Jumat, 03 Maret 2023

Nordstrom closing all of its Canadian stores, cutting 2,500 jobs - Financial Post

'We do not see a realistic path to profitability for the Canadian business," says CEO

The Canadian Press

Tara Deschamps

Published Mar 02, 2023  •  Last updated 4 hours ago  •  2 minute read

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Shoppers take the escalators at a Nordstrom store in downtown Toronto. Nordstrom Inc. says it is winding down its Canadian operations and closing all of its stores in Canada.
Shoppers take the escalators at a Nordstrom store in downtown Toronto. Nordstrom Inc. says it is winding down its Canadian operations and closing all of its stores in Canada. Photo by Christopher Katsarov /THE CANADIAN PRESS

TORONTO — Nordstrom Inc. is closing all of its Canadian stores and cutting 2,500 jobs as it winds down operations in the country.

The Seattle-based retailer has six Nordstrom and seven Nordstrom Rack stores in Canada, which it announced Thursday will be shuttered by late June. Its e-commerce business, nordstrom.ca, was due to cease operations by the end of the day.

Chief executive Erik Nordstrom said the closures were the result of regular reviews the company conducts that challenged its longtime plans “to build and sustain a long-term business” in Canada.

“Despite our best efforts, we do not see a realistic path to profitability for the Canadian business,” he said in a statement.

“This decision will simplify our structure, intensify focus on our growth and profitability goals and position us to create greater value for our shareholders.”

Nordstrom, an upscale department store chain that sold a mix of designer goods, first announced plans to expand to Canada in 2012 and opened its first store in Calgary at CF Chinook Centre in September 2014.

It quickly expanded its presence with stores at CF Rideau Centre in Ottawa, CF Pacific Centre in Vancouver and CF Eaton Centre, Yorkdale Shopping Centre and CF Sherway Gardens in Toronto.

Nordstrom Rack, which promised luxury brands at bargain prices, followed with several locations. When it opened its first Rack store in Canada in 2018 at Vaughan Mills, a mall north of Toronto, it said as many as 15 more could follow.

The company said its Rack stores would deliver savings of up to 70 per cent on apparel, accessories, home, beauty and travel items from 38 of the top 50 brands already sold in its Canadian department stores.

The Canadian closures were “probably the right choice” and show the company has a lack of confidence in how it could continue to support Canadian losses, said Neil Saunders, the managing director of GlobalData, a retail research agency.

“Although the division is relatively small, and the Canadian market has somewhat limited potential because of its size, it is nevertheless a significant admission of failure that Nordstrom cannot make its proposition work financially,” he wrote in a note to investors.

“It also underlines the rather tenuous position of the company which wants to focus is finances and firepower on reinvigorating the U.S. operation.”

Nordstrom’s wind down is being completed through an order obtained by the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act.

It intends to seek court approval later this month for a liquidation sale, which would begin shortly after.

Nordstrom Canada gift cards will continue to be honoured to the end of the liquidation period, though none would be made available for purchase after Thursday.

Returns and exchanges will be permitted until March 17 at which point all sales and returns will be considered final.

The Canadian wind-down came as Nordstrom released its fourth quarter results, which included net earnings of US$119 million in the period ended Jan. 28. That compared with net earnings of US$200 million during the same period the year before.

As a result of the Canadian closures, Nordstrom expected to record US$300 to US$350 million in pre-tax charges in the first quarter of fiscal 2023.

The wind-down is expected to result in a roughly US$400 million decline in net sales.

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2023-03-03 11:19:55Z
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Kamis, 02 Maret 2023

TD Bank reports $1.58B Q1 profit, down 58% from year ago - BNN Bloomberg

Toronto-Dominion Bank’s focus on retail banking in Canada and the U.S. paid off last quarter as rising interest rates made lending to consumers more profitable. Still, concerns about its loan-loss provisions and delays to a major deal weighed on the stock.

The bank’s U.S. business saw its net interest margin — the difference between what it earns on loans and what it pays for deposits — expand to 3.29 per cent in the quarter ended Jan. 31 from 3.13 per cent in the previous three months. Its Canadian retail operation got a similar boost, helping overall profit top analysts’ estimates.

