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Pretty ironic to see the Bank of Cda cite the (slight) April increase in year/year CPI (from 4.3% to 4.4%) as part of the rationale for today's 8th interest hike. Let's refresh their memories as to the *causes* of that uptick, from the StatsCan release: www150.statcan.gc.ca/n1/daily-quoti… /2 
The April uptick in yr/yr CPI was mostly due, StatsCan reported, to higher rents & mortgage debt charges. Both of those are direct effects of *higher* interest rates. Mortgage debt (3% of the CPI bundle) is skyrocketing. Rents are a bigger weight (6.57%), also growing fast. /3
Rents grow because of higher int. rates cuz:
* People can't afford a house, so turn to renting.
* Landlords charge more to cover their own debt charges.
High interest rates are crushing new housing supply (both to-own & to-rent), so the surge in housing costs will get worse. /4
* People can't afford a house, so turn to renting.
* Landlords charge more to cover their own debt charges.
High interest rates are crushing new housing supply (both to-own & to-rent), so the surge in housing costs will get worse. /4
An interesting (and hopeful) angle in today's 🇨🇦 GDP release. Economy-wide inflation (measured by the GDP deflator) has largely abated: up just 1.3% in last 12 mos. This corresponds to a moderation of the excess profits corporations racked up in post-lockdown period. #cdnecon /2
Gross corporate operating surpluses are down 6% over the last yr. That's largely because of lower fossil fuel energy prices (& profits), but also due to easing supply constraints & lower profit-taking in other key sectors (like building products, autos, primary metals, M&E). /3
We had documented the sectors that had seen the biggest increases in profits (and biggest price hikes) when inflation peaked in mid-2022; see our @CntrFutureWork report on 15 super-profitable sectors: centreforfuturework.ca/2022/12/02/fif…. /4
Oil sands companies in the Pathways Alliance have awarded a $10m contract to Wood, a global engineering company, to develop detailed plans for a 400km CO2 pipeline that will eventually link >20 oil sands facilities with a storage hub near Cold Lake #cdnecon #oott #ableg
1/4 The federal payroll has grown about 42% in the last five years, a 7.3% compound annual rate. This is accounted for by a 25.9% rise in employment (4.7% annual growth rate) and a 13.2% increase in average weekly earnings per employee (2.5% annual rate). #cdnecon
2/4 The increase in average earnings per employee cannot be called excessive since the annual CPI rose 16.0% over the same period (3.0% annual rate), implying a 0.5% decrease in real average earnings per year.
3/4 However, the rise in employment was extraordinary. Although just 2% of Canada's employment, federal jobs have contributed to the tight labour market we see in Canada today. The Treasury Board estimates the employment increase to be even larger, at 28%.
1/4 Canadian household expenditures, in volume terms, grew more rapidly in October and November. The November pickup was in services (0.5%) and durable goods (0.8%). See: rpubs.com/PhilSmith26/99… #cdnecon
2/4 There were large drops in spending on food, alcoholic beverages and tobacco in this pre-Christmas month. Outlays for clothing and food were flat. Paid rents have been rising and were up a further 0.6% in November. There was a 1.0% volume increase for household appliances.
3/4 Purchases of vehicles rose 2.1% and fuels and lubricants increased 6.3% in volume terms. Transport services (air, rail, etc.) grew 3.0%. The volume of spending on recreation and culture remained fairly flat as did expenditure on food and accommodation services.
In light of Loblaw's inept efforts on social media to justify its super-sized inflation-fueling profits, this is an opportune time to remind shoppers of four crucial economic facts regarding supermarket profitability: 🧵 #cdnecon /2
A. Food retail profits have more than doubled from pre-pandemic norms. /3
B. Their higher profits are NOT the result of a constant profit margin collected from a growing base of sales. Claims to this effect are outright lies. The average margin has increased by three-quarters since the pandemic. /4
🧵Consumer prices fell 0.6% in 🇨🇦 in Dec., yr/yr CPI growth fell to 6.3% (from 8.1% in June). This is good. But lest anyone interpret this as evidence that Bank of Canada tightening is 'working', or relief is imminent, let's review the short history of this inflation. #cdnecon /2
Pandemic caused big breaks in global supply (not fully repaired yet) & big shifts in global demand (mostly, not fully, rebalanced). Govt stimulus maintained aggregate demand & prevented a depression. For a short time, demand exceeded supply (mostly due to constrained supply). /3
Quick phase-out of COVID supports then cut household spending power quickly; it is now below pre-COVID trend. Supply has rebounded but still not caught up to pre-COVID trend. We are currently in a situation where both supply and demand are below potential. /4
The emotional & intellectual immaturity of a man who speaks to people who deny science, residential schools, & are racists & homophobic says to me that he really doesn't want to be Prime Minister.
