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business briefing

Briefing highlights

* How we’re being squeezed

* An EQAO answer I’d love to see

* Markets at a glance

* Facebook buoys investors

* Canadian dollar just shy of 78 cents

* What to expect from the ECB

* Precision Drilling loss narrows

* Husky Energy profit climbs

* GM profit dips

The squeeze

If you feel sometimes like you can’t catch a break, it’s because you can’t.

From higher prices at the gas pump to admittedly still-low interest rates, Canadians are being squeezed.

And it’s going to play out through the economy.

“Household consumption was the key driver of GDP growth last year, when Canada enjoyed one of the strongest performances in the G7,” said Paul Ashworth, chief North America economist at Capital Economics in Toronto.

“More recently, however, consumption growth has slowed markedly. The housing slowdown appears to have played a role, with the slowdown in consumption growth coinciding with the drop-off in house price inflation.”

Oh, but there’s so much more. You would have felt it, for example, as you perused your credit card bills last night or filled up on the way to work this morning.

“In addition to the housing slowdown, we suspect that the surge in gasoline prices in the second half of last year also played a role, reducing the purchasing power of households and weighing on consumption,” Mr. Ashworth said in a new report.

Retail gasoline price

Cents per litre

140

130

120

110

100

90

80

2010

2011

2012

2013

2014

2015

2016

2017

2018

Effective interest rates

Per cent

Household

Business

4.0%

3.8

3.6

3.4

3.2

3.0

2.8

2.6

2.4

2012

2013

2014

2015

2016

2017

2018

Consumer and mortgage credit

Per cent 3-month over 3-month annual

Mortgages

Consumer

8%

7

6

5

4

3

2

1

0

2012

2013

2014

2015

2016

2017

2018

THE GLOBE AND MAIL, SOURCE: CAPITAL ECONOMICS

Retail gasoline price

Cents per litre

140

130

120

110

100

90

80

2010

2011

2012

2013

2014

2015

2016

2017

2018

Effective interest rates

Per cent

Household

Business

4.0%

3.8

3.6

3.4

3.2

3.0

2.8

2.6

2.4

2012

2013

2014

2015

2016

2017

2018

Consumer and mortgage credit

Per cent 3-month over 3-month annual

Mortgages

Consumer

8%

7

6

5

4

3

2

1

0

2012

2013

2014

2015

2016

2017

2018

THE GLOBE AND MAIL, SOURCE: CAPITAL ECONOMICS

Retail gasoline price

Cents per litre

140

130

120

110

100

90

80

2010

2011

2012

2013

2014

2015

2016

2017

2018

Effective interest rates

Per cent

Household

Business

4.0%

3.8

3.6

3.4

3.2

3.0

2.8

2.6

2.4

2012

2013

2014

2015

2016

2017

2018

Consumer and mortgage credit

3-month over 3-month annual per cent change

Mortgages

Consumer

8%

7

6

5

4

3

2

1

0

2012

2013

2014

2015

2016

2017

2018

THE GLOBE AND MAIL, SOURCE: CAPITAL ECONOMICS

Indeed, the latest look by Statistics Canada showed pump prices up by more than 17 per cent in March from a year earlier, helping to drive annual inflation to 2.3 per cent.

In fact, the federal agency said, seven of the eight major components it measures all climbed last month from the same period in 2017.

The only category to show a price decline was clothing and footwear.

Which was great if you needed boots for April’s lousy weather, at least where I live.

And then there’s Mr. Ashworth’s biggie, the rise in interest rates. While still low in this post-crisis and post-oil shock era, they’re still higher.

“It appears the biggest driver behind the slowdown in consumption growth has been the surge in interest rates, which began in earnest in mid-2017,” he said.

“Given that households are up to their eyeballs in debt, that is perhaps no surprise.”

Remember, too, that the Bank of Canada is poised to jack up its benchmark lending further, though it’s in no rush to take that step again.

And, as Mr. Ashworth pointed out, oil prices have jumped of late, which will mean even higher costs at the pump, though he added in an interview that he doesn’t expect a big jump.

Canadian retailers are feeling the pinch of all this, Mr. Ashworth added, suggesting the final numbers may well show a contraction in first-quarter consumption.

And, of course, that lousy weather may have played a role on that front.

“I certainly wasn’t rushing out to Canadian Tire to buy new lawn chairs,” he said.

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