Toronto-Dominion’s large retail-banking businesses on both sides of the U.S.-Canadian border are benefiting from rising interest rates that let it charge more for loans, as well as a sizable base of deposits that’s holding its funding costs down. Total net interest income rose to $7.73 billion (US$5.68 billion) in the fiscal first quarter, up 23 per cent from a year earlier. However, the bank set aside more capital to absorb loan losses than analysts expected, which held back profit.

The bank reported “a somewhat mixed quarter,” Mike Rizvanovic, an analyst at Keefe, Bruyette & Woods, said in a note to clients. “Margins were strong, outperforming peers, and expenses were contained, while on a negative note, the bank saw a larger-than-expected provisions for credit losses jump.”

Toronto-Dominion set aside $690 million in provisions for credit losses, more than the $597.4 million analysts projected.

Toronto-Dominion shares fell 1.4 per cent to $89.44 at 9:34 a.m. in Toronto. They’ve gained 2.1 per cent this year, compared with a 5.2 per cent increase for the S&P/TSX Commercial Banks Index.

Net income fell 58 per cent to $1.58 billion, or 82 cents a share, the Toronto-based bank said Thursday. Excluding some items, profit was $2.23 a share, more than the $2.20 analysts estimated.

The bank is looking to expand its presence in the U.S. with the US$13.4 billion acquisition of First Horizon Corp., which would fill in its footprint in the U.S. Southeast. First Horizon was told by Toronto-Dominion that it doesn’t expect to receive the necessary regulatory approvals by May 27 — as projected in early February — and that it can’t provide a new expected closing date, according to a regulatory filing Wednesday.

Toronto-Dominion’s US$1.3 billion acquisition of Cowen Inc., meanwhile, received all its necessary regulatory approvals. The takeover, which is poised to bolster Toronto-Dominion’s capital-markets franchise in the U.S., was completed Wednesday.

In a negative turn of events, the bank said earlier this week that it agreed to pay more than US$1.2 billion to settle a lawsuit by investors claiming it aided R. Allen Stanford’s US$7 billion Ponzi scheme more than a decade ago. The bank denies wrongdoing in the matter.

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2023-03-02 17:25:32Z
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TD tops analysts' forecasts as improved margins offset higher provisions for bad loans - The Globe and Mail

Toronto-Dominion Bank (TD) logos are seen outside of a branch in Ottawa, Ontario, May 26, 2016.Chris Wattie/Reuters

Toronto-Dominion Bank received a boost from rising interest rates as lending margins swelled in its Canadian and U.S. retail divisions, offsetting climbing loan loss reserves amid economic uncertainty.

Canada’s second largest lender posted a bump in revenue that helped first quarter earnings beat analyst expectations as higher borrowing costs bolstered its net interest margins – the difference between what the bank pays on deposits and earns on loans. The results came a day after TD’s plan to acquire Tennessee-based First Horizon Corp. was upended as regulatory approvals further delay the deal’s closing date.

TD earned $1.58-billion, or 82 cents per share, in the three months that ended Jan. 31. That compared with $3.73-billion, or $2.02 per share, in the same quarter last year. Excluding certain items, including a settlement charge in a lawsuit, the bank said it earned $2.23 per share. That beat the $2.19 per share analysts expected, according to Refinitiv.

Toronto-Dominion Bank is the last of the Big Six banks to report first quarter earnings as profits in the sector slumped on larger loan loss reserves and narrowing lending margins. Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Montreal and National Bank of Canada posted dips in profit that still beat analyst estimates, while Bank of Nova Scotia missed expectations.

TD’s revenue rose 8 per cent in the quarter to $12.2-billion. Profit from Canadian personal and commercial banking was $1.73-billion, an increase of 7 per cent from a year earlier, while earnings in its U.S. arm jumped 25 per cent to $1.59-billion.

Banks can charge more interest on lending products as interest rates rise. With TD’s large base of cheap deposits, its wide spreads in its Canadian and U.S. retail divisions propped up the lender’s total net interest margin, excluding one-time items, by 2 basis points. (One hundred basis points equal one percentage point.)

