Author: Consultant

Economic Calendar: Sept 12 – Sept 16

Monday September 12

Chinese markets closed

Japan machine tool orders

(8:30 a.m. ET) Canada’s National Balance Sheet and Financial Flow Accounts for Q2.

Earnings include: Oracle Corp.

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Tuesday September 13

Germany CPI

(8:30 a.m. ET) Canadian construction investment for July.

(8:30 a.m. ET) U.S. CPI for August. The Street is projecting a year-over-year rise in inflation of 8.1 per cent, which is down from July’s 8.5 per cent.

(2 p.m. ET) U.S. budget balance for August.

Earnings include: Evertz Technologies Ltd.

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Wednesday September 14

Japan and Euro zone industrial production

(8:30 a.m. ET) Canadian manufacturing sales and new orders for July. The Street is projecting month-over-month declines of 1.0 per cent for both.

(8:30 a.m. ET) U.S. PPI Final Demand for August. Consensus is a slide of 0.1 per cent from July and up 8.8 per cent year-over-year.

Earnings include: BRP Inc.

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Thursday September 15

Japan and Euro zone trade deficit

(8:30 a.m. ET) Canadian motor vehicle sales for July. Estimate is a year-over-year decline of 13.0 per cent.

(8:30 a.m. ET) U.S. initial jobless claims for week of Sept. 10. Estimate is 225,000, up 3,000 from the previous week.

(8:30 a.m. ET) U.S. retail sales for August. The Street expects a flat result month-over-month

(8:30 a.m. ET) U.S. import prices for August. Consensus is a decline of 1.3 per cent from July but up 7.7 per cent year-over-year.

(8:30 a.m. ET) U.S. Philadelphia Fed Index for September.

(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for September

(9 a.m. ET) Canadian existing home sales and average prices for August. Estimate is year-over-year declines of 26.0 per cent and 2.0 per cent, respectively.

(9 a.m. ET) Canada’s MLS Home Price Index for August. Estimate is a year-over-year rise of 8.5 per cent.

(9:15 a.m. ET) U.S. industrial production for August. The consensus projection is a rise of 0.1 per cent from July with capacity utilization remaining 80.3 per cent.

(10 a.m. ET) U.S. business inventories for July. The Street expects an increase of 0.6 per cent from June.

Earnings include: Adobe Systems Inc.; Empire Company Ltd.

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Friday September 16

China industrial production, retail sales and fixed asset investment

Euro zone CPI

(8:15 a.m. ET) Canadian housing starts for August. The Street is forecasting an annualized rate decline of 3.8 per cent.

(8:30 a.m. ET) Canadian wholesale trade for July. Estimate is a drop of 0.1 per cent from June.

(8:30 a.m. ET) Canadian international securities transactions for July.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for September.

Imperial Signs Deal With U.S.-Based Air Products For Hydrogen

Imperial Oil says it has reached a deal with a U.S.-based industrial gas company to supply low-carbon hydrogen for its proposed renewable diesel complex near Edmonton.

The deal will see Pennsylvania-based Air Products, which is building a hydrogen facility near Edmonton, supply hydrogen via pipeline to Imperial’s Strathcona refinery.

The hydrogen will be used together with locally grown vegetable oils to produce low-carbon diesel fuel.

Air Products says it will increase its overall investment in its Edmonton hydrogen facility to $1.6 billion to support the Imperial contract.

It says its facility will produce 165 million cubic feet per day of hydrogen when it opens in 2024 and approximately half of that will go to Imperial.

Imperial says its renewable diesel complex will be the largest facility of its kind in Canada, producing more than one billion litres per year of low-carbon diesel fuel.

This report by The Canadian Press was first published Sept. 6, 2022.

Bullish on Alimentation Couche-Tard Inc.

In our previous report (Sept. 19, 2021 – $49.85) we identified the start of a new uptrend and provided targets of $54 and $59. Earlier this year, Alimentation Couche-Tard ATD-T +1.56%increase (Friday’s close $59.42) rose to a high of $59.60 to fulfill our targets (A).

The stock had a minor correction recently and found support near the 40-week Moving Average (40wMA) and the rising trend line (solid line – B). The subsequent rise to $60.66 signalled the continuation of the uptrend toward higher targets (C).

Behaviour indicators including the rising 40wMA and the rising trend line confirm the bullish status. There is good support near $54-55; only a sustained decline below $52-53 would be negative.

Point & Figure measurements provide targets of $64 and $69. Higher targets are visible.

Monica Rizk is the Senior Technical Analyst of the Phases & Cycles publication

Canada’s jobless rate jumps to 5.4% as hiring falls for third consecutive month

Canada’s unemployment rate shot up in August as the economy shed jobs for a third consecutive month, the latest sign of a chill spreading through the labour market.

