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business briefing

Briefing highlights

  • Consumers ahead temporarily
  • Stocks, loonie, oil at a glance
  • Scotiabank posts stronger profit
  • Required Reading

Where we stand

So, are we winning or losing?

“Temporarily, we’re a little better,” according to CIBC World Markets economist Katherine Judge.

Ms. Judge and her CIBC colleague, senior economist Royce Mendes, took a look at where Canadian consumers are winning, and where they’re losing since the end of last year, and what that could mean for the retail sector.

“Canadian retailers have been contending with a slowdown in household spending, but things may be looking up this year,” Ms. Judge and Mr. Mendes said in their report.

First, they looked at the yield on the five-year Canadian government bond, against which many mortgages are priced, noting that it’s lower than five years ago.

“Relative to the end of last year, that means the pinch from higher interest rates has eased in 2019,” they said.

Countering that, though, is a jump of more than 20 per cent in prices at the gas pump since the start of the year.

Estimated change in spending power due to change in gasoline prices and job creation since the end of 2018

Percentage change

1.5%

1.0

0.5

0.0

-0.5

-1.0

Gasoline prices

Job creation

SOURCE: CIBC WORLD MARKETS

Estimated change in spending power due to change in gasoline prices and job creation since the end of 2018

Percentage change

1.5%

1.0

0.5

0.0

-0.5

-1.0

Gasoline prices

Job creation

SOURCE: CIBC WORLD MARKETS

Estimated change in spending power due to change in gasoline prices and job creation since the end of 2018

Percentage change

1.5%

1.0

0.5

0.0

-0.5

-1.0

Gasoline prices

Job creation

SOURCE: CIBC WORLD MARKETS

“But total household spending power has increased even more than [the negative effect caused by rising gas prices] as a result of the robust job gains seen in 2019,” Ms. Judge and Mr. Mendes said.

“While job growth is likely to slow down and interest rates rise again, retailers could see an at least temporary boost to sales growth.”

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Markets at a glance

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Scotiabank profit rises

Bank of Nova Scotia posted an increase in second-quarter profit, with chief executive officer Brian Porter boasting of “strong operating results across our businesses.”

Profit rose to $2.26-billion, or $1.73 a share, diluted, from $2.18-billion or $1.70 a year earlier.

Return on equity slipped to 13.8 per cent from 14.9 per cent.

Scotiabank’s provisions for credit losses climbed to $873-million.

Adjusted, earnings per share declined to $1.70 from $1.71.

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Ticker

Nutrien boosts dividend

Nutrien Ltd. is raising its quarterly dividend to 45 US cents a share from 43 US cents.

NFI buys British bus firm

From The Canadian Press: Bus manufacturer NFI Group Inc. has acquired British bus maker Alexander Dennis Ltd. for about $546-million. The company formerly known as New Flyer Industries said the deal complements its product offerings, diversifies its business and creates a platform for international growth.

Huawei holds No. 2 ranking

From Reuters: Chinese telecom company Huawei held on to its spot as the world’s second biggest smartphone vendor in the first quarter, despite being blacklisted by the United States, research and advisory firm Gartner said.

Required Reading

USMCA road unclear

Ottawa has taken a first crucial step toward implementing its renegotiated trade deal with the U.S. and Mexico. But, Barrie McKenna reports, the road ahead for the updated version of the North American free-trade agreement remains unclear – particularly in the United States, where the Democratic-held House of Representatives is demanding key changes, including on enforcement of labour rules.

IEA urges support for nuclear

The International Energy Agency is urging developed countries to support their nuclear industries, saying the planned retirement of aging reactors will make it harder to meet climate-change targets, global energy reporter Shawn McCarthy writes.

Good news for Canadian investors

Morgan Stanley strategist Andrew Sheets’s highest conviction trade idea is that the S&P 500 will underperform the rest of the global equity market. For Canadian investors, market strategist Scott Barlow writes, this is even better news than it appears on the surface.

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