Skip to main content
business briefing

These are stories Report on Business is following Wednesday, Dec. 10, 2014.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Vacation, all I ever wanted
A beach vacation looks pretty good right about now, as the cold sets in.

Just remember that the loonie is worth only about 87 cents in Miami today, compared to, say, what it'll buy in Cancun or Rio de Janeiro.

Or, better still, perhaps consider Whistler, B.C., where a dollar's worth a dollar.

"With that sunny Florida vacation getting pricier by the day, Canadians might want to shift their sights to other destinations this winter, like Brazil or Mexico, where the loonie has appreciated 11 per cent and 3 per cent, respectively, since the spring (versus a 4-per-cent drop against the greenback," BMO senior economist Sal Guatieri said of the various currencies, based on Monday's rates.

"Then again, with the cost of driving 22-per-cent cheaper, a 'staycation' is also an option (albeit a chillier one)."

Especially given that the Canadian dollar is expected to erode further.

The loonie is worth about 12.5 Mexican pesos and, to Brazil's real, 2.3.

Of course, you can drive to Florida and enjoy the lower cost of filling up.

By the time you drive to Mexico, vacation's over.

Of course, airline fuel charges should drop any day now.

At least, that's what the International Air Transport Association said, oh, about six weeks ago.

Today, in Geneva, IATA said we can expect the world's airlines to make even heftier profits in 2014 and 2015 as oil prices drop and the global economy grows, almost $20-billion (U.S.) this year and $25-billion next.

"Consumers will benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through," the airline group said.

Right. Still waiting.

Here's another way of looking at it: Per passenger, the net profit among airlines next year is projected to rise to $7.08, compared to this year's $6.02 and 2013's $3.38.

(To be fair, IATA said it's a highly competitive industry, and that next year's $25-billion amounts to a margin of 3.2 per cent. And that these things take time.)

Société Générale, by the way, believes that the Canadian and U.S. dollars will be next year's strong performers, though the former will still slip against the latter through to next March before inching back up.

It works the other way, too.

The Conference Board of Canada said in a new report this week that it expects a boost to tourism next year, partly because of some big upcoming events, like the Pan Am Games and the FIFA Women's World Cup, but also because of the weaker loonie and the stronger U.S. economy.

"Improved economic conditions in the U.S. and a weaker Canadian dollar will boost overnight visits from American travellers by 3.5 per cent in 2015," the group said in an accompanying statement.

It added, though that "while growth in overnight U.S. visitors is expected to increase over the next three years, they will remain well below the levels seen a decade ago."

Oil down, stocks mixed
Oil prices are sinking again today, though stocks are mixed, and tumbling fast in North America.

Tokyo's Nikkei lost 2.3 per cent, while Hong Kong's Hang Seng gained 0.2 per cent.

And the Shanghai market, which fell sharply yesterday, rebounded today to the tune of 2.9 per cent.

European stocks lost ground, but for those in Germany, having been up earlier.

The S&P 500, Dow Jones industrial average and Toronto's S&P/TSX composite all stumbled.

"The second week of the month is often one of the quieter weeks and much of the sentiment tends to be driven by Asia, where a number of important economic indicators provide an update on how the countries are performing," said market analyst Craig Erlam of Alpari in London.

"The problem we have at the moment is that the data coming from China and Japan paint quite a depressing picture, with both economies facing quite difficult situations and thus far, struggling to show they're up to the task."

The oil rout picked up steam as OPEC cut its projections for crude demand next year.

The Canadian dollar, meanwhile, touched a low point of 87.05 cents U.S. and a high of 87.44 cents.

Inflated prices
The Bank of Canada says the country's housing market is overvalued.

No surprise there. The question is by how much.

As The Globe and Mail's Barrie McKenna reports, the central bank said today its new model indicates prices have been inflated by at least 10 per cent since 2007, and overvaluation could now be in the area of 10 per cent to 30 per cent.

Having said that, the central bank still sees no crash in sight.

"The Canadian housing market has been overvalued by more than 10 per cent since at least 2007, and has exhibited only a modest degree of upward creep since 2009," it said in its review of the financial system.

"This supports the view that a soft landing is the most likely way forward: A stronger Canadian economy will continue to support the housing market, while household imbalances gradually diminish."

About 5 million in low-income group
Almost 5 million Canadians were living in low-income status in 2012, or 13.8 per cent of the population, Statistics Canada said today.

It's the first glimpse of low-income trends for 2012, but the numbers are not comparable with prior years as this is the first release of Statistics Canada's new Canadian income survey, The Globe and Mail's Tavia Grant reports.

The new survey showed median after-tax income of Canadian families of two or more people was $71,700 in 2012. Families of two or more people in Ontario, Saskatchewan, Alberta and British Columbia all saw higher-than-average median after-tax income.

Families in Alberta had the highest median at $92,300. Those in New Brunswick had the lowest at $59,300.

BP sees charge
BP PLC expects restructuring charges of about $1-billion (U.S.) by the end of next year as it cuts jobs and operations.

In a statement today before an investor presentation, the energy giant did not spell out the details, but gave the expected total over the course of five quarters, including the current three-month period.

Reuters quoted sources saying they expect to see hundreds of jobs slashed.

"We have already been working very hard over these past 18 months or so to right-size our organization as a result of completing more than $43-billion of divestments," said chief executive officer Bob Dudley.

"The simplification work have already done is serving us well as we face the tougher external environment," he added.

"We continue to seek opportunities to eliminate duplication and stop unnecessary activity that is not fully aligned with the group's strategy."

Worth noting is that BP said it approves its projects at $80-a-barrel oil, but it also tests them at $60 "to understand the resilience of the portfolio."

Streetwise (for subscribers)

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 4:15pm EDT.

SymbolName% changeLast
BP-N
BP Plc ADR
+0.59%37.68
CADUSD-FX
Canadian Dollar/U.S. Dollar
-0.01%0.73843
CM-N
Canadian Imperial Bank of Commerce
+1.3%50.72
CM-T
Canadian Imperial Bank of Commerce
+1.13%68.67

Interact with The Globe