Employment fell by 40,000 in August, taking total losses since May to 114,000, Statistics Canada said Friday in a report. The unemployment rate rose to 5.4 per cent from a record low of 4.9 per cent in July. Economists were expecting a far stronger month, with 15,000 jobs created and the jobless rate nudging up to 5 per cent.

Canada is experiencing an economic slowdown as the Bank of Canada aggressively raises interest rates to temper demand and rein in the largest inflation surge in decades. The shift appears to be taking the steam out of a labour market that, over the past year, has been characterized by tight conditions and robust demand for workers.

“Canada has now seen three consecutive months of job losses, something that hasn’t historically happened outside of a recession,” said Royce Mendes, head of macro strategy at Desjardins Securities, in a note to clients. “The deterioration in the job market appears to be occurring faster than anticipated.”

Even as supply chain problems ease, ‘Canadian-born’ inflation could stay stubbornly high

Despite the pullback, financial analysts say the Bank of Canada is likely to raise interest rates again at its next meeting, in October, part of its battle to curb inflation that is almost four times higher than its 2-per-cent target. Earlier this week, the central bank hiked its policy rate to 3.25 per cent from 2.5 per cent.

“This report shouldn’t cause the Bank of Canada to change course,” wrote James Orlando, senior economist at Toronto-Dominion Bank, in a note to investors. “Wage growth has increased again and domestic demand-driven inflation is only continuing to rise.”

The job losses in August were largely concentrated among young people (15 to 24) and those approaching the traditional retirement age (55 to 64). Employment fell by 28,000 in the public sector, while the contraction was hefty in both educational services (50,000) and construction (28,000).

Even so, many companies are still struggling to find workers. Employment fell slightly in the accommodation and food services sector last month, and total employment in that industry was down 15 per cent – or 179,000 people – from its prepandemic level. At the same time, employers in hospitality were recruiting for more than 170,000 positions as of June.

There are indications, though, that demand is ebbing somewhat. As of late August, total job postings on Indeed Canada had dropped 8 per cent from their May peak but were still significantly higher than before the pandemic.

It’s “still a job market where opportunities for workers are plentiful,” said Brendon Bernard, senior economist at Indeed Canada, in an interview. “But the outlook is definitely more uncertain.”

The tight hiring conditions are reflected in wages, which are rising quickly. The average hourly wage rose 5.4 per cent in August from a year earlier, up from 5.2 per cent in June and July, although those figures lag the annual inflation rate of 7.6 per cent in July. The Bank of Canada monitors wages for signs they are driving up inflation and making its task of reining in consumer price growth more difficult.

“As labour demand eases from excessive levels, pressure on wages and prices – and therefore inflation – should also recede,” said Carolyn Rogers, senior deputy governor at the Bank of Canada, in a speech Thursday.

In Friday’s report, Statscan also found that more people are considering a change in jobs. Almost 12 per cent of permanent employees were planning to leave their jobs over the next year, about double the level in January. Among workers whose hourly wages were in the bottom 20 per cent, almost one in five were planning to leave their jobs.

If that materializes, it could further drive up wages. Job switchers in the U.S. are pocketing their largest pay raises in decades. In Canada, “hopefully it’s not a situation where people missed their shot” to change jobs, Mr. Bernard said.

Among economists, there is a boisterous debate about whether this period of rising interest rates and slowing economic growth will lead to sharply higher unemployment. One side, which includes prominent central bankers, argues that employers will take down help-wanted ads but largely spare workers from layoffs. The other side points to a well-worn trend: When job vacancies decline, there is a meaningful rise in the unemployment rate.

The current unemployment rate of 5.4 per cent is “still quite low by historical standards,” Mr. Bernard said. “Of course, it didn’t move in the right direction today. The concerns I have are more the road ahead rather than the state of conditions right now.”

Dollarama beats estimates and boosts sales forecast as affluent seek bargains

Dollarama Inc. on Friday raised its full-year same-store sales forecast after topping quarterly revenue estimates, helped by strong demand for its groceries and household essentials as more consumers turn to discount stores amid surging inflation.

Rising prices of goods ranging from edible oils to paper products and gas has been forcing Canadian consumers to trade down to cheaper items to ease the strain on their wallets, benefiting discount store chains such as Dollarama.

Montreal-based Dollarama, which typically sells everything from kitchen essentials to party supplies under $4, has also rolled out additional price points up to $5, which Wall Street analysts have said would cushion margins amid higher costs.

Dollarama’s U.S. counterpart Dollar General Corp also lifted its annual comparable sales forecast last month, with inflation pushing affluent U.S. shoppers to hunt for bargains as well.

The discount store operator said it now expects comparable store sales growth of 6.5 per cent to 7.5 per cent for fiscal 2023, up from the 4 per cent to 5 per cent range estimated previously.

