Businesses downbeat but less worried about worst-case tariff scenario, Bank of Canada surveys find
The quarterly pulse checks, conducted in late April and May, captured the sour mood across Canada as Mr. Trump rolled out waves of tariffs through the spring and early summer.
Canadian companies said they're curtailing investment and hiring, and eating higher tariff-related costs because of weak consumer demand. Consumers said they are worried about their jobs and are delaying big purchases.
Tariffs are likely here to stay. What now, for Canada?
At the same time, the surveys found a sense of relief that U.S. tariffs have not bitten as hard as many feared earlier in the year when Mr. Trump was threatening across-the-board tariffs, without the exemptions that were later introduced.
'Fewer businesses are considering extremely negative scenarios in their planning,' the Bank of Canada said.
This hint of optimism reinforces expectations that the central bank will hold interest rates steady for the third-consecutive time when it meets next week.
After a string of better-than-expected economic data in recent weeks, financial markets are pricing a nearly 90-per-cent chance that the bank will keep its policy rate at 2.75 per cent next Wednesday, according to LSEG Data & Analytics.
What happens to monetary policy going forward depends a lot on how the trade war unfolds – both the outcome of Ottawa's trade negotiations with Washington, and how tariffs end up feeding through Canada's economy and influencing business pricing decisions and consumer behaviour.
Given the rapidly changing trade environment, the two Bank of Canada surveys are already dated. Since May, Mr. Trump has doubled tariffs on steel and aluminum to 50 per cent and threatened to increase tariffs on goods that don't meet free-trade-agreement rules to 35 per cent from 25 per cent. Last week, Prime Minister Mark Carney acknowledged that U.S. tariffs probably aren't going to zero, even if Ottawa can secure some reprieve.
That said, the surveys highlight several dynamics that could inform where interest rates go from here.
So far, U.S. tariffs and Canadian countertariffs haven't had a major impact on Consumer Price Index inflation, which came in at 1.9 per cent in June – below the central bank's 2-per-cent target.
The business survey suggested that companies are having trouble raising prices. Around half of the respondents said they're facing cost pressures related to tariffs and changes to their supply chains. However, 'competitive pressures and the current weakness in demand are limiting firms' ability to pass on these costs to customers,' the Bank of Canada said.
'As a result, many businesses expect their selling prices to increase over the coming year at a similar rate as they did over the past year. Because customers are sensitive to price increases, many firms are absorbing a portion of these increased costs, compressing their profit margins in an effort to preserve market share,' the bank said.
Quebec Premier says any new trade deal with the U.S. needs to have specific time frame
Having spiked dramatically in the first quarter, business and consumer expectations about future inflation remain elevated, although they did level off somewhat in the second quarter.
'Worries about tariff passthrough and inflation expectations were the reasons that the Bank of Canada held rates back in June, but those look less concerning in these surveys,' Royce Mendes, head of macro strategy at Desjardins, wrote in a note to clients.
'While central bankers probably won't ease monetary policy next week, there is ample scope for them to resume their cutting cycle later in the year should the economy continue to stagnate,' he wrote.
Both Bank of Canada surveys had notes of pessimism and optimism. The share of companies planning for a recession declined to 28 per cent from 32 per cent in the first quarter, and the number of companies that expected higher tariff-related costs dropped to one-third from two-thirds.
That said, more companies reported that leading indicators, such as order books and sales inquiries, have deteriorated, and hiring and investment intentions remain weak.
The consumer survey found that concerns about job security have eased somewhat since the first quarter. But fears of job losses remain elevated, and consumers are becoming increasingly cautious about spending on non-discretionary items.
Bradley Saunders, North America economist at Capital Economics, said in a note to clients that the surveys may appear overly downbeat given when they were conducted.
'Bleak sales and spending intentions captured by the Bank of Canada's second-quarter business and consumer surveys are consistent with a sharp downturn in GDP growth,' he said.
'However, the surveys were carried out at a time of peak tariff uncertainty. Since then, the timelier monthly business and consumer surveys generally suggest that sentiment has improved as tariff escalation threats have receded.'
