger and deeper. On Canada Day, I hope you sing O Canada as you’ve never sung it before.” Mayor Melissa Blake addressed the Edmonton crowd at the stadium and told them “I love the crowd. I love the energy. I love what’s happening. Absolutely outstanding. We love you right back.” There si no denying that the residents of Wood Buffalo could use a little entertainment after their forced evacuation and everything else that they have gone through recently. The event was a welcome break from the process of recovering and rebuilding, and the residents needed a little time off with some great distractions.

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Alberta Economic Ft Mac

Builder Declaration Required for Any Construction Companies Involved With Rebuilding Fort McMurray

The province has learned from past mistakes, such as the fire and massive destruction at Slave Lake, and as a result new rules are being put into place forcing construction companies to provide a builder declaration before they can take part in rebuilding the damaged or destroyed homes and buildings in Fort McMurray and Wood Buffalo. The province will post the work history plus any fines that are outstanding for each of the construction companies which participate in the rebuilding effort. This is to assist residents so that they do not end up falling for shady builders or using incompetent companies. According to Municipal Affairs Minister Danielle Larivee during a recent press conference a builder declaration must be completed before the construction company can apply for a building permit. This allows homeowners online access to the history, background, financial data, and outstanding fines or even court orders for a specific company.

According to Larivee the goal of the builder declaration is to weed out any incompetent and shady construction companies. “I certainly know first-hand how stressful rebuilding can be. Five years ago, I watched many in my community who struggled through the rebuilding process at a time when they were already vulnerable. They didn’t know how to choose the right builder for them or what should be included in a contract. It was a tremendously stressful experience and many Slave Lake families did not have the support they needed.” Companies who will be doing repairs or renovations will also be required to register and follow the same process, not just builders who build new homes.

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Economic Ft Mac Politics

Does the Wood Buffalo Council Deserve the Pay Raise They Voted for Themselves?

A number of residents are upset over the pay raise that Wood Buffalo council members voted for themselves, with some receiving a new salary that is more than double what they were making before they voted to give themselves a hefty raise. As soon as the news reached the public there was anger and outrage. The votes meant that a part time salary for a council member went from a little over $35,000 to $75,000. 3 members of the council were designated as full time council members, and their salaries were increased to $150,000 per year, the same salary as Mayor Melissa Blake makes. This is the highest salary amount for a council member in Canada, even higher than Toronto and other much larger cities.

Some on the Wood Buffalo council who voted for the pay raise defended their vote. Colleen Tatum took to a Facebook post to defend her decision to vote for and accept the enormous pay raise, posting “Childcare, lost time in my business, lost opportunities elsewhere do cost me much more than I ever earn. It does seem obscene on face value, to ask for a raise in these extreme and very hard times, but the justification I do feel is there.” Mayor Melissa Blake and a number of council members voted against the pay increase but they were outnumbered. The Canadian Taxpayers Federation Alberta director Paige MacPherson asked “Was such a dramatic wage increase really necessary right now? That’s a fair question for residents and taxpayers to be asking. These are now some of the highest base salaries of any major centre in Canada. It’s unprecedented for a councillor to make the same or more as any mayor.”