One thing for sure: powerful people won't be trembling in his presence🤦♂️!
#cdnpoli
One thing for sure: powerful people won't be trembling in his presence🤦♂️!
#cdnpoli
“At some point Mr. Poilievre needs to begin showing that he is prime ministerial material, that he has the gravitas to ascend to such an important position. Because up to now, he’s been one of the least serious Conservative leaders we have seen …”
theglobeandmail.com/opinion/articl…
theglobeandmail.com/opinion/articl…
And the party leader which courts extremism in Canada? Pierre Poilievre:
“Mostly it is a kind of adolescent nihilism, an unwillingness to be bound by any constraint, whether of taste, morals, logic or reality – and, ultimately, the law”
theglobeandmail.com/opinion/articl…
“Mostly it is a kind of adolescent nihilism, an unwillingness to be bound by any constraint, whether of taste, morals, logic or reality – and, ultimately, the law”
theglobeandmail.com/opinion/articl…
Why is the Bank of Canada owned by the government? Because Alberta Premier William Aberhart invaded Saskatchewan.
A nerdy thread about the Bank and Bible Bill for #cdnecon, #ableg, and #cdnpoli. 🤓🧵
A nerdy thread about the Bank and Bible Bill for #cdnecon, #ableg, and #cdnpoli. 🤓🧵
First, some background. The Bank of Canada was established in 1934 and began operations in early 1935. (Brief history here: bankofcanada.ca/about/our-hist…)
But it was a fully private entity, with roughly 12k shareholders across the country. Government owned no shares.
But it was a fully private entity, with roughly 12k shareholders across the country. Government owned no shares.
The govt had influence, to be clear. Govt appointed the first Governor + the Governor could veto any board decision.
And dividends to shareholders were capped at 4.5%. All excess went to the government. So, it wasn't really a profit maximizing corporation in the normal sense.
And dividends to shareholders were capped at 4.5%. All excess went to the government. So, it wasn't really a profit maximizing corporation in the normal sense.
A widely anticipated, and interesting, development. What is going on? Should taxpayers be concerned? I'll explain. 🧵 #cdnecon #cdnpoli
First, here's the full picture of the Bank of Canada's finances for 2021 before all the fun started.
The Bank earns revenue from interest earnings on bonds that it holds. Expenses are (1) normal stuff, staff, etc., and (2) interest expenses, which I'll explain next.
The Bank earns revenue from interest earnings on bonds that it holds. Expenses are (1) normal stuff, staff, etc., and (2) interest expenses, which I'll explain next.
Commercial banks hold much of their reserves at the central bank. They earn interest on these deposits. Recently those holdings have grown significantly as a result of quantitative easing during the pandemic. Now ~$200 billion earn interest at 3.75%.
#TrudeauWasRight and here’s why in a series of random photos from my files.
@POECommission #EmergenciesActInquiry #POEC #cdnpoli #FluTruxKlan
@POECommission #EmergenciesActInquiry #POEC #cdnpoli #FluTruxKlan
The federal deficit this year is projected to fall to $36b from Budget 2022's projection of $53b. Here's the breakdown of what caused the change. #cdnecon #cdnpoli
Hard to be precise, but it looks like the overwhelming majority of the increase in income taxes is due to high oil prices.
Corp income taxes up nearly $23b. That's almost two-thirds of the change. Oil & gas, mining, petroleum products dominate the increase in corp profits.
Corp income taxes up nearly $23b. That's almost two-thirds of the change. Oil & gas, mining, petroleum products dominate the increase in corp profits.
Interestingly, total GST revenues are projected to come in lower than Budget 2022 expected. I anticipated an increase due to inflation (higher prices --> higher GST payments). Likely due to the slowdown in economic growth currently happening (and reflected in the projections).
Pull up a chair.
Let's talk about the heart-stopping share of Canadians supposedly '$200 away from insolvency'.