But higher interest also weighs on demand for loans, and mortgage growth is slowing as central banks have hiked rates to temper inflation. Meanwhile, bank leaders have also signaled that they are bracing for a potential slowdown as the threat of a recession looms. TD’s margin expansion bucked the trend as net interest margins at its peers slumped 2 basis points, according to CIBC analyst Paul Holden.

Economic uncertainty is also prompting banks to ramp up the money that they set aside for loans that could turn sour. In the quarter, TD set aside $690-million in provisions for credit losses — the funds banks reserve to cover loans that may default. That was higher than analysts anticipated, and included $137-million against loans that are still being repaid. In the same quarter last year, TD reserved $72-million in provisions.

“On a positive note, margins were strong, outperforming peers, and expenses were contained, while on a negative note, the bank saw a larger-than-expected PCL jump,” Keefe, Bruyette & Woods analyst Mike Rizvanovic said in a note to clients.

TD’s earnings for the quarter were affected by three large, unusual items. It took a previously announced legal provision of $1.6-billion to settle a lawsuit from investors accusing it of contributing to one of the world’s largest Ponzi schemes by former Texas billionaire Allen Stanford. The bank denies any allegations of liability.

It also recorded a $876-million loss on an interest rate hedging strategy on its US$13.4-billion acquisition of First Horizon Corp. In the previous quarter, the bank took a $2.3-billion gain on the same hedge.

In an annual filing Wednesday, Tennessee-based First Horizon disclosed that TD recently told its management team that the Canadian bank does not expect to receive the required regulatory approvals in time to complete the deal before May 27, which is when their merger agreement is set to expire.

TD also missed a Nov. 27 deadline. Since the deal did not close by that date, TD has to pay First Horizon a premium equal to 5.4 cents a share each month until the closing, and he lender posted a $127-million charge in the quarter.

Meanwhile, its US$1.3-billion acquisition of New York-based investment bank Cowen Inc. Closed Wednesday after receiving regulatory approvals.

“TD is fully committed to the transaction and we are in discussions with First Horizon about a potential further extension beyond May 27th,” Mr. Masrani said in a statement. “This is a great transaction that offers scale and new capabilities for the U.S. bank.”

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2023-03-02 12:47:17Z
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Rabu, 01 Maret 2023

Travelling soon? Get ready to pay higher cellphone roaming rates - CBC News

Two of Canada's biggest telecom providers are raising the fees they charge customers when they use their devices outside of Canada.

Starting March 8, Telus will charge customers $14 a day when they roam on their devices in the United States, and $16 a day when they do so internationally. That's an increase from $12 and $15, respectively. Customers of the Telus-owned discount brand Koodo will see a similar fee hike.

Rival Bell is making a similar move starting the following day, raising its U.S. roaming rate from $12 to $13, and going from $15 to $16 internationally. Those  increases will also be in effect at Bell-owned subsidiaries including Virgin Mobile.

There's no indication that Rogers has similar plans to raise roaming rates, but as it stands, customers at Rogers and its flanker brands including Chatr and Fido pay $12 to roam in the U.S. and $15 internationally.

CBC News reached out for comment to all three companies for this story, asking for an explanation for the move.

A spokesperson for Telus said the company needed more time to respond.

Bell cited Statistics Canada data showing that overall wireless prices have declined in the past year, despite "price increases from our suppliers" and "increasing costs to our business," without elaborating.

Rogers outlined the company's roaming rates, but declined comment as to whether they had increased recently or were about to.

High prices

Canadians pay some of the highest telecom bills in the world, according to numerous international reports. Multiple federal governments have pressured providers to bring prices down, especially for basic plans with limited data, and while official data shows wireless prices have come down by some metrics, that's not the case for high-end packages.

A recent report by CBC's consumer affairs program Marketplace found that, on average, Canadians pay seven times more for a gigabyte of data than people in Australia, 25 times more than people in Ireland and France, and 1,000 times more than people in Finland.

