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GDP growth at a standstill in Canada, oil and gas sector one major bright spot – Conference Board of Canada

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2 years ago

4 minute read

Article submitted by the Conference Board of Canada

Muted Outlook for Canadian Economy

Consumer Spending Holding Strong Despite Confidence Being Weak

Despite the progress that has been made, inflation is still weighing down Canada’s economy according to new research from The Conference Board of Canada. In keeping with its previous forecast, real GDP growth will be at a virtual standstill for the rest 2023. For the year as a whole that means a 0.9 per cent gain, followed by only a modest 1.4 per cent improvement in 2024.

“Concerns about the U.S. financial system are unlikely to be mirrored in Canada given our country’s more concentrated banking system,” stated Ted Mallett, Director, Economic Forecasting at The Conference Board of Canada. “The indirect effects will be muted, and business investment was already expected to be weak in Canada so there is relatively little business lending to pull back.”

The global economy has slowed sharply over the past year as major central banks have increased interest rates, but despite the weak near-term growth anticipation, the chances of a severe global recession have receded. Inflation remains a threat, but two key developments provide reason for optimism. The first is the mild winter in Europe eased concerns of an energy crunch, with natural gas prices now lower than before the Russian invasion of Ukraine. The second is China’s removal of the zero-COVID policy, which saw their economy open at a much faster pace than anticipated.

The U.S. economy continues to defy expectations, with an expansion of 2.7 per cent in the final quarter of last year. Several factors should ensure that the coming slowdown in economic growth won’t be as severe as past slumps in economic activity. The major reason behind this view is the excess savings that households in America built up during the pandemic when the opportunity to spend was severely limited.

A slower U.S. economy will weigh on Canada’s trade results in the coming months, but the exports sector will still see a good showing in 2023, according to The Conference Board of Canada. Supply chain disturbances, which significantly restrained activity for many export sectors last year, have shown signs of easing over the past several months. A weak domestic economy, the depreciation of the loonie, and a steep decline in machinery and equipment investment will lead to muted activity for total real imports this year.

The oil and gas sector is a major bright spot in Canada thanks to strong corporate profits and ongoing projects in Western Canada and Newfoundland and Labrador.

Canada’s labour market has seen an impressive start to 2023, according to The Conference Board of Canada, which is being fuelled by an uptick in population growth. International migration to Canada has risen sharply in recent quarters, driven by record immigration targets and increased admissions of non-permanent residents, including temporary foreign workers.

Higher mortgage rates have slowed residential demand and unsurprisingly, the resale market has corrected with sales and prices decreasing. This downturn will frustrate some homeowners who bought at peak prices, while higher interest rates could severely impact some homeowners forced to renew mortgages at higher interest rates.

“While much of the COVID-19 support spending is now in the rear-view mirror, governments continue to have a heightened presence in the economy,” continued Mallett. “The pandemic brought about a new era of challenges to public finances, which were hardly looking rosy heading into the pandemic. The most notable question mark in today’s fiscal climate is how well governments can cope with new economic shocks.”

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Business

Peavey Mart confirms all 90 stores will be closing

Published on January 28, 2025

By

From Retail Insider

By Craig Patterson
 
Sources have confirmed to Retail Insider that Peavey Mart, a Canadian retail chain known for its agricultural supplies, hardware, and home improvement products, is closing all of its stores nationwide. Liquidation sales began on the weekend. The store closures include the flagship location in Red Deer, Alberta, where the company’s headquarters are also based. This marks a significant and surprising turn of events for a company with deep roots in Canadian retail, dating back to its establishment in Winnipeg in 1967.

(Update: Peavey Industries confirmed store closures on Monday evening in a press release)

A Legacy of Growth and Acquisitions

Peavey Mart has long been a staple for rural and small-town communities, catering to farmers, ranchers, and homeowners. Over the years, the company expanded from its Western Canada base into Ontario and other regions, particularly following its acquisition of TSC Stores in 2016. That move helped establish Peavey Mart as a household name in Ontario, diversifying its reach and bolstering its product offerings. It was also a huge expense.

In 2020, the company further broadened its scope by acquiring the Canadian master license for Ace Hardware from Lowe’s-owned RONA Inc., adding 107 Ace Hardware locations to its portfolio. This strategic acquisition was part of Peavey Industries’ efforts to compete in the hardware and home improvement sector against larger rivals like Home Depot and Canadian Tire.

