BANK OF CANADA MONETARY POLICY

Today, Tiff Macklem assumes his role as the Bank of Canada’s tenth Governor. In his first interest rate announcement, the Bank of Canada maintained its target for the overnight rate at the effective lower bound of 0.25 percent. The Bank Rate is correspondingly 0.5 per cent and the deposit rate is 0.25 per cent.

To cushion the negative impacts of COVID-19 shock in the economy, advanced economies have introduced an unprecedented amount of economic stimulus and lowered interest rates. These measures seem to have softened the impacts of economic shutdowns. The Bank of Canada notes that financial conditions have improved, and commodity prices have increased in recent weeks.

The Bank of Canada’s recent actions in response to the economic shock from COVID-19 included lowering the target for the overnight rate 150 basis points and conducting lending operations to financial institutions and asset purchases in core funding markets of around $200 billion. The Bank of Canada notes that recent data confirms that the Bank’s programs to improve market function are working as intended. As a result, the Bank will be reducing the frequency of its term repo operations to once a week, and its program to purchase bankers’ acceptances to bi-weekly operations. other programs to purchase federal, provincial, and corporate debt are continuing at their present frequency and scope.

In Canada, the real GDP in the first quarter of 2020 was 2.1 per cent lower than the fourth quarter of 2019. The Bank notes that this level of GDP is in the middle of the Bank’s April monitoring range and reflects the combined impact of falling oil prices and widespread shutdowns. The Bank of Canada projects GDP level  to further decline by 10-20 per cent due to continued lower consumption and investment.

CPI inflation has decreased to near zero in line with the projections provided in the April Monetary Policy Report (MPR). The decline in inflation was primarily due to lower gasoline prices. The Bank expects temporary factors to keep CPI inflation below the target band in the near term.

With global economies turning their focus to reopening, uncertainty remains on how the recovery will unfold nationally and globally. The Bank expects the Canadian economy to resume growth in the third quarter of 2020 supported by household consumption.

As market conditions improve, the Bank’s focus will shift to supporting growth in employment and output. The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.

The next scheduled date for announcing the overnight rate target is July 15, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

Bank of Canada: Rate announcement

CANADA BUSINESS SECTOR LABOUR PRODUCTIVITY, Q1 2020

During the COVID-19 pandemic, comparisons of year-to-date averages and sums do not show Nova Scotia’s rapidly-changing economic situation.  The DailyStats will focus on year-over-year comparisons, comparing one month with the same month in the prior year.  Where possible the DailyStats will make comparisons of seasonally adjusted data from the pre-COVID-19 period (January and February 2020) with the period during which COVID-19 measures were in place from March 2020 onwards.

In 2020Q1, Labour productivity of Canadian businesses increased 3.4 per cent after a decline of 0.1 per cent in 2019Q4. In 2020Q1, Labour productivity of Canadian businesses year-over-year growth increased 3.6 per cent over 2019Q1. In 2020Q1, Real gross domestic product (GDP) of businesses declined 2.6 per cent over 2019Q4, with hours worked down 5.8 per cent. Total compensation per hour worked was up 4.5 per cent over 2019Q4

Unit labour costs increased 1.1 per cent in 2020Q1.

Measured in US dollars, Canada’s unit labour costs declined 0.8 per cent in 2020Q1, following a 1.0 per cent increase in 2019Q4. Unit labour costs in US dollars have increased 2.7 per cent since Q1 2019.

Note: Labour productivity, GDP and, unit labour costs cover the business sector only. Labour productivity is a measure of real GDP per hour worked. Unit labour cost is defined as the cost of workers’ wages and benefits per unit of real GDP.

Statistics Canada.  Table  36-10-0206-01   Indexes of business sector labour productivity, unit labour cost and related variables

EU AND EURO AREA UNEMPLOYMENT RATE, APRIL 2020

Eurostat has reported that April 2020 was the second month when COVID-19 containment measures were implemented by Member States, the unemployment rate in the Euro Area was 7.3 per cent in April, up from 7.1 per cent in March 2020 and down from 7.6 per cent in April 2019.

For the broader European Union 27, the unemployment rate was at 6.6 per cent in April 2020, up from 6.4 per cent in March 2020 and down from 6.8 per cent in April 2019.

Among major European economies, the unemployment rate was highest in Greece (16.1 per cent in Feb), Spain (14.8 per cent), Latvia (9.0 per cent), Cyprus (8.9 per cent), France (8.7 per cent), and Lithuania (8.6 per cent).  Unemployment rates were lowest in Czechia (2.1 per cent) and Poland (2.9 per cent).

Source:  Eurostat. Unemployment News Release, time series data for unemployment rates, latest unemployment rates by member country

Statistics Canada.  Table  14-10-0287-01   Labour force characteristics, monthly, seasonally adjusted and trend-cycle

STUDY: THE DISTRIBUTION OF TEMPORARY FOREIGN WORKERS ACROSS INDUSTRIES IN CANADA

In response to the COVID-19 pandemic, Statistics Canada completed a study on the distribution of temporary foreign workers (TFWs) across industries in Canada. Due to measures taken to contain the spread of the virus, the availability of new TFWs may be reduced or delayed in 2020.

TFWs have played an increasingly important role in the Canadian labour market in recent years with almost 470,000 work permits in 2019, up from 390,000 in 2018. Although TFWs account for a small share of the total workforce, they are particularly important in agriculture, forestry, fishing, and hunting, accounting for 15.5 per cent of employment in 2017.  Among services-producing sectors, the highest proportion of TFWs was observed in accommodation and food services at 7.2 per cent.

Crop production had the highest proportion of TFWs in 2017, at 27.4 per cent nationwide. Provincially, TFWs accounted for 41.6 per cent of agricultural workers in Ontario, and over 30 per cent of agricultural workers in Quebec, British Columbia and Nova Scotia during the year. Among sectors that continue to operate during the COVID-19 pandemic, relatively high 2017 TFW employment was observed in private household services (9.8 per cent), gasoline stations (8 per cent), warehousing and storage (4.3 per cent), and food manufacturing (3.4 per cent).

When looking at firm level data, 17 per cent of employers in private household services (including cooks, maids, gardeners and nannies), and approximately 10 per cent of firms in crop production, gasoline stations, and food services and drinking places, had at least 30 per cent of their employees as TFWs in 2017.

Source: Statistics Canada. Study: The distribution of temporary foreign workers across industries in Canada

ELECTRIC POWER, MARCH 2020

During the COVID-19 pandemic, the DailyStats will examine a broader range of indicators to identify signals of rapidly changing economic activity.

Electric power consumption (here shown as electric power available for use within a geographic area) aligns with broad economic activity.  There are distinct seasonal patterns to electric power volumes with peaks for most provinces in January.

In March 2020, there was a total of 966,928 Megawatt hours of electric power available for use in Nova Scotia.  This was a 4.6 per cent decline compared to March 2019, but there were also fewer heating-degree-days (requiring electricity for heating purposes) in March 2020.

Compared with the usual January peak, Nova Scotia’s electric power available for use was down by 13.0 per cent in March 2020.  Electric power available for use typically declines in Nova Scotia during February and March.  This year’s decline is consistent with declines observed in 2018 and 2019.

Source: Statistics Canada.  Table  25-10-0016-01   Electric power generation, monthly receipts, deliveries and availability; Environment and Climate Change Canada Monthly Climate Summaries

STATISTICS CANADA OTHER RELEASES

Weekly aircraft movements, May 16 to 22, 2020

Canadian foreign post indexes, April and May 2020

Canadian Health Measures Survey