A woman in the background and a man in the foreground are shown using their cellphones while walking outside.
Commuters use their mobile phones near St. Pancras International railway station in London in February 2019. Europeans are protected from high roaming rates, but that's not the case for Canadians. (Simon Dawson/Bloomberg)

Wall Communications Inc. publishes an annual report on Canadian telecom services and, while this year's version has not yet been released, on the whole company founder Gerry Wall says the public perception that wireless prices keep going up is unfair, as providers have created many more low-cost plans targeting basic users.

"At the very, very low level — I think you can say it's relatively affordable in Canada," he said. "It's when you get up into sort of the mid-level and the higher-level plans that Canada doesn't look as good."

A service such as roaming is one of those high-level perks, and prices are going up because consumers have shown that they want that service, Wall says.

"When I look at [those companies'] annual reports ... they do point to the fact that that people are traveling a lot more," he said.

"If you look back three or four years, all the Big Three were charging considerably lower per-day roaming fees for Canada and U.S. ... I expect it goes up every year and it will continue as traveling continues."

WATCH | How Canadian wireless prices stack up:

Wireless mobile plan costs around the world

2 months ago

Duration 4:16

Cellphone users in Ireland, France and Australia react to cost-per-gigabyte price differences in Canada.

Last summer, the European Union passed a law which will ensure that cellphone customers in the EU are entitled to the same quality and price for wireless service when they travel in Europe as they get from their domestic carriers.

But Canadian wireless users have no such legal protection.

Canada's telecom providers spend billions of dollars every year to grow, maintain and improve their networks, expenditures that have made the country's wireless networks, on the whole, more robust than those in other countries. Cellular users bear the brunt of those costs and improvements in higher bills, but none of those costly infrastructure expenses — on things like cellphone towers and new spectrum — are a factor for roaming internationally, when calls piggyback on existing networks for a small fee. 

Keldon Bester, an analyst on competition policy and co-founder of the Canadian Anti-Monopoly Project, says it's hard to know if the carriers are facing some sort of cost increase that would justify the rise in roaming rates, since the deals that they sign with their international partners are a closely guarded secret.

"[They can say] 'Our partners are are demanding this of us and and we're trying our best but we can't really do anything,'" said Bester, "but because we don't have access to these roaming agreements we really can't test the validity of that."

He says it's not hard to imagine that the major telecom providers may see roaming costs as a way to boost revenue without as much of the scrutiny they face for their domestic plans.

"It's a situation where consumers have even fewer options than they might domestically," he said. "It's like buying food at a sports arena — they've got you ... your options are really limited, so there's an opportunity to squeeze more out of the consumer."

Janine Rogan has felt that squeeze first hand.

On a recent trip to Mexico, she was hit by a roaming charge of more than $100 from her telecom provider, Telus. "From a consumer perspective kind of feels like price gouging," she said. "They're just trying to make every possible dollar they can off of us."

She has plans to travel to Europe this summer, and given her recent experience, she says there's no way she will use her phone normally while she's there, and will instead get a short-term phone plan from a local provider for a fraction of the cost.

"It's always amazed me how cheap it is to get a SIM card over there and just pop it in while you're traveling," she says. "To see that they're not allowing roaming charges while Canada's increasing them just makes the average person's phone bill go up [by] an exorbitant amount that really isn't necessary."

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2023-03-01 09:00:00Z
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Before the Bell: Wall Street futures give up early gains; Canadian investors weigh bank results - The Globe and Mail

Equities

Wall Street futures reversed early gains Wednesday in the wake of a losing month. European markets were modestly positive. TSX futures gained with more big banks reporting this morning.

Futures linked to the Dow, S&P and Nasdaq were had been up slightly in the early premarket period but lost altitude as the North American open approached. All three finished in the red on Tuesday, capping a down month which saw the Dow slide more than 4 per cent while the S&P 500 fell more than 2 per cent. The Nasdaq lost about 1.1 per cent last month. The S&P/TSX Composite Index also saw losses yesterday and ended the month down 2.6 per cent.

“Overall, the narrative has turned weaker, but it’s unsurprising: inflation has proved stickier, and it takes time for higher rates and yields to be passed on to average funding costs,” Stephen Innes, managing partner with SPI Asset Management, said.