The company’s sales rose 18.2 per cent to $1.22 billion in the second quarter, beating analysts’ average estimate of $1.19 billion, according to Refinitiv data.

Net income for the quarter ended July 31 rose to $193.5 million, or 66 cents per share, from $146.2 million, or 48 cents per share a year earlier.

Wisconsin judge rules against Enbridge on Line 5, but stops short of shutdown

A Wisconsin judge has ruled in favour of an Indigenous band in its dispute with Enbridge over Line 5, but stopped short of shutting down the controversial cross-border pipeline.

District Court Judge William Conley says the Bad River Band of the Lake Superior Chippewa has proven it was entitled to revoke permission for the pipeline to cross its territory back in 2013.

Conley also says the band, which wants the line removed from the Bad River reservation, is entitled to financial compensation — although the decision does not go into detail on that front.

The judge rejected the band’s motion to have the pipeline shut down, however, citing the potential for serious foreign policy and trade consequences for both Canada and the United States.

He acknowledges Foreign Affairs Minister Melanie Joly’s decision late last month to formally invoke a 1977 treaty between the two countries that specifically covers cross-border pipelines.

Conley’s order, issued late Wednesday, also requires Enbridge to reroute the pipeline around Bad River territory within five years, an effort the company says is already underway.

“The court will grant the band’s motion with respect to its trespass and unjust enrichment claims, Enbridge’s counterclaims and the band’s entitlement to a monetary remedy,” he writes.

“Nevertheless, the court must deny the band’s request for an automatic injunction, as an immediate shutdown of the pipeline would have significant public and foreign policy implications.”

Environmental concerns are top of mind in Wisconsin, where the pipeline runs directly through the Bad River Reservation, more than 500 square kilometres of pristine wetlands, streams and wilderness.

The band has been in court with Enbridge for more than three years, arguing that the Calgary-based company is trespassing, having violated the terms of the easements that allowed the pipeline to traverse the reservation beginning in 1953.

Enbridge, which is in the process of trying to reroute the pipeline around the reservation, argued that a 1992 agreement with the Bad River Band allows the pipeline to keep operating until 2043.

Conley, however, concluded that the band was within its rights to decide not to renew the easements in 2013, and that the 1992 agreement was not by itself a guarantee that the pipeline would be allowed to continue to operate.

“The agreed-upon purpose was not, as Enbridge now asserts, to permit it to operate across the entire reservation for 50 years,” the judge writes.

“Moreover, Enbridge knew of the risk that its 20-year easements might not be renewed, and yet failed to protect itself from that risk.”

In a statement, the company cheered the decision to keep Line 5 operational and said it remains committed to resolving the dispute “amicably” with the Bad River band.

The company’s plans for a 66-kilometre detour of Line 5 around the reservation are already two years along, with 100 per cent of private landowners along the new route having already signed agreements.

“The relocation project will be built by a Wisconsin contractor and create approximately 700 family-supporting union jobs and millions in construction-related spending in northern Wisconsin,” the company said.

“Roughly (US)$46 million will be spent with tribally owned businesses and on hiring and training Native American workers who will make up at least 10 per cent of the project workforce.”

Line 5 has been under legal siege in both Wisconsin and neighbouring Michigan for the better part of the last three years, and with opponents in both cases arguing for a shutdown, the ruling Wednesday is likely to be seen as a win.

Business groups and chambers of commerce on both sides of the border, provincial governments and Ottawa have rallied behind Enbridge in its effort to portray Line 5’s survival as a mission-critical matter of continental energy security.

Allies have argued in court filings as well as public forums that Line 5 is a vital source of energy for several Midwestern states, and an essential link for Canadian refineries that fuel some of Canada’s busiest airports.

Late last month, the company won a key battle in the suit in Michigan, where a federal judge rejected Attorney General Dana Nessel’s efforts to get the case removed back to circuit court, where the state stands a better chance of success.

Nessel has since indicated she plans to appeal that decision.

This report by The Canadian Press was first published Sept. 8, 2022

Statistics Canada to release August jobs report today (sept 9)

OTTAWA – 

Statistics Canada is expected to release its August labour force survey today.

The unemployment rate in July was 4.9 per cent, the lowest on record with comparable data going back to 1976.

Average hourly wages in July were up 5.2 per cent compared with a year ago, but continue to lag red-hot inflation.

RBC is predicting the Canadian economy added 5,000 jobs in August while the unemployment rate ticked up slightly to 5 per cent.

The Bank of Canada has characterized the Canadian economy as “overheated’ in part due to the tight labour market.

As the Bank of Canada continues to raise interest rates to tame inflation, economists are expecting an economic slowdown is on the horizon.