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Winnipeg Free Press
36 minutes ago
- Winnipeg Free Press
Trump says Japan will invest $550 billion in US at his direction. It may not be a sure thing
WASHINGTON (AP) — President Donald Trump is bragging that Japan has given him, as part of a new trade framework, $550 billion to invest in the United States. It's an astonishing figure, but still subject to negotiation and perhaps not the sure thing he's portraying. 'Japan is putting up $550 billion in order to lower their tariffs a little bit,' Trump said Thursday. 'They put up, as you could call it, seed money. Let's call it seed money.' He said 90% of any profits from the money invested would go to the U.S. even if Japan had put up the funds. 'It's not a loan or anything, it's a signing bonus,' the Republican president said, on the trade framework that lowered his threatened tariff from 25% to 15%, including on autos. A White House official said the terms are being negotiated and nothing has been formalized in writing. The official, who insisted on anonymity to detail the terms of the talks, suggested the goal was for the $550 billion fund to make investments at Trump's direction. The sum is significant: It would represent more than 10% of Japan's entire gross domestic product. The Japan External Trade Organization estimates that direct investment into the U.S. economy topped $780 billion in 2023. It is unclear the degree to which the $550 billion could represent new investment or flow into existing investment plans. What the trade framework announced Tuesday has achieved is a major talking point for the Trump administration. The president has claimed to have brought trillions of dollars in new investment into the U.S., though the impact of those commitments have yet to appear in the economic data for jobs, construction spending or manufacturing output. The framework also enabled Trump to say other countries are agreeing to have their goods taxed, even if some of the cost of those taxes are ultimately passed along to U.S. consumers. On the $550 billion, Japan's Cabinet Office said it involves the credit facility of state-affiliated financial institutions, such as Japan Bank for International Cooperation. Further details would be decided based on the progress of the investment deals. Japanese trade negotiator Ryosei Akazawa, upon returning to Japan, did not discuss the terms of the $550 billion investment. Akazawa said he believes a written joint statement is necessary, at least on working levels, to avoid differences. He is not thinking about a legally binding trade pact. The U.S. apparently released its version of the deal while Japanese officials were on their return flight home. 'If we find differences of understanding, we may have to point them out and say 'that's not what we discussed,'' Akazawa said. The U.S. administration said the fund would be invested in critical minerals, pharmaceuticals, computer chips and shipbuilding, among other industries. It has said Japan will also buy 100 airplanes from Boeing and rice from U.S. farmers as part of the framework, which Treasury Secretary Scott Bessent said would be evaluated every three months. 'And if the president is unhappy, then they will boomerang back to the 25% tariff rates, both on cars and the rest of their products. And I can tell you that I think at 25, especially in cars, the Japanese economy doesn't work,' Bessent told Fox News' 'The Ingraham Angle.' Akazawa denied that Bessent's quarterly review was part of the negotiations. 'In my past eight trips to the United States during which I held talks with the president and the ministers,' Akazawa said. 'I have no recollection of discussing how we ensure the implementation of the latest agreement between Japan and the United States.' He said it would cause major disruptions to the economy and administrative processes if the rates first rise to 25% as scheduled on Aug. 1 and then drop to 15%. 'We definitely want to avoid that and I believe that is the understanding shared by the U.S. side,' he said. Monday Mornings The latest local business news and a lookahead to the coming week. On buying U.S. rice, Japanese officials have said they have no plans to raise the current 770,000-ton 'minimum access' cap to import more from America. Agricultural Minister Shinjiro Koizumi said Japan will decide whether to increase U.S. rice imports and that Japan is not committed to a fixed quota. Trump's commerce secretary, Howard Lutnick, has suggested that the Japanese agreement is putting pressure on other countries such as South Korea to strike deals with the U.S. Trump, who is traveling in Scotland, plans to meet on Sundayv with European Commission President Ursula von der Leyen to discuss trade. 'Whatever Donald Trump wants to build, the Japanese will finance it for him,' Lutnick said Thursday on CNBC. 'Pretty amazing.' ___ Yamaguchi reported from Tokyo.

Globe and Mail
3 hours ago
- Globe and Mail
Gen Z is saving for retirement better than millennials
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Despite facing one of the toughest job markets in decades and an increasingly unattainable path to homeownership, many are learning from the experiences of older generations using online resources to take their financial futures into their own hands. According to new data from TD Bank, 68 per cent of Gen Zers invest consistently each year, more than any other age group. They're also contributing more to their RRSPs than millennials were at the same age, according to data from Statistics Canada. In 2023, the median RRSP contribution for Canadians under 25 was $1,880, more than 20 per cent more than millennials contributed in 2009, even after adjusting for inflation. 'Gen Zs have grown up in an information-rich environment,' said Pat Giles, TD's vice-president of Saving & Investing Journey, the bank's approach to help Canadians start saving as early as they can. 'They're much more likely to use social media to shape their investing decisions.' Many Gen Z Canadians have taught themselves financial basics, with the help of resources in the form of TikToks, YouTube, Reddit or even AI. A June CFA Institute report found that 79 per cent of young Canadians trust online financial education, more than two-thirds use AI tools like ChatGPT for information and 62 per cent turn to influencers and social media. Ms. Imasogie estimates that a large majority of what she knows about money came from the internet. She then used that knowledge to open her RRSP through Questrade, a do-it-yourself investment platform. Low-cost investment platforms such as Questrade and Wealthsimple let users open and manage registered accounts from their phones, with minimal fees and no in-person meetings. Today, nearly one in five Canadians aged 18 to 40 use Wealthsimple, according to the company. While a tough labour market stalled salary growth for some young workers, the pandemic presented a unique opportunity to them. 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He now saves 25 per cent of his nearly six-figure income and contributes regularly to his RRSP, not just for retirement, but to eventually use the funds under the federal Home Buyers' Plan, which lets first-time home buyers borrow from their RRSP tax-free for a down payment. 'The sole reason for putting it in the RRSP is not for retirement, as dumb as I sound,' he said. 'It's to take advantage of the Home Buyers' Plan.' Airlines are using AI to set ticket prices. Here's how you can avoid price manipulation when booking flights That kind of strategy is becoming more common, financial experts say. New policies have made registered accounts more flexible, and appealing, for young people. The FHSA, introduced in 2023, allows Canadians to save up to $40,000 tax-free toward a home. In April, 2024, the Home Buyers' Plan withdrawal limit rose to $60,000 from $35,000. Still, some Gen Zers are able to save simply because they're not buying homes. For many, the decision to hold off on homeownership isn't a rejection of the dream, but a lesson learned, said Hans Friedrich, an adviser at Sun Life and managing partner at Evolv Financial. After watching older millennials stretch their budgets thin to buy property, many Gen Zers are choosing to invest their savings instead. 'A lot of people on the millennial side tried to push through that and were like, 'We're going to get this done no matter what,'' Mr. Friedrich said. 'Gen Z is the first generation to actually learn from what the millennials did.'


CBC
3 hours ago
- CBC
Stony Plain Road construction straining business, shop owners says
Construction along Stony Plain Road for the Valley Line West LRT is causing major challenges for shops in west Edmonton, business owners say. Many shop owners say the years-long project has led to a significant drop in foot traffic, leaving them struggling to stay open. Marigold Infrastructure Partners initiated several closures in the area, including some the area around Stony Plain Road and 156 Street, as part of the accelerated roadwork for Valley Line West Petra Sekhon owns Vacuum Central, which has been on Stony Plain Road for 36 years. She said her business has lost a third of its revenue this month alone. "We've been told it's going to be another three years," said Sekhon. "Ninety-nine per cent of the customers when they come in say it's hard to get in … they're telling us that we should move." She said decisions are also being made without input from business owners. "They're going to put one tree right in front of my door, which I did not ask for. But I was not given the opportunity to have any kind of input," said Sekhon. "The plan was in place and they weren't making any changes, even though we've asked." Bijoy Sasmel, owner of Spirit of India Express, took over his restaurant in January. He said construction around 156th Street has made it almost impossible for customers to reach him. "I've had a very bad experience here," said Sasmel. Sasmel said he hasn't taken a salary in six months, as even delivery drivers cancel orders because they can't find the entrance to the plaza where his restaurant is located. "Some days my sale is not even $100," he said. "If I don't move from here, maybe I'll be bankrupt. I have to feed my family, I have to feed my kids." Despite asking for support from the city and Marigold Infrastructure, Sasmel said he got no positive response. Construction for the Edmonton Valley Line West LRT has been going on for 50 months and is anticipated to be complete in 2028. Justin Keats from the Stony Plain Road Business Association said businesses are losing 50 per cent or more of their traffic. "There are no programs that are compensating or trying to rectify the unequal playing field these businesses have been placed in," said the association's members' relations and communications coordinator. Keats said there was some talk about financial support with city council that has gone through several times, led by Ward Nakota Isga Cioun. Andrew Knack, but council was unable to reach a decision. The association hopes that with Edmonton's municipal election coming up in October, they might be able to start the conversation anew. "Businesses need some form of compensation that addresses them individually as the business owner versus having those funds go directly to the property owner," said Keats. "The area in itself would also need some significant reinvestment, whether that's in marketing or additional placemaking initiatives to make this place more viable and lively." In a statement to CBC News, Po Sun, general supervisor for the Valley Line West, said the city is aware of the challenges and is grateful for the continued patience of residents, commuters and businesses. "The city doesn't offer financial compensation to businesses due to construction," the statement said, but added that the city is offering "business outreach, signage, and stakeholder support." Construction at the 156th Street intersection reopened on July 10, but work will continue throughout the area until the LRT is finished, said the city. "The plan will reduce the overall duration of traffic restrictions by more than half, and take many of the roads along the Valley Line West alignment to their final configuration by the end of 2025." "If I ran my business the way they run this construction project, I would've been bankrupt years ago," said Sekhon of Vacuum Central.