Corpcentre's Blog

September 15, 2009

Evaluating Canada’s Inflation: More Buying Power for Small Business

Volumes have been written in the last few months about Canada’s inflation rate, currently sitting at 0.25% annually, and the interest rates set by the Bank of Canada. As the 2009 recession is seemingly coming to an end, according to many government and private analysts, speculation exists as to how the interest and inflation rates will be affected.

According to the chief economist for the CIBC, Avery Shenfeld, there should not be any expected growth above non-inflationary potential until sometime in 2011. The economic slack created by the recession is quite large and is expected to persist for a couple of years. Although the Bank of Canada is rather optimistic in its projections, Shenfeld feels that inflation will still feel the downward pressure of a sizable output gap well into next year.

Shenfeld explained that the core inflation rate did not decelerate this year as much as the Bank of Canada predicted. The reason for this deceleration slowdown is due, in part, to a process that economists call the income effect. Essentially, the Bank of Canada has excluded most of the volatile items that have been deflating from the Consumer Price Index (CPI).

Putting aside economic evaluation, the real question is what this means for the average consumer. In real terms, a negative year-on-year inflation rate means an increase in buying power of the average wage. With lower gas prices at the pump, and new, lower mortgage bills, average Canadians will have more money in their pockets when they go shopping. Also important is the strength of the Canadian dollar. The strong dollar is having a dampening impact on retail prices of imported goods.

Mr. Shenfeld’s report does not see the projected US recovery as having much benefit for Canada. The US stimulus programs, while spurring economic growth in that nation, contain trade barriers with Canadian manufacturers that historically have benefited from trade with the US. Thus, US recovery may actually dampen some of Canada’s economic advancement.

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September 7, 2009

Visa to the U.S.

Gone are the days when a Canadian family would hop in the car and drive down for a day to the closest city in the U.S. to do a little shopping. But the desire to purchase certain goods in the U.S. still exists. Now, in the world of eCommerce, a British company has made shopping in the U.S. available to Canadians while staying at home.

Borderlinx, headquartered in the U.K. with additional offices in Brussels, was established by experts in eCommerce, logistics management and international trade. The company enables U.S. retailers to sell their products to a global marketplace by providing innovative eCommerce management solutions. Similarly, consumers globally are provided access to the best quality products at the best possible prices.

Canadian Visa credit card holders are now able to purchase goods online from American retailers with relative ease. Through Borderlinx, Canadian shoppers are provided with a U.S. address and shipping services. This makes previously hard to access stores as simple as shopping from the store around the corner. Studies conducted by Visa revealed that 37% of Canadian online shoppers prefer shopping from U.S. stores due to the variety of products available. The Borderlinx service simplifies the shopping procedures and provides an on-screen calculator that allows shoppers to know exactly what will be the final price of their purchase. Additionally, shoppers through this service have the option of consolidating their purchases from several U.S. stores into one shipment, thus reducing shipping prices.

Canada is the first country to utilize this shopping agreement with Visa although other countries are expected to join later this year.

In the current economic climate, when consumers are careful how they spend their money, this new service affords shoppers an excellent way to make informed shopping decisions.

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August 24, 2009

U.S. Economic Stimulus Plan Harms Canadian Business

Filed under: Buy America,canada economy,recession,US economy — corpcentre @ 2:46 pm

While the U.S is struggling to recover economically from the global recession, certain measures enacted by the American government to bolster the struggling U.S. economy may harm Canadians as part of the price.

Canadian leaders, including the provinces’ premiers, are united in their opposition to the “Buy America” provision in the U.S. economic stimulus package. The “Buy America” provision in the landmark $787 billion stimulus package states that government contracts in the U.S must use only products made in America. For Canadian manufacturers of iron, steel, and other manufactured goods that would be used in public works and building projects funded under the U.S. stimulus package, this translates into almost $280 billion that cannot enter the Canadian economy.

While Canadian leaders are quick to embrace the spirit of recovery of the nation’s largest neighbour, they are quick to point out that a large portion of Canada’s manufacturing industry is based upon trade with the U.S. The provincial leaders are supporting the federal government’s efforts to exempt Canada from this controversial clause in the U.S. economic package.

Some provincial leaders, as well as representatives of the industrial community, fear that the “Buy American” clause may force some Canadian industries to relocate to the U.S. in order to survive and continue manufacturing. In a sad irony, some Canadian manufacturers have recently seen a large increase in orders from the U.S., fueled by economic stimulus funds. However, while the increase in business is encouraging for the Canadian economy as well, the orders may have to be produced in the U.S. in order for the funds to flow to both the U.S. and Canadian companies.

Some Canadian companies have considered a boycott of American products in retaliation. However, a major shift in U.S. policy will only come to be at the national leadership level.

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