Skip to main content
business briefing

These are stories Report on Business is following Wednesday, May 22, 2013.

Follow Michael Babad and the Globe's top business stories on Twitter.

Hey, Mr. Stewart
First, let me say that I truly love The Daily Show and applaud its latest effort to shed more light on Canada (and the alleged adventures of Toronto's mayor).

I just think that there are 10 or so things Jon Stewart should know (and probably does) when he jokingly refers to smoking crack as our national pastime, as he did last night.

I'm setting aside things like hockey and Justin Bieber here, and the fact that our beer is better, and putting the focus more on business:

1. Our wealthy businessmen can rise to the very top of the Prime Minister's Office, and then spread the largesse around.

2. Our 1-per-centers don't have a God complex. "If Jesus Christ himself had been appointed co-chairman of the board and was offered that package, we would have voted against it," Caisse de dépôt chief Michael Sabia declared after he opposed an $11.9-million pay package to a Barrick Gold executive.

3. We think our house prices will keep going up forever. Oh, you already know all about that.

4. Our condo developers won't take "no" for an answer.

5. We're very good at selling things to foreigners at the top of the market. So that we don't own them when the market turns.

6. We love our cellphone companies so much that we keep signing up for three-year stretches.

7. We make sure we pay high enough fees so that our banks don't collapse.

8. We love Boston Pizza even though Boston's not known for pizza.

9. We can get sick without going bankrupt. As long as we can find a doctor fast enough.

10. We think sex should last up to half an hour, according to the latest Canadian Living survey: "Less than 2 per cent of those polled said sex should last under five minutes ('Ahem,' we're blaming it on the layers of clothes)."

Bernanke sends no signal on QE
Pulling back on central bank stimulus could cripple the recovery, Federal Reserve chairman Ben Bernanke warned today, initially buoying markets.

Markets had been closely monitoring Mr. Bernanke testimony to a congressional committee, fearing a signal that the central bank's quantitative easing program could be scaled back prematurely, The Globe and Mail's Kevin Carmichael reports.

But the Fed chief gave no such signal, meaning the massive bond-buying program will continue at its current pace for some months yet, though it will taper down at some point.

"A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," he told the Joint Economic Committee.

The Federal Reserve is juicing the economy by tens of billions of dollars a month, while holding its benchmark rate near zero, which it has pledged to do until unemployment eases to at least 6.5 per cent.

That's having an impact, Mr. Bernanke said.

"Low real interest rates have helped support spending on durable goods, such as automobiles, and also contributed significantly to the recovery in housing sales, construction, and prices," he said.

"Higher prices of houses and other assets, in turn, have increased household wealth and consumer confidence, spurring consumer spending and contributing to gains in production and employment."

Mr. Bernanke's testimony marked the first of two Fed events today, the second being the release this afternoon of the minutes of the latest policy-setting meeting.

Where the markets are concerned, so far so good, as QE3, as the program is known, has helped drive stock prices. Markets soured, however, after minutes of the last Fed meeting raised speculation that the scheme could end earlier.

"Despite recognizing some of the drawbacks of a long period of low rates, he shows no interest in pulling away from that just yet, and mentioned both increasing or decreasing the QE pace when talking about the Fed's willingness to adjust it," chief economist Avery Shenfeld of CIBC World Markets said of Mr. Bernanke, noting that his comments mirrored the latest Fed policy statement.

"Over all, the news in this statement is that there is no news, with Bernanke not yet wanting to hint at thoughts on when curtailing QE is likely to begin."

Thank U.S. malls for holding down Canadian prices
Consumers can thank the "relentless" competition from south of the border for holding down Canadian prices.

Retail sales in Canada were flat in March, according to Statistics Canada today, but rose 0.7 per cent in volume terms.

That's after tripping out the impact of price changes, largely those at the gas pump, which fell.

Helping to drive the overall result were car and truck sales, and clothes, which BMO Nesbitt Burns says may been helped along by a "lull" in cross-border shopping given a marginally weaker dollar.