However, Peavey’s relationship with Ace Hardware International came to an end in 2024, following the announcement that the partnership would cease on December 31, 2024. This decision marked a turning point for the company, forcing it to refocus on its Peavey Mart and MainStreet Hardware brands.

Financial Struggles and Early Signs of Trouble

Last week, Peavey Industries announced plans to shutter 22 underperforming Peavey Mart locations in Ontario and Nova Scotia by the end of April. At the time, the closures were presented as part of an organizational restructuring aimed at stabilizing the business and positioning it for future growth.

Doug Anderson, President and CEO of Peavey Industries, addressed the challenges in a previous statement:

“The Canadian retail environment has undergone significant disruptions in recent years, and Peavey has not been immune to these challenges. These closures are a challenging yet necessary step to stabilize and position our business for future growth.”

Despite these efforts, it now appears the company’s financial difficulties have proven insurmountable, leading to the closure of all 90+ stores across Canada.

Liquidation signs at Peavey Mart’s Red Deer store on Saturday, January 25. Photo: Joel Graham via Facebook

Financing and Restructuring Efforts Fall Short

In its bid to remain viable, Peavey Industries had secured a CAD $155 million financing package from Gordon Brothers. The package included a $105 million revolving credit facility, a $30 million term loan, and a $20 million consignment program. This financial injection was intended to facilitate restructuring efforts, support ongoing operations, and provide a lifeline to the struggling retailer.

Additionally, Peavey Industries collaborated with Gordon Brothers to ensure a smooth transition for affected employees and communities. However, these measures were ultimately insufficient to save the business.

Impact on Communities and Employees

The closure of Peavey Mart will leave a significant void in the Canadian retail landscape, particularly in rural and small-town markets where the chain has long been a trusted resource for agricultural and home improvement needs. The closures are also a major blow to the company’s workforce across the country.

While Peavey Industries initially expressed a commitment to supporting its employees during the transition, the abrupt announcement of a full shutdown leaves many workers and communities grappling with uncertainty.

Image: Peavey Mart
Image: Peavey Mart

A message from the Peace River Manager

In a heartfelt statement shared on Facebook, the manager of the Peace River, Alberta, Peavey Mart location expressed regret about the closures. The post sheds light on the situation and offers a glimpse into the company’s struggles over recent years. The manager wrote:

“Peace River Community,

It is with regret that I inform you of the upcoming closure of Peace River Peavey Mart, along with all other Peavey Mart locations across Canada. While many details are being kept confidential, I will keep you updated as we receive more information from the corporate team. At this time, I do not have a time frame; my best guess is 3 to 6 months.

Until an official statement is released by the company, I can only offer my personal perspective on the situation. Since 2016, Peavey Mart has expanded rapidly, acquiring over 70 stores in Eastern Canada, opening new stores, and acquiring several other businesses. However, growth was met with challenges, including a decline in business levels and rising interest rates. Unfortunately, many of the acquired stores did not prove profitable, and the company’s efforts to adjust did not have the desired results.

As a last resort, Peavey partnered with Gordon Brothers, an American investment firm, which I believe now holds a majority stake in the company and are making all decisions going forward. It appears the current plan may be to liquidate and close all locations, with potential rebranding, though which stores will remain open is still uncertain.

Please note that this is my personal opinion, and I am sharing it to help clarify the situation for our valued customers. I kindly ask that you direct any concerns toward our corporate offices, as these decisions are beyond the control of the staff here in the store.

We have worked diligently to serve you, and we appreciate your understanding during this time. It’s difficult to come to terms with the closure of so many profitable locations in Western Canada, with Peace River being one of the most notable. The Peace River location recently achieved top sales growth company-wide, consistently delivering a healthy profit despite Peavey’s constant inventory challenges.

I would like to express my sincere gratitude to all of our customers. It has been a pleasure serving the Peace River community, and I will miss it when our time here comes to an end. If you have any questions, please feel free to visit the store, and I will do my best to provide answers. At the current moment, the company has told us they are not ready to make a statement yet.”

Update: Press Release from Peavey Industries

Peavey Industries confirmed Monday evening that all Peavey Mart stores will be closing. The following is the press release that was forwarded by email to Canadian media sources:

“Red Deer, Alberta – January 27, 2025 – Peavey Industries LP (“Peavey” or “the Company”), Canada’s largest farm and ranch retail chain, announced today that it has sought and obtained an Initial Order for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) from the Court of King’s Bench Alberta.

Following the recently announced closures of 22 stores in Ontario and Nova Scotia, the Company will now begin store closing sales at all remaining locations across Canada. This includes 90 Peavey Mart stores and six MainStreet Hardware locations. The closures and liquidation efforts will commence immediately.

The decision to seek creditor protection and close all stores was made after thorough evaluation of available options, in consultation with legal and financial advisors. The Canadian retail industry is experiencing unprecedented challenges, including record-low consumer confidence, inflationary pressures, rising operating costs, and ongoing supply disruptions along with a difficult regulatory environment. These factors have created significant obstacles for businesses like Peavey.

“This was a profoundly difficult decision, but one that allows us to explore the best possible alternatives for the future of the Company,” said Doug Anderson, President and CEO of Peavey Industries LP. “For nearly six decades, our customers’ loyalty, employees’ dedication, and the resilience of the communities we serve have been the cornerstone of our business. We remain focused on working with our partners and stakeholders to preserve the Peavey brand and the value it represents.”

The Company’s immediate priority is to generate liquidity through the closure process while continuing to work with funders, partners, and stakeholders to explore potential opportunities to preserve the brand.

Peavey Industries LP is committed to providing regular updates as the situation develops.”

Craig Patterson
Craig Patterson
Located in Toronto, Craig is the Publisher & CEO of Retail Insider Media Ltd. He is also a retail analyst and consultant, Advisor at the University of Alberta School Centre for Cities and Communities in Edmonton, former lawyer and a public speaker. He has studied the Canadian retail landscape for over 25 years and he holds Bachelor of Commerce and Bachelor of Laws Degrees.
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Business

Instead of competing, Ontario’s Ford plans to spend billions to stimulate growth

Published on January 28, 2025

By

From the Fraser Institute

By Jake Fuss and Grady Munro

Premier Doug Ford, who will trigger an election this week, recently said he plans to “spend billions of dollars” to stimulate Ontario’s economy if President Donald Trump makes good on his threat to slap a 25 per cent tariff on Canadian exports into the United States.

But rather than piling on even more spending, the next Ontario government—whoever that may be—should enact policies that finally get provincial finances back in order and make Ontario an attractive place to work and invest.

Relief can’t come soon enough. The Ford government has woefully mismanaged provincial finances. When first elected in 2018, Premier Ford promised to balance the budget and reduce government debt—something Ford’s former finance minister Vic Fedeli described as a “moral” imperative. Yet since then, the government has run deficits in five of six years and its net debt burden has increased by an estimated $70.3 billion.

As a result, in 2023 Ontario had the second-highest debt burden of any province (only Newfoundland and Labrador had a larger burden) when measured on a per-person basis.

Based on the Ford government’s latest fiscal update, the reckless mismanagement has continued into this fiscal year (2024/25). Despite enjoying lower-than-expected debt interest costs and higher-than-expected revenues—which combined could have nearly eliminated the budget deficit—the Ford government instead chose to again increase spending and keep running deficits.

Why should Ontarians care?

Because the Ford government’s penchant for spending and borrowing is hurting Ontario’s economy. When the government runs a deficit and accumulates more debt, it competes with individuals, households and businesses for borrowing. This drives up interest rates (i.e. the cost of borrowing) for everyone, which can reduce the level of investment in the economy. Moreover, because rising debt and higher interest rates equal higher interest payments, the government faces pressure to raise taxes. And the brunt of the new tax burden will fall on younger generations of Ontarians.

Also this week, Premier Ford said President Trump “wants to attract businesses from Ontario to come down to the United States,” which will eliminate jobs in the province.

And Ford’s right. When policymakers create the conditions to attract people and investment, their economies grow and people prosper.

If the Ontario government wants to beat Trump at his own game, it should lower personal income taxes and make the province a more attractive destination for high-skilled workers such as engineers and entrepreneurs who contribute greatly to the economy and create jobs. Lower taxes also improve the incentive for individuals to engage in productive activities such as working, saving and investing. In 2023, Ontario had the third-highest top combined (provincial and federal) personal income tax rate in Canada and the U.S.

The government should also lower business taxes to make Ontario more competitive with the U.S. in attracting businesses and investment—the pillars of job-creation and prosperity.

Regardless of who wins the election, the next Ontario government should finally restore some semblance of fiscal responsibility and balance the budget. And it should lower taxes for workers and businesses to help create prosperity across the province. That’s a much more sensible and sustainable way to counter threats from Trump (or anyone else) than spending billions of dollars borrowed on the backs of Ontarians.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute
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