Apparently, I have to keep giving this talk because there's a quarterly clickbait survey that sometimes gets eyeballs.
FML #cdnecon #cdnpoli
Let's talk about the heart-stopping share of Canadians supposedly '$200 away from insolvency'.
Apparently, I have to keep giving this talk because there's a quarterly clickbait survey that sometimes gets eyeballs.
FML #cdnecon #cdnpoli
If you want to re-read the OG thread from 2019 here's a link:
Here's the Q from QP that raised the claim once again...
Like a zombie, this undead data point continues to eat brains.
Note: I am referring to the *data point* not a person or public figure.
Like a zombie, this undead data point continues to eat brains.
Note: I am referring to the *data point* not a person or public figure.
This is a pretty slick production, but it is not entirely accurate. A few points to note where @AndrewScheer has gone wrong. (🧵).
TL;dr: The Bank probably wasn't perfect, but Mr Scheer's characterization of what it did is largely wrong.
#cdnpoli #cdnecon
1/12
TL;dr: The Bank probably wasn't perfect, but Mr Scheer's characterization of what it did is largely wrong.
#cdnpoli #cdnecon
1/12
First, Mr Scheer takes issue with the Bank of Canada's claim that it did not "flood" the economy with "billions of dollars of new currency."
Except that this claim is correct. There was not a major increase in the amount of currency. The money printer was not going "brrr".
2/12
Except that this claim is correct. There was not a major increase in the amount of currency. The money printer was not going "brrr".
2/12
Currency outside of banks went from about $90 billion before the pandemic to about $105 billion at the end of 2020, $111 billion at the end of 2021 and $116 billion in July of this year (not seasonally adjusted). Not hundreds of billions of new cash.
3/12
3/12
Yet again, #NevrePoilievre demonstrates #PierrePoilievreIsAnEconomicIlliterate and a stunning example of #DunningKruger. It’s gobsmacking how Polievre imagines he knows more than economists because he consumes crypto propaganda & Bitcoin videos thestar.com/opinion/contri… #cdnpoli
This dangerously stupid & gullible quote from March/22 also demonstrates that Polievre is working on behalf of greedy corrupt billionaires who want to dismantle central banking & any & all checks on their power. Like Elon Musk. #CdnEcon #NeverVoteConservative #cdnpoli
If you haven’t already, I strongly urge everyone to read this ⬇️ masterpiece by @davetroy in @WashSpec. See link attached.
There’s also an audio version that you can listen to in 3 parts starting here: podcasts.apple.com/ca/podcast/dav…
#Fascism #CryptoIsAPonziScheme
There’s also an audio version that you can listen to in 3 parts starting here: podcasts.apple.com/ca/podcast/dav…
#Fascism #CryptoIsAPonziScheme
NEW: MLI research finds that young Canadians are pessimistic about their economic futures - and for good reason.
Check out our interactive data set based on polling and focus groups examining the views of Canadians aged 18-29. @awudrick #cdnpoli
macdonaldlaurier.ca/after-covid-yo…
Check out our interactive data set based on polling and focus groups examining the views of Canadians aged 18-29. @awudrick #cdnpoli
macdonaldlaurier.ca/after-covid-yo…
<40% of young Canadians expect to enjoy a better standard of living than their parents. “This pessimism seems to be the result of a wider realization,” argue Blair Gibbs & @awudrick. “Making economic progress is harder for younger people than ever before.” macdonaldlaurier.ca/polling-86-per…
86% of young Canadians believe their parents' generation had an easier time purchasing a home or raising a family than they are having or will have. This has major implications for financial and family planning decisions of Canada's young people #cdnpoli macdonaldlaurier.ca/after-covid-yo…
Inflation has many concerned, and it's a complex issue. So I'm happy to share some results of work with my colleague, Prof. Sonja Chen: papers.ssrn.com/sol3/papers.cf… Not yet peer-reviewed, but there's some interesting results I'll preview here. 🧵 #cdnecon #cdnpoli
First, it's important to appreciate that rising inflation is accounted for by a few specific items. Had energy and shelter prices, for example, not increased then overall inflation would have been 4.1% in July rather than 7.8%.
More interesting is the spillover effect of energy prices on other goods and services. We find roughly one-quarter of items move up and down strongly with oil prices. And those items account for 60% of the non-energy inflation we're seeing.
#YouAskedUs if we printed cash to finance the federal gov’t.