Interest rates remain a big concern for markets. Traders have started to price in the chances of a 50 basis-point rate hike in March from the Federal Reserve, although the odds remain low at about 23 per cent, according to Fed fund futures, which suggest rates peaking at 5.4 per cent by September. The Bank of Canada, meanwhile, makes its next policy decision on March 8. After hiking rates eight consecutive times, the central bank is expected to hold steady after signalling a conditional pause on its tightening campaign.

On Wednesday, Canada’s big banks continue to report results with earnings due from Royal Bank and National Bank. TD Bank ends the cycle with its results on Thursday morning. On Tuesday, Scotiabank fell short of market expectations while BMO topped forecasts.

Royal Bank, Canada’s biggest lender, reported overall net income of $3.2-billion, or $2.29 a share, for the quarter ended Jan. 31, compared with $4.1-billion, or $2.84 a share, a year ago. RBC reported adjusted earnings of $3.05 per share, up from $2.87 a year earlier and ahead of the $2.94 analysts had been forecasting. Provisions for bad loans came in at $532-million for the quarter, up from $105-million a year ago.

National Bank, meanwhile, said profit for the three months ended Jan. 31 was $881-million or $2.49 per share, compared with $930-million or $2.64 per share a year earlier.

On Wall Street, retailer Lowe’s reported this morning. Salesforce reports after the close of trading.

Elsewhere, Norway’s Equinor is close to reaching a deal to buy Suncor Energy’s British North Sea oil and gas assets for around $1-billion, three sources familiar with the matter told Reuters on Wednesday. The deal includes Suncor’s 40-per-cent stake in the Equinor-operated offshore Rosebank oil and gas project, located some 130 kilometres northwest of Shetland Islands, and one of the largest developments in the ageing basin, Reuters reported Wednesday morning.

Overseas, the pan-European STOXX 600 was up 0.20 per cent by midday. Britain’s FTSE 100 rose 0.90 per cent. Germany’s DAX and France’s CAC 40 advanced 0.60 per cent and 0.63 per cent, respectively.

In Asia, Japan’s Nikkei finished up 0.26 per cent. Hong Kong’s Hang Seng added 4.21 per cent with the tech index up more than 6 per cent.

Commodities

Crude prices struggled to hold early gains despite a positive reading on China’s factory activity, which boosted optimism about demand from one of the world’s biggest consumers of oil.

The day range on Brent was US$82l90 to US$84.20 in the predawn period. The range on West Texas Intermediate was US$76.40 to US$77.47.

Early Wednesday, new figures showed China’s manufacturing activity grew at its fastest pace in more than a decade last month, Reuters reported.

“All we need to see now are signs of cooling price pressures and perhaps less heat in the labour market in order for crude to potentially break higher,” OANDA senior analyst Craig Erlam said.

“Higher interest rates forcing a hard landing remains the main downside risk for crude prices which has driven the consolidation we’ve seen in recent months, and recent data has only fed those fears.”

Sentiment was tempered somewhat by a rise in weekly crude inventories in the United States. The American Petroleum Institute reported that U.S. crude stocks rose by 6.2 million barrels last week.

More official numbers are due later this morning from the U.S. Energy Information Administration.

In other commodities, spot gold rose 0.2 per cent to US$1,830.30 per ounce by early Wednesday morning, after hitting a two-month low in the previous session. U.S. gold futures rose 0.3 per cent to US$1,842.00.

“Gold is quietly heading for a third day of gains, boosted by a softer dollar today as other currencies react favourably to the Chinese survey data,” Mr. Erlam said.

Currencies

The Canadian dollar was up in early trading while its U.S. counterpart pulled back against a basket of currencies after adding about 3 per cent last month.

The day range on the loonie was 73.20 US cents to 73.58 US cents in the early premarket period. The Canadian dollar fell more than 2 per cent last month against the U.S. dollar and is down 0.36 per cent for the year to date.

There were no major Canadian economic reports due Wednesday.

On world markets, the U.S. dollar index, which weighs the greenback against a selection of currencies was down 0.6 per cent at 104.36 by early Wednesday morning, according to figures from Reuters.