In fact, clothes and shoes, with jewellery and purses thrown in for good measure, helped buoy some of the Canadian shops two months ago.

Clothing shops registered the biggest gain, up 3.5 per cent for the third increase in four months. Shoe store sales rose for the fourth month in a row.

Sales of jewellery, luggage and leather goods gained 2.3 per cent, ending  a string of monthly declines.

"The quick-fire conclusion to today's retail sales data would be that the Canadian consumer has all but run out of gas," chief economist Douglas Porter said of the overall flat reading.

"However, much of the softness in both March and over the past year has been a weaker price story – retail prices were down in March and have dropped over the past 12 months, no doubt in part due to the relentless competitive pressure of cross-border shopping," he added in a research note.

"Underneath that price softness is indeed a sluggish consumer, but one that is still managing to grind out modest underlying growth of between 1 per cent to 2 per cent."

Six of the 11 sectors measured by Statistics Canada chalked up gains, represented just under half of the total.

Annual inflation in Canada is now just 0.4 per cent, though that's been driven down by falling gas prices.

Still, the cost of clothes and shoes, for example, fell in April from a year earlier and, on a seasonally-adjusted basis, dipped from their March levels.

Retail sales have now climbed at an annual pace of 1.8 per cent in the first quarter, noted economist Dina Ignjatovic of Toronto-Dominion Bank, well up from late last year, though consumer spending will likely hold just below 2 per cent given the weak economic outlook and the juggling act when it comes to household debt.

All in all, economists studying a raft of indicators, today's being the latest, now expect to see that first-quarter economic growth in Canada perked up to an annual pace of between 2 per cent and 2.5 per cent, compared to the disappointing 0.6 per cent of the last three months of 2012.

"Such an increase, if realized, would represent an upward surprise relative to the Bank of Canada's currently forecast increase in Q1 of 1.5 per cent," said assistant chief economist Paul Ferley of Royal Bank of Canada.

Don't take that to mean that the central bank will moving any faster to hike its benchmark interest rate, however.

"However, any move to push official rates higher by the central bank would require indications of this stronger growth being sustained," Mr. Ferley said.

"Our forecast does not assume that this will be sufficiently evident until the middle of next year with the overnight rate then only rising modestly to 1.5 per cent by the end of 2014 from 1 per cent currently."

Central bank projects 'moderate recovery path'
The Bank of Japan held a steady course today, announcing no policy changes but pointing to a stronger outlook.

"Japan's economy has started picking up," the central bank declared after its meeting.

"Exports have stopped decreasing as overseas economies have been moving out of the deceleration phase that had continued since last  year and are gradually heading toward a pick-up."

The central bank projected its economy, which expanded markedly in the first quarter, will return to "a moderate recovery path," though risks remain.

Those risks, the Bank of Japan said, include "the prospects for the European debt problem and the growth momentum of the U.S. economy as well as the emerging and commodity-exporting economies."

BRP prices IPO
BRP Inc., the maker of Ski-Doos and the Can-Am Spyder three-wheeled motorcycle, has priced its initial public offering at $21.50 per share, with the stock exchange symbol "DOO," The Globe and Mail's Bertrand Marotte reports.

The company said today that the IPO of 12.2 million subordinate voting shares will take in about $262-million. The net proceeds of the offering are to be used to reduce debt

Just sayin'
A major battle with big consequences for Canada's labour movement is set to play out over the coming weeks in the Senate … The bill would force unions to make a wide range of financial disclosures to the Canada Revenue Agency that would then be posted online.

Globe and Mail, May 21

A Senate committee accused of toning down its report on Mike Duffy's expense claims will reopen its probe of the PEI politician's conduct.

Globe and Mail, May 21

Streetwise (for subscribers)

Economy Lab

ROB Insight (for subscribers)

Business ticker

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 7:35pm EDT.

SymbolName% changeLast
CADUSD-FX
Canadian Dollar/U.S. Dollar
+0.02%0.73868

Interact with The Globe