Everything You Need to Know on Wednesday：Canada's Economy 'set to turn a Corner', TD Economics Says

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,290.20, down 0.02%

● Canada's economy 'set to turn a corner': TD Economics

● Wage pressures sticky in Canada even as job market cools

● Stocks to watch: WestJet Group

Today, the Canadian dollar is trading at 72.94 cents US, a slight increase from Tuesday.

S&P/TSX 60 Index Standard Futures are trading at 1,290.20, down 0.02% from previous close.

Canada’s economy appears to be positioned for a rebound after experiencing weakness last year, but consumer spending is expected to be impacted by higher borrowing costs, tighter immigration policy and a softer labour market, according to a report.

On Tuesday, TD Economics said in a quarterly forecast that “the economy is soft, but not facing a cliff,” which will allow the Bank of Canada to be cautious while determining how restrictive interest rates need to be. The report highlights that after “no growth” during much of 2023, the economy has performed better in the first quarter of the year and is “set to turn a corner.”

“Real GDP (gross domestic product) advanced by 1.7 per cent on an annualized basis boosted by a second straight quarter of healthy three per cent annualized consumer spending,” the report said.

“Going forward, we expect the overall Canadian economy to pick up the pace from 2023’s weakness. However, the consumer is not likely to be pulling the freight.”

According to TD Economics, consumer spending is expected to “cool” due to three factors.

“First off, even though the Bank of Canada has started to cut interest rates, borrowing costs will remain much higher than the pandemic lows,” the report said.

“Second, some tightening in immigration policy towards the end of this year should help alleviate some of the pressure on consumer spending. The three per cent growth in the past two quarters occurred against a record pace in population growth,” TD Economics said.

Lastly, the report said a “softening labour market” is likely to impact consumer spending, as Canada’s job market is “at greater risk of tipping into net losses” during the second half of the year compared to the U.S.

Wages aren’t yet cooling in Canada as the job market loosens and output per worker slows, a scenario that the country’s central bank has warned may derail progress on inflation.

The average hourly wage offered for vacant positions was $27.25 in the first quarter, up 7.3 per cent from a year earlier, Statistics Canada reported Tuesday. Part of the jump was due to a shift in the composition of job vacancies to higher-paying offers from lower ones, the agency said. After adjusting for composition, Statistics Canada estimated offered wages are up 4.7 per cent year over year.

That matches other measures in the labour force and payroll surveys, which still show wages growing at a yearly pace of between 4.5 per cent and 5.5 per cent. Compensation pressures may lag the cooling labour market, as wages tend to adjust slowly to rising prices due to the length of contracts, and companies and job seekers weigh changing trends in the supply and demand for labour.

Still, the Bank of Canada has warned that without gains in productivity, or gross domestic product output per worker, annual wage gains of between four and five per cent are inconsistent with achieving the two per cent inflation target.

The WestJet Group has cancelled about 40 flights in anticipation of a possible strike by its aircraft maintenance workers on Thursday.

The airline says about 6,500 travellers have been affected by the decision covering flights on Tuesday and Wednesday. WestJet says it started cancelling and consolidating its flights in order to park aircraft in a safe and organized manner.

Some 670 WestJet mechanics, represented by the Aircraft Mechanics Fraternal Association, are poised to walk off the job as early as Thursday night after serving the airline with strike notice earlier this week.

The flight cancellations came as WestJet waits for a response to its request that the Canadian Industrial Relations Board intervene.

If accepted, the move would refer the dispute to arbitration and prevent labour action by both sides, the company says.

The union, whose members voted overwhelmingly to reject a tentative agreement last week, opposes the move.