We didn't.
👇 Keep reading to learn how we supported the economy from the shock of the pandemic. #CdnEcon #AskTheBoC
1/6
We didn't.
👇 Keep reading to learn how we supported the economy from the shock of the pandemic. #CdnEcon #AskTheBoC
1/6
The pandemic has been a crisis like no other.
As a result, we took various measures, like buying bonds, to support and ensure a strong and stable #economy.
2/6
As a result, we took various measures, like buying bonds, to support and ensure a strong and stable #economy.
2/6
We bought existing gov't bonds from banks on the open market.
Why?
This helped unblock frozen markets at the start of the #pandemic.
It let households, companies and governments access funding when they really needed it.
3/6
Why?
This helped unblock frozen markets at the start of the #pandemic.
It let households, companies and governments access funding when they really needed it.
3/6
We keep talking about inflation becoming “entrenched.” What does that mean?
The more people believe inflation will continue to increase and the longer they believe it will last, the more likely it is to remain high.
👇 Keep reading to learn more. #CdnEcon #AskTheBoC
1/7
The more people believe inflation will continue to increase and the longer they believe it will last, the more likely it is to remain high.
👇 Keep reading to learn more. #CdnEcon #AskTheBoC
1/7
Prices tend to go up⬆ when the demand for goods and services is more than the #economy can supply.
Prices tend to go down⬇ when the #economy produces more goods and services than people want or need.
2/7
Prices tend to go down⬇ when the #economy produces more goods and services than people want or need.
2/7
If people believe inflation will remain low, short-term jumps in prices are not a huge deal.
3/7
3/7
While I have some issues w/ @TorontoStar, this investigation into price gouging by 🇨🇦’s big supermarket chains, thestar.com/business/2022/… is worth a subscription. If the Star keeps doing valuable investigations like this, they may win back some lost subscribers. #InflationScam
Not one word. Not one about the real problem. It’s not wages. It’s soaring profits that are the problem. Come on: workers wages have not kept pace and the one chance to catch up and central bankers coaching biz not to raise wages too much! #cdnpoli cbc.ca/news/business/…
In June, @CntrFutureWork warned this would happen. That workers would pay the price for inflation padding corporate profits: centreforfuturework.ca/2022/06/01/bus… And here we are! /2
Canada's central banker:
"As a business, don't plan on the current rate of inflation staying. Don't build that into longer-term contracts. Don't build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down." /3
"As a business, don't plan on the current rate of inflation staying. Don't build that into longer-term contracts. Don't build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down." /3
Today's high inflation is regressive. This point has been made by many, but I thought some numbers might help. 🧵 #cdnecon
I estimate the effect of price increases on household disposable incomes here 👇. The high rates for May (reported today) are like a nearly 10 percent reduction in the disposable incomes of the lowest income families. Let that sink in a moment.
This is not because lower-income households buy more items w/ big price increases. The reverse is true (owned accommodation, for example).
Here's a set of estimates of the inflation rate for different types of households based only on differences in products purchased.
Here's a set of estimates of the inflation rate for different types of households based only on differences in products purchased.
Inflation pressures are broad-based, to be absolutely clear, but this is worth noting: if shelter and energy prices remained flat since last year, I estimate headline inflation would have been 3.2% in May instead of 7.7%. #cdnecon
This is not to deny the financial pressures that price increases create. But it shows that the biggest pressures are narrowly concentrated. This may matter for policy makers trying to figure out where to direct efforts and to understand what is going on.
Also worth noting, this doesn't account for the spillover effects of rising energy prices on goods and services throughout the economy. This is hard to estimate, but my best attempt is that this may add another 1-1.5 points on top of energy's direct 2.5 point contribution in May.
Okay, so part 2 of a 🧵on inflation (for part 1, see embedded tweet). Same caveats apply. This part will discuss some of the sources for the inflation we're experiencing and what can be done about it.
#cdnecon #cdnpoli
1/
#cdnecon #cdnpoli
1/
As has been widely reported, a main driver of the rise in CPI has been energy prices, primarily gasoline. The steep rise in crude oil, particularly because of Russia's illegal invasion of Ukraine, and tight refining capacity, have caused those prices to shoot up.
2/
2/
In addition, some other commodities and goods are seeing high prices due to supply chain issues and other supply constraints/concerns. The pros call these "cost-push inflation."
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