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ECONOMIC IMPACT & RESOURCES

Inflation rate the highest since 1983 at 7.7%

Annual inflation rose to 7.7 per cent last month, up from 6.8 per cent in April, Statistics Canada reported Wednesday in Ottawa. That’s the highest since January 1983 and well above economist expectations for a 7.3 per cent increase. The inflation gauge rose 1.4 per cent from a month earlier with gasoline, hotel rates and cars among the largest contributors to the gains in May.

The average of core measures — often seen as a better indicator of underlying price pressures — rose to 4.73 per cent, a record in data back to 1990.

Benchmark Canadian two-year yields dropped as low as 3.269 per cent amid a global rally in government bonds. The Canadian dollar pared losses to trade at $1.2968 per U.S. dollar as of 8:56 a.m.

Wednesday’s report illustrates the urgency for Governor Tiff Macklem to quickly withdraw stimulus from an overheating economy amid concern price pressures are becoming entrenched in the economy.

Markets are now fully pricing in a 75-basis-point rate hike by the Bank of Canada next month, which would bring its policy rate to 2.25 per cent. That rate is expected to reach as high as 3.5 per cent by the end of this year. Prime lending rates offered by commercial banks are typically a little more than 2 percentage points above the policy rate.

Fallout

Like other countries, Canadian households are being hit by record gasoline prices, paired with surging food costs.

After a small reprieve in April, gasoline prices shot up again in May, rising 12 per cent during the month and gaining 48 per cent from a year earlier. Food costs rose a smaller 0.8 per cent last month, but are up 8.8 per cent from a year earlier.

The 7.7 per cent annual reading may not even represent the peak, given that gasoline prices have picked up further in June. There are also more signs that imported inflation is spilling over into domestic price gains, with the cost of services rising 5.2 per cent from a year earlier, the fastest pace since 1991.

Excluding food and energy costs, inflation was also up 5.2 per cent — a three-decade high. The cost of living is increasing at twice average wage gains in the country, adding a major headwind to the economy.

Wednesday’s report includes updated basket weights, as well as the inclusion of used car prices for the first time. The statistics agency said the changes didn’t have an impact the consumer price index for May.

Click here for the full report from Statistics Canada.

POLICY UPDATES

Canada to ban making, importing many single-use plastics from December 2022

The government of Canada on Monday published final regulations to prohibit “harmful” single-use plastics, with a ban on manufacturing and importing most of these items to come into effect in December.

The ban will be on single-use plastics including checkout bags, cutlery, food-service ware made from or containing plastic that is hard to recycle, ring carriers, stir sticks and straws, the Canadian government said in a statement.

Canada said in 2020 it intended to impose binding standards for how much recyclable plastic content there has to be in products and packaging and added at the time it wanted new rules in place within 24 months.

“The ban on the manufacture and import of these harmful single-use plastics, barring a few targeted exceptions to recognize specific cases, will come into effect in December 2022,” the government said on Monday.

The sale of these items will be prohibited as of December 2023 to provide businesses in Canada with enough time to transition and to deplete their existing stocks, the government said.

“The Government will also prohibit the export of plastics in the six categories by the end of 2025, making Canada the first among peer jurisdictions to do so internationally,” it added.

Up to 15 billion plastic checkout bags are used every year and about 16 million straws are used daily in Canada, according to government figures.

Prohibitions on the manufacture and import of ring carriers and flexible straws packaged with beverage containers will come into force in June 2023 and the prohibition on the sale of these items will come into force in June 2024.

Ontario’s new Cabinet appointed

Today in Toronto, Ontario Premier Doug Ford announced his new Cabinet after his recent election win. The Cabinet swearing-in left no doubt that the Premier felt that there was still unfinished business for most of his cabinet as most Ministers remained in same role they had. There were a few members dropped from Cabinet and some new faces.

Who’s In

Former Brampton City Councillor Charmaine Williams takes the open Ministry at Women’s Issues. The PC sweep of the City on June 2nd was almost certainly going to lead to more Cabinet representation in this term.

Michael Ford, Doug Ford’s nephew is the new Minister of Citizenship and Multiculturalism.

Hamilton also finds itself represented at the PC Cabinet table for the first time as CFL Hall of Famer, Neil Lumsden, takes on the role of Ontario’s Tourism, Culture and Sport Minister.

The PC gains in Northern Ontario led to two new Northern Cabinet Ministers with former Timmins Mayor George Pirie taking on the role of Ontario’s new Minister of Mining – with a priority on the Ring of Fire, separating that job from the Northern Development role for the first time in decades. Former AMO President Graydon Smith takes on the role of Minister of Natural Resources and Forestry.

Moving Sylvia Jones to Health meant that someone had to take on her previous role as the province’s Solicitor General. York Centre’s new MPP, Michael Kerczner, is taking on the role of Solicitor General

Second term PC MPP Michael Parsa was added to the Cabinet roster as a new Associate Minister at Municipal Affairs and Housing, with a specific focus on housing.

Who’s Out

The biggest story about who’s on the outs of this cabinet is long-time PC MPP Lisa McLeod. The fifth term Ottawa MPP and former Community Services and Tourism Minister finds herself on the outside looking in after a campaign controversy about her riding association expenses.