This report by The Canadian Press was first published Sept. 9, 2022

Economic news: Sept 9

Transat A.T. Inc. reported a third-quarter loss that was smaller than a year ago as it said it is on track for a winter travel season that promises to match pre-pandemic levels. Transat chief executive Annick Guerard said the pace of sales is currently very comparable to 2019. The comment came as the travel company reported a net loss attributable to shareholders of $106.5-million or $2.82 per diluted share for the quarter ended July 31. The result compared with a loss of $138.1-million or $3.66 per diluted share in the same period a year earlier.

BoC senior deputy says rates to keep rising, period of lower growth needed to tame inflation

Bank of Canada senior deputy governor Carolyn Rogers says the central bank intends to keep pushing borrowing costs higher and that a period of lower economic growth is necessary to bring inflation back under control.

Speaking to Calgary Economic Development on Thursday, Ms. Rogers warned that the economy is still overheating and price pressures are broadening. She said getting inflation back to the central bank’s 2-per-cent target will be a long process with potential “bumps along the way.”

She was speaking a day after the central bank increased its benchmark interest rate by 0.75 of a percentage point, its fifth hike since March. This brought the overnight rate to 3.25 per cent, a restrictive level that will see borrowing costs weighing on economic growth.

Ms. Rogers gave no hints about how high the bank expects to push interest rates. She said its governing council will respond to incoming economic data, paying particularly close attention to consumer spending, labour-market tightness, supply-chain disruptions and inflation expectations.

“Our primary focus will be to judge how monetary policy is working to slow demand, how fast supply challenges are resolved and, most importantly, how both inflation and inflation expectations respond,” she said in her second speech since taking over the bank’s No. 2 job.

Financial markets and most private-sector forecasters expect an end-point for the central bank’s rate hike cycle of between 3.5 per cent and 4 per cent.

“The speech made clear that the lags in monetary policy mean that central bankers are flying blind when it comes to how high rates need to rise,” wrote Royce Mendes, head of macro strategy at Desjardins, in a note to clients. “That said, if monetary policymakers have to make a choice between a recession and controlling inflation in the near-term, their actions will be guided by the latter.”

Higher interest rates, which make it more expensive for individuals and companies to borrow money, are already squeezing the Canadian economy – particularly rate-sensitive sectors such as housing. But Ms. Rogers cautioned that the economy remains in “excess demand,” where households and businesses want more goods, services and labour than the economy can supply.

“Because we are in a period of excess demand, we need a period of lower growth to balance things out and bring demand back in line with supply,” she said.

U.S. Federal Reserve chair Jerome Powell echoed this hawkish narrative in a separate appearance Thursday. In a discussion moderated by the Washington-based Cato Institute, Mr. Powell said the Fed remains “firmly committed” to bringing inflation down. The U.S. central bank is widely expected to announce another oversized rate hike this month.

“The longer inflation remains well above target, the greater the risk that the public sees higher inflation as the norm,” Mr. Powell said. “History cautions strongly against prematurely loosening policy.”

Both the Bank of Canada and the Fed are trying to engineer a so-called soft landing, in which inflation comes down without causing a recession or a spike in unemployment. Ms. Rogers acknowledged that the persistence of high inflation makes that task more challenging.

“Is that path a delicate balance? Absolutely,” she said in a news conference after her speech. A key factor in achieving that soft landing is keeping Canadians’ inflation expectations under control.

“The scenario that we’re worried about is that Canadians look at the current rate of inflation, they think it’s here to stay, they start incorporating that thinking into long-term decision making,” she said. “Certainly if that starts to occur, it makes inflation much harder to get down. It means monetary policy has to do more, rates have to go higher, to get inflation down.”

Much of the speech focused on the uncertainty surrounding inflation. Some of the global forces that pushed up consumer prices over the past year – including elevated energy prices and shipping costs – have begun to normalize. That has helped lower headline inflation; the annual rate of Consumer Price Index growth dipped to 7.6 per cent in July from a four-decade high of 8.1 per cent in June, largely as a result of falling oil prices.

But measures of core inflation, which strip out the more volatile elements of the Consumer Price Index such as food and gasoline, continue to push higher. Core inflation tends to be driven by domestic factors tied to the Canadian service sector and labour market. The job market in particular is increasingly adding to inflationary pressures, as the ultralow unemployment rate and high number of job vacancies push up wages.

“While it looks like we might have seen the peak of overall inflation in Canada, inflation excluding gasoline prices has continued to rise and broaden across goods and services. There are also some significant uncertainties, particularly in the global commodity markets, that could set us back,” Ms. Rogers said.

The Bank of Canada said in July that it expects inflation to ease to about 3 per cent by the end of 2023 and return to 2 per cent by the end of 2024. Its next rate decision, where it will also publish a new economic forecast, is on Oct. 26.