CANADA ECONOMICS

CANADA - BRAZIL AWARDS

Canada-Brazil Awards. Aug 8, 2017. Joint Research Projects

Competition: Open for research projects between April 2018 and September 2020

Deadline: October 11, 2017

Who Applies: The Canadian professor who will take on the role of Project Lead. Eligible and complete applications will only be reviewed if a corresponding application has been submitted by the Brazilian Project Lead to the Federal Agency for Support and Evaluation of Graduate Education (CAPES) before the deadline.

Description: The objective of this program is to support team-oriented research projects between Canadian and Brazilian universities collaborating in mutually beneficial areas of research. The collaborations are expected to result in high quality research that will have an impact in Canada and in Brazil through the mobility of both Canadian and Brazilian research students and Project Leads. This program is open to all academic disciplines.

Guidelines

The Canada-Brazil Awards – Joint Research Projects support exchanges of research teams collaborating on bilateral research projects. The projects must engage in collaborative research in mutually beneficial areas of research that is of benefit to both Canada and Brazil. Applicants must clearly explain the advantages of the partnership for both countries, and indicate if a joint peer-reviewed article or book publication is anticipated upon completion of the project.

FULL INFORMATION: http://www.scholarships-bourses.gc.ca/scholarships-bourses/can/institutions/brazil-cbjp-brezil.aspx?lang=eng

INTERNATIONAL TRADE

EDC. SEPTEMBER 7, 2017. WEEKLY COMMENTARY. Look Who’s Emerging Again
By Peter G Hall, Vice-President and Chief Economist

As we swing into the fall, exporters have a lot of issues to wrestle with. Top of the list is concern about the state of global trade, and the popular backlash to globalization. With NAFTA renegotiation is full swing, most are hoping for the best…but also considering opportunities in other markets. With CETA soon to be inked, eyes are on European possibilities. There are also rumblings about a future agreement with China, and the CEPA deal with India is still a possibility. Small wonder that there’s now more talk about trade diversification than I have heard for awhile. With growth picking up in the US, Europe and other OECD markets, is there any sign of a spillover into the emerging world?

One key signal is export performance. When the Great Recession blew in, export-dependent emerging markets were pummeled. China’s trade intensity – the sum of exports and imports as a share of GDP – went from almost 70 per cent to less than 50 per cent in a memorable two-year plunge. That would have been catastrophic for the economy had the government not stepped in with a very substantial stimulus package. What makes this shift far worse is that in the seven odd intervening years, it hasn’t changed. That chunk of GDP never came back. Not every emerging economy suffered as much as China, but they have collectively realized much slower growth in export activity in the post-2010 period.

Until recently, that is. Since late 2016, inflation-adjusted export activity across emerging markets has been somewhat more animated. With inflation-adjusted exports averaging growth in the 2-3 per cent range since 2012, year-on-year growth jumped through the first half of this year to 5 per cent. That’s still a far cry from the double-digit growth that was common early in the new millennium, but it does appear to be breaking with the gloomy post-recession trend.

What is the source of the action? Latin America is showing some signs of movement, but inconsistent from country to country. Collectively, Africa and the Middle East saw a flash of growth in 2016, but it has since faded. On the other hand, Emerging Asia seems to be moving upward in a way we haven’t seen since 2012. Both exports and imports are rising enough to shift trade intensity upward in a manner we haven’t seen for years. It also suggests that the region is dealing with some of those excessive inventories of goods that piled up during the slow-growth years. Emerging Europe is also putting out more impressive numbers.

Industrial production is another gauge. There’s a notable shift in trend growth in developing markets during the past year, and again, it seems to be Emerging Asia and Eastern Europe that are taking the lead.

Prices of equities – a noted leading indicator of overall economic activity – are also on the march. The MSCI share price index for all emerging economies is up on a year-to-year basis by 20 per cent, the highest annual growth since 2010, and the trend is currently up. The bearish sentiment that followed the 2014-16 commodity price plunge is now giving way to a dramatic rush of optimism, according to measures of the investor mood.

While these signals hint that something may be in the works in the emerging world, it is still too recent and too modest to suggest that there is a conclusive turnaround in the works. Emerging economies generally have some distance to go before past excesses will be sopped up, and uncertainty around global trading arrangements will keep exporters and investors the world over on tenterhooks until there is some form of resolution. Still, when that moment occurs, this growing segment of the world economy promises to impress again with annual increases in GDP that make the developed world blanch. Waiting for that moment to arrive is almost too late, as it runs the risk of getting lost in the rush of returning deal-doers. If a revival in growth is inevitable, then diversification is a good ‘now’ strategy.

The bottom line? Growth fundamentals suggest that emerging markets will soon catch the wave of growth that is washing through the developed world. Data point to early signs that the surf’s getting up. Instead of watching from binoculars on the beach, maybe it’s time to wax the board, paddle out and get ready to ride – before the crowd catches on.

EDC. SEPTEMBER 7, 2017. Export Performance Monitor

The Export Performance Monitor is a monthly publication which tracks recent movements in Canadian exports by industry and geographic market. The insight also references our Global Export Forecast which is produced twice yearly.

FULL REPORT: http://www.edc.ca/EN/Knowledge-Centre/Economic-Analysis-and-Research/Documents/export-performance-monitor.pdf

Canadian International Trade Tribunal. September 7, 2017. Tribunal Initiates Final Injury Inquiry — Carbon and Alloy Steel Line Pipe from Korea

Ottawa, Ontario — The Canadian International Trade Tribunal (the Tribunal) today initiated an inquiry to determine whether the dumping of carbon and alloy steel line pipe originating in or exported from the Republic of Korea has caused injury or retardation or is threatening to cause injury. This final injury inquiry was initiated further to a notice received from the Canada Border Services Agency stating that a preliminary determination had been made respecting the dumping of the above-mentioned goods.

On January 4, 2018, the Tribunal will determine whether the dumping has caused injury or retardation or is threatening to cause injury to the domestic industry.

The Tribunal is an independent quasi-judicial body that reports to Parliament through the Minister of Finance. It hears cases on dumped and subsidized imports, safeguard complaints, complaints about federal government procurement and appeals of customs and excise tax rulings. When requested by the federal government, the Tribunal also provides advice on other economic, trade and tariff matters.

FULL DOCUMENT: http://www.citt-tcce.gc.ca/en/node/8130

Global Affairs Canada. September 8, 2017. Canada takes another strategic step in the Asia-Pacific region: exploratory free trade agreement talks agreed to with ASEAN nations

Ottawa, Canada - Canada is further deepening its strategic economic relationship with Asia-Pacific nations, which offer enormous potential for Canadian businesses and opportunities to create good-paying jobs for Canada’s middle class.

Exploratory discussions on Canada-ASEAN free trade agreement

At today’s 6th ASEAN Economic Ministers-Canada Consultation in Manila, representatives of all 10 ASEAN member states and Canada together agreed to launch exploratory discussions to determine the potential for an ASEAN-Canada free trade agreement. Canada is a Pacific nation and is stepping up its strategic commitment to trade diversification by expanding influence and economic footprint in this burgeoning, high-growth region. Canada has taken significant steps to bolster its influence within ASEAN, including by establishing a diplomatic presence in all 10 ASEAN member states and appointing a permanent ambassador to the organization itself. This announcement marks another important milestone in the Canada-ASEAN economic relationship.

New Canadian representative to APEC Business Advisory Council

Further building on Canada’s relationship with the Asia-Pacific region, the Government of Canada today announced the appointment of Ralph J. Lutes, Vice President, Asia, for Teck Resources Limited, to the APEC Business Advisory Council (ABAC). Mr. Lutes successfully competed in an open, transparent and merit-based process. He will play a key role in representing the interests of the Canadian business community throughout the Asia-Pacific region. ABAC provides a crucial interface between Canadian business leaders and their counterparts from APEC member economies, enabling dialogue on issues related to trade and economic cooperation.

Quotes

“Canada is a Pacific nation and is pursuing a comprehensive, strategic and progressive trade agenda throughout the region. An enhanced economic partnership with ASEAN will create good middle-class jobs and benefit our small and medium-sized enterprises by providing clear, stable and progressive rules of conduct so businesses can grow and expand in one of the world’s fastest-growing and most dynamic markets.”

- François-Philippe Champagne, Minister of International Trade

“As one of Canada’s representatives to the APEC Business Advisory Council, Ralph Lutes will play an important role in increasing Canada’s trade and economic cooperation with APEC and promoting progressive trade policies that benefit everyone.”

- Pamela Goldsmith-Jones, Parliamentary Secretary to the Minister of International Trade

Quick facts

ASEAN

• ASEAN is a regional intergovernmental organization comprising 10 member states: Cambodia, Brunei, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand, and Vietnam.
• In 2016, Canada-ASEAN merchandise trade reached a value of $21.6 billion.
• ASEAN is one of the world’s fastest-growing economic regions, with a GDP estimated at over $3.1 trillion in 2015.
• The Philippines is the chair of ASEAN in 2017 and is responsible for coordinating ASEAN’s overall relationship with external partners, including Canada.
• This year marks the 40th anniversary of Canada’s status as a Dialogue Partner of ASEAN. Canada is one of only 10 countries with this important level of partnership.

APEC

• APEC’s 21 members are home to nearly 2.9 billion people who generate 60% of the world’s GDP and accounted for 84% of Canada’s total merchandise trade in 2015.
• APEC includes four of Canada’s top five trading partners: the United States, China, Mexico and Japan.
• ABAC brings together business and political leaders from APEC member economies who are focused on increasing trade and economic cooperation. Canada’s ABAC representatives are Suzanne Benoît, President of Aéro Montréal (appointed in 2015) and Ralph J. Lutes, Vice President, Asia, of Teck Resources Limited (appointed in 2017).

INDUSTRY

StatCan. 2017-09-08. Industrial capacity utilization rates, second quarter 2017

Industrial capacity use
85.0%, Second quarter 2017
1.8 pts increase (quarterly change)

Source(s): CANSIM table 028-0002

Canadian industries operated at 85.0% of their production capacity in the second quarter of 2017, up from 83.2% in the previous quarter. This reflected the very strong growth in economy-wide production. This was the second straight quarter where the industrial capacity utilization rate exceeded the historical average of 83.1%.

The mining, quarrying and oil and gas extraction sector was the main source of the increase.

Chart 1   Chart 1: The industrial capacity utilization rate continues to rise
The industrial capacity utilization rate continues to rise



Oil and gas extraction is the main source of the increase

Following two consecutive quarters of declines, the capacity utilization rate in oil