The index ended a four-month losing streak in February, adding nearly 3 per cent as markets bet the Fed will keep rates higher for longer.

The euro was last up 0.7 per cent against the U.S. dollar at US$1.0650.

Britain’s pound rose 0.5 per cent to US$1.2081, having surged 1 per cent at the start of the week after Britain struck a post-Brexit Northern Ireland trade deal with the European Union, Reuters reported.

In bonds, the yield on the U.S. 10-year note was up at 3.945 per cent in the predawn period.

More company news

Lowe’s Cos Inc forecast full-year sales below market expectations on Wednesday, hit by weak demand for home improvement products as inflation forces consumers to pause spending on projects around their homes. The company said it expected full-year total sales of $88-billion to $90-billion, while analysts on average estimated annual revenue of $90.48-billion, according to Refinitiv data. -Reuters

The Panamanian government and Canada’s First Quantum are nearing an agreement on their negotiations over the contract to operate a major copper mine, Ebrahim Asvat, a lawyer advising the government on the negotiations told Reuters on Tuesday. An agreement could be reached in less than two weeks, Asvat said, noting there are only three issues left to be solved, with two of them being in the final stage of negotiations. -Reuters

The Frankfurt-listed shares of COVID-19 vaccine maker Novavax fell 26% on Wednesday, after the company raised doubts the day before about its ability to remain in business. U.S.-listed shares in Novavax fell 25% in after-hours trading on Tuesday.

Pipeline operator Enbridge Inc said on Wednesday it would buy a gas storage facility in Tres Palacios in the U.S. Gulf of Mexico coast region for $335-million to strengthen its liquefied natural gas (LNG) export business. The deal looks to tap into high demand for North American LNG exports after Western sanctions on major producer Russia following its invasion of Ukraine squeezed a tight global supply.

Eli Lilly and Co said it would reduce prices by 70% for its most commonly prescribed forms of insulin. The U.S. drug maker said the reduced prices for its branded insulin injections, Humalog and Humulin, will be effective from the fourth quarter of this year.

Economic news

(10 a.m. ET) U.S. ISM Manufacturing PMI for February.

(10 a.m. ET) U.S. construction spending for January.

With Reuters and The Canadian Press

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2023-03-01 10:34:07Z
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China's factory activity grows further, marks its highest reading in nearly 11 years - CNBC

A worker processes high-end yarn at a new materials workshop in Zaozhuang, East China's Shandong Province, Feb. 27, 2023.
Future Publishing | Future Publishing | Getty Images

China's factory activity for February bounced further into expansion territory, according to data from the National Bureau of Statistics.

The official manufacturing purchasing managers' index rose to 52.6 in February – above the 50-point mark that separates growth from contraction. That marks the highest reading since April 2012, when it hit 53.5.

February's PMI reading is also higher than the 50.1 reported for January and above expectations of 50.5, according to economists surveyed by Reuters.

Non-manufacturing PMI also grew further to 56.3 from January's print of 54.4, when it saw a sharp improvement backed by a recovery in services and construction activity.

The government said February's reading showed continued improvement in the climate for production and business, noting that the total volume of activity "significantly increased" as well.

"The broad-based obvious improvements for both Manufacturing and non-Manufacturing PMIs in February reflect the solid momentum of post-reopening recovery," economists at Citi said in a note.

Citi economists added that while expectations for stimulus policies are low, the People's Bank of China would be be "mindful of inflation risks and may tilt to a natural policy once the economy is back on track."

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The Chinese offshore yuan strengthened 0.56% to 6.9148 against the greenback.

China Beige Book's chief economist Derek Scissors told CNBC's "Squawk Box Asia" he expects to see an improvement in consumption later this year – buoyed by any announcements from the upcoming National People's Congress meetings.

"I think April's really the time that consumers will take cues from the March National People's Congress meetings and the announcements made there," said Scissors.

He added, "In April, we should see where the course of Chinese consumption is going. It will be better than last year, but it won't be much better and the people relying on that may be disappointed."

China's National People's Congress kicks off on Sunday.