Despite more representation from Northern Ontario, third term Sault Ste. Marie MPP Ross Romano is out of Cabinet after rocky tenures at Colleges and Universities, and Government and Consumer Services.

The night before Cabinet was announced, Mississauga cabinet Minister Nina Tangri announced she would be running to become Speaker of the Legislature and would not be serving in Cabinet.

Who’s Moved

Prominent Front bench Minister Greg Rickford has seen a couple of his files moved, losing Mining and Natural Resources.

Also of note is the move of Supply Ontario from its former home at Government and Consumer Services, to the Treasury Board office where Prabmeet Sarkaria is still the Minister.

Key Ministers for the CFA

Peter Bethlenfalvy, Minister of Finance, Vic Fedeli, Minister of Economic Development, Job Creation and Trade, with an additional mandate for small business and Monte McNaughton, Minister of Labour, Immigration, Training and Skills Development all remain in their previous portfolios.

Parm Gill, is the new Minister of Red Tape Reduction. He previously served as Minister of Citizenship and Multiculturalism.

Former Digital Affairs Minister Kaleed Rasheed is moving to a newly renamed Public and Business Services Delivery Ministry, formerly the Ministry of Government and Consumer Services. This is the Ministry responsible for the Arthur Wishart Act.

For more analysis on the new Ontario Cabinet click here.

New ministers appointed in Alberta cabinet shuffle

Outgoing Premier Jason Kenney announced several changes to cabinet Tuesday afternoon, including new ministers for environment and parks, infrastructure, transportation and children’s services.

Jason Nixon’s temporary position as minister of finance has been made permanent, the government said in a news release.

The former minister of environment and parks was asked to fill in after Travis Toews, the former finance minister and treasury board president, resigned to seek the UCP leadership.

Calgary MLA Whitney Issik will take over as the environment and parks minister. Issik’s previous role as the associate minister of status of women will be filled by Jackie Armstrong Homeniuk, the MLA for Fort Saskatchewan-Vegreville.

Prasad Panda has been moved from infrastructure to the transportation portfolio. Calgary-Currie MLA Nicholas Milliken takes over as infrastructure minister.

Calgary-South East MLA Matt Jones is the new minister of children’s services, a role left vacant when Rebecca Schultz opted to run for leadership of the UCP.

Jason Luan, the minister of community and social services, had been acting as the children’s service minister for the past week.

Brad Rutherford, MLA for Leduc-Beaumont and deputy government whip, becomes chief government whip and minister without portfolio.

The government also announced a few non-cabinet changes:

• MLAs Tracy Allard and Jackie Lovely have been appointed to the treasury board.
• Justice Minister Tyler Shandro has been appointed chair of the community and families cabinet policy committee.
• Education Minister Adriana LaGrange has been appointed to the priorities implementation cabinet committee.

Following a leadership review in May, Kenney announced he would resign as leader of the United Conservative Party. His replacement is expected to be chosen in October.

OTHER NEWS

Canada posts fastest first-quarter gain in population since 1990

Canada’s population grew at the fastest rate for the first quarter since 1990 thanks to continued immigration.

The number of people living in Canada rose by 0.3 per cent, or 127,978, to 38.7 million in the first three months of 2022, according to Statistics Canada estimates released Wednesday in Ottawa. The report showed accelerating gains following a slow-growth period in 2020 as the COVID-19 pandemic began.

The majority of the gains came from international migration, which remains driver of population and labor growth in Canada. The country welcomed 113,699 immigrants in the first quarter, the highest number in any first quarter since quarterly data became available in 1946.

Canada’s biggest province, Ontario, also reached a milestone, with its population surpassing 15 million for the first time.

With an aging workforce and a record number of job vacancies, robust immigration will be “even more critical to the labor market,” the statistics agency said.

Prime Minister Justin Trudeau’s government has set an ambitious plan to bring in more than 1.3 million newcomers over the next three years to support the country’s post-pandemic growth. Last year, Canada welcomed more than 405,000 new residents, the largest single-year increase in its history.

Here’s more new data on Canada’s immigration and labor supply from Statistics Canada:

• In the 2010s, immigrant workers accounted for 84 per cent of the growth in the total labor force and 55 per cent of the growth in the high- and medium-skilled jobs. They also offset a decline in lower-skilled jobs among Canada-born workers
• Since 2010, the shares of new and recent immigrants grew the fastest in transportation and warehousing, professional services, and accommodation and food services
• In 2021, recent immigrants, who were in Canada 10 years or shorter, made up 8 per cent of the total employed labor force
• Canada is increasingly reliant on temporary foreign workers to fill labor gaps, with the number increasing to 777,000 in 2021 from 111,000 in 2000
• About a quarter of temporary foreign workers who arrived in Canada in the late 2000s and early 2010s became permanent residents within five years after obtaining their first work permit
• Lower-skilled temporary foreign workers tended to have higher rates of transition to permanent residency as compared with their higher-skilled counterparts
• A third of international students who arrived in the late 2000s and early 2010s became permanent residents within 10 years