These are stories Report on Business is following Thursday, March 12, 2015.
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Shifting sands
A new forecast today highlights the fast-changing shift in the economic fortunes of Canada's provinces: Ontario is poised for a milestone, while Alberta is headed for markedly slower times.
Ontario, Canada's manufacturing heartland, is projected to lead the provinces this year is economic growth, Royal Bank of Canada said, while Alberta, the heart of the oil patch, will see tougher times.
Ontario hasn't led the country in 15 years, RBC said, forecasting economic growth of 3.3 per cent this year and 2.7 per cent in 2016.
What's partly ailing Alberta is, of course, a boon to the central Canadian province.
"The plunge in oil prices, sliding value of the Canadian dollar, surprise interest rate cut by the Bank of Canada and mounting evidence of the U.S. economy hitting its stride – these factors should all boost growth in Ontario," said chief economist Craig Wright.
Manufacturers should benefit from the slump in the oil-induced slump in the currency.
RBC forecasts that Alberta, in turn, will see its economy expand at an "anaemic pace" of just 0.6 per cent this year, perking up just somewhat to 1.1 per cent next year.
"Widespread deterioration in Alberta's consumer confidence is most evident in the potential boom-bust scenario currently being played out in the province's housing market," the bank said.
"A cumulative 35-per-cent plunge in existing home sales in December 2014 and January 2015 accompanied the inventory of homes on the market surging to the highest level since 2008."
The study highlighted the warnings of Alberta Premier Jim Prentice, who, as the bank put it, has "cautioned that a period of fiscal restraint is imminent and revenue boosting initiatives, including tax hikes, are likely to accompany significant program spending cuts as the province deals with an estimated $7-billion budget shortfall in the 2015/2016 fiscal year."
The RBC study may be different in its numbers – indeed, other forecasts have warned of a possible recession in Alberta – but the theme is the same.
A recent World Bank paper, for example, warned of the hit from the collapse in oil.
"If oil prices are sustained around $50-$70 per barrel – well below the breakeven cost for many projects – investment in the oil and gas sector could swiftly drop by some 30 per cent, thus lowering overall business investment by some 10 per cent," it said.
"Although consumers would benefit from lower pump prices, the terms of trade deterioration would trickle through to lower incomes, which would worsen household balance sheets and may slow the housing the housing market."
Like Ontario, Quebec will also bask in the glow of sinking oil prices and the weaker currency, with growth of 2 per cent this year.
"Quebec's economy is even more ready than we previously thought for achieving a four-year high growth rate in 2015," said Mr. Wright. "Still, there will continue to be factors holding back the pace of growth – 2 per cent is far from a boom."
British Columbia, too, is headed for a stronger period, with its fastest economic expansion since 2010, according to the report.
The westernmost province should see growth of 3.1 per cent this year, and 2.8 per cent next, buoyed by stronger exports, notably in the forestry second given stronger housing demand in the United States.
There's a good outlook for real estate, too.
"Significantly fewer people relocated to Alberta from British Columbia in the second half of 2014, turning net migration with Alberta positive in Q3 2014 for the first time since early 2011," the bank said.
"With population growth expected to accelerate in 2015, RBC anticipates the resulting boost to underlying demand will support ongoing housing market activity, as existing home sales are set to reach their highest level since 2007 in 2015."
Saskatchewan's economy is also forecast to see continued growth, despite the oil collapse, at 2.1 per cent in each of the next two years. That's lower than earlier projected, however.
Newfoundland and Labrador, another oil-sensitive province, will also expand, but at just 0.8 per cent and 0.2 per cent.
Over all, the eastern provinces will see "modest economic growth this year."
For Canada as a whole, RBC has cut its growth forecast, to just 2.4 per cent this year, because of the oil crash.
But that crash will be offset by exports and stronger consumer spending, given the plunge in gas prices.
"Lower gasoline prices puts more money in the pockets of consumers – we estimate that the drop in oil and corresponding fall in gas prices will pump up consumer purchasing power by $11-billion in 2015," Mr. Wright said.
- Bill Curry: Economists say stable oil price means no need for federal budget delay
- David Parkinson: The loonie may be down but it's from out
- Loonie dives as U.S. dollar's 'violent' strength roils currency markets
Company apologizes
An Indonesian company says it's going to replace unbelievable washing-instruction labels that suggest men give their jerseys to "your woman" because it's her job.
Salvo Sports, which Reuters reports designed the jersey for soccer club Pusamania Borneo, has apologized "profusely" on Twitter, saying it didn't mean to "denigrate" women.
It's just that men aren't always competent in caring for their own clothes, and women are more expert in that kind of thing.
(That's my rough translation from the original tweets.)
Under "washing instructions," the original label said: "Give this jersey to your woman. It's her job."
(For photos, click here.)
Reuters translated the apologetic response like this:
"There's no intention to humiliate women. In contrast, (we want to tell the men) learn from women on how to take care of clothes because they pay attention to details. Not all men understand/know how to take care of their own clothes, women are more knowledgeable/experts on such matters."
Needless to say, there was a backlash against Salvo on Twitter.
Said Lucinda Philumalee: "Hey, @SALVO_ID – How about you go back to the kitchen and make me a sandwich and bring back a full apology while you are at it."
Brandy Sunset: "Do women wash clothes? I need to read up on that. Ha."
And Toronto's Alan Langford: "Hey, @SALVO_ID management: you should leave running the business to 'your' woman. Looks like she'll do a better job."
There were others, like Ineke Hoho: "I'm anything but the typical housewife but I love this one. Let's keep some humour in the world."
We're richer but ...
This tells the story: Canadians are growing richer at a slower pace and their debts are getting even further out of hand.
The key measure of household debt to disposable income hit a record 163.3 per cent in the fourth quarter of last year, The Globe and Mail's David Parkinson reports.
"For the third consecutive quarter, disposable income increased at a slower rate than household credit market debt," Statistics Canada said today.
Not only that, but the debt service ratio inched up to 6.8 per cent, though it's still near its record low.
What the first number shows, Statistics Canada said, is that Canadian consumers are carrying $1.63 for each dollar of disposable income.
Household net worth, meanwhile, rose in the final three months of last year by 0.9 per cent, which the statistics agency said marked the slowest pace in 1 ½ years.
Expressed in per-capita terms, that's $233,000. Are you feeling it?
Total household credit market debt now stands at more than $1.8-trillion.
CRTC to relax rules
Canada's broadcast regulator is re-writing the rules that protect Canadian television programs, hoping it can nurture better, more popular shows by relaxing quotas that ensure blocks of the broadcast day are made in Canada, The Globe and Mail's James Bradshaw reports.
To encourage producers and broadcasters to focus their spending on quality, the Canadian Radio-television and Telecommunications Commission is substantially reducing the number of hours each day that must be filled with Canadian content. But it will keep half of the prime time evening schedule earmarked for Canadian programs on local networks.
Broadcasters will still have to spend a certain portion of their revenues on producing Canadian TV content, but will be able to concentrate those dollars on a smaller number of shows if they choose to. The regulator is also scrapping a rule that protected many niche channels from direct competition in a bid to open up competition between channels.
Not only that but ...
The CRTC is also proposing new rules that would offer the owners of CraveTV and Shomi the prospect of looser regulation if they make their services available to all Canadians directly online with no television or Internet subscription required, The Globe and Mail's Christine Dobby reports.
The proposed rules would allow the owners of such video services to offer exclusive content, avoid a requirement to contribute to Canadian programming and deliver their offerings over television set-top boxes as long as they also make the services available over the Internet.
But the services also have the option of remaining under the existing rules for video-on-demand services – which are delivered through set-top boxes – as long as they follow all of the regulations and do not keep content exclusive.
Alternatively, they could offer their service entirely over the Internet and be subject to the digital media exemption order, which exempts providers from the regulatory trappings that come with licensing.
Penn West strikes deals
Penn West Petroleum Ltd. turned in a bleak performance and slashed its dividend today as part of a tentative deal with creditors.
Among other measures, the company cut its quarterly payout by 2 cents to a penny.
Penn West chief executive officer David Roberts cited agreements in principle with lenders and debtholders "to amend some of our covenants," adding that the dividend cut is temporary.
That's the second cut, the first being a reduction from 14 cents.
"We believe that these amendments are prudent and responsible measures designed to ensure Penn West's long-term financial sustainability," Mr. Roberts said in a statement.
For the fourth quarter, Penn West posted a loss of $1.8-billion, or $3.57 a share, far wider than the loss of $675-million or $1.38 a year earlier.
Intel cuts projection
Intel Corp. has slashed its revenue forecast, a weak signal for the PC industry.
The chip maker said today it now projects first-quarter revenue of $12.8-billion (U.S.), give or take $300-million. That's well down from its prior projection of $13.7-billion, give or take $500-million.
"The change in revenue outlook is a result of weaker-than-expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain," Intel said.
"The company believes the changes to demand and inventory patterns are caused by lower-than-expected Windows XP refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe."
House prices up
Canadian house prices may be up for the second month in a row, but a key report warns that "there have clearly been corrections" in some markets.
The Teranet-National Bank house price index rose in February by 0.1 per cent from January, but prices were actually up in just three of the 11 markets tracked in the report released Thursday.
Prices rose 1.5 per cent in Vancouver, 0.5 per cent in Victoria and 0.3 per cent in Hamilton. And that's where it ends.
The index showed losses of 0.1 per cent in Toronto and Quebec City, 0.3 per cent in Calgary and Montreal, 0.6 per cent in Halifax, 0.8 per cent in Edmonton, 1 per cent in Winnipeg and 2.1 per cent in the Ottawa regions.
"In some markets there have clearly been corrections in progress," said senior economist Marc Pinsonneault of National Bank.
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