Moody's raises forecast

Shortly after China's factory activity data was released, Moody's announced that it expects China's economy to grow by 5% for 2023, an upgrade from its previous outlook of 4% growth.

"We expect pent-up demand for non-traded services to support a consumption rebound starting this spring," it said, adding that its growth forecast for 2024 has also been upgraded from 4% to 5%.

"The Chinese government's decision to fully relax COVID-19 restrictions will naturally boost the country's economic activity from 3.0% growth in 2022," Moody's said, while noting growth will likely decline over the medium term.

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2023-03-01 01:44:00Z
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Selasa, 28 Februari 2023

Canadian economy didn't grow at all in fourth quarter - CTV News

OTTAWA -

The Canadian economy was treading water at the end of 2022, the latest GDP report shows, but beneath the disappointing data is resilient consumer spending keeping the economy afloat.

On Tuesday, Statistics Canada said real gross domestic product was unchanged in the fourth quarter of 2022 after five consecutive quarters of growth.

The report, which said the economy contracted by 0.1 per cent in December, showed a much grimmer economy than forecasters were expecting as higher interest rates took a more noticeable toll on the economy.

Statistics Canada's preliminary estimate had predicted 1.6 per cent annualized growth for the quarter.

But Statistics Canada expects the economy bounced back in January, posting 0.3 per cent growth in real GDP.

The fourth quarter also included some silver linings for Canadians. After declining by 0.1 per cent in the third quarter, household spending bounced back by 0.5 per cent in the fourth quarter.

TD's director of economics James Orlando said the consumer, which is "the real engine of the Canadian economy," is still faring relatively well.

"Overall, the headline print looks really bad. But when you pull back the lens ... Some of the underlying fundamentals are still coming in quite good for the Canadian economy," Orlando said.

The fourth quarter slowdown was largely driven by businesses accumulating less inventory than in the previous two quarters.

Orlando said inventories reached record levels earlier in the year as a result of easing supply chains. But that accumulation wasn't expected to last.

In addition to lower inventories, real business investment declined for a third consecutive quarter as higher interest rates weakened housing investment in 2022.

Although growth stalled for the quarter, Canadians saw their disposable incomes rise faster than their nominal spending, allowing them to save more money.

The federal agency said the household savings rate was six per cent in the fourth quarter, up from five per cent the previous quarter.

The report partly attributes this improvement in household finances to government benefits, including the one-time top-up to the GST tax credit and a 10 per cent increase in Old Age Security payments for seniors aged 75 years and over.

The Liberal government introduced these measures targeted at lower-income Canadians to help them cope with higher inflation.

"All of this together means more money in the pockets of Canadians and ... that Canadians are going to spend more," Orlando said.

Looking ahead, Orlando said recent economic data has been coming in "much better than expected."

The latest labour force survey showed the economy added 150,000 jobs last month, suggesting there's still steam on the hiring front. Retail sales were also up in January.

These figures support forecasts for a rebound for economic growth in January.

But most economists expect the Canadian economy won't be able to avoid a recession in the first half of the year as higher interest rates dampen spending.

Since March, the Bank of Canada has raised its key interest rates from near-zero to 4.5 per cent, the highest it's been since 2007.

The central bank announced in January it would take a conditional pause on hiking rates to assess how the economy is responding to higher interest rates.

If the economy continued to run hot or inflation proved sticky, the Bank of Canada made it clear it would be ready to jump back in and raise rates further.

But Orlando said it's likely content with its decision to sit on the sidelines, given the softer GDP report.

The Bank of Canada is set to make its next interest rate decision on March 8.

The central bank contends a slowdown is necessary to bring inflation back down to its two per cent target.

After peaking at 8.1 per cent in the summer, Canada's annual inflation rate slowed to 5.9 per cent in January.

The Bank of Canada is forecasting inflation will slow to three per cent by mid-2023 and fall back to the two per cent target next year.

It's hoping inflation can come back down to target without a sharp economic downturn. At the same time, the central bank has stressed that returning to normal price growth is its primary focus, one that could come at the expense of a more severe economic contraction.

This report by The Canadian Press was first published Feb. 28, 2023.

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2023-02-28 18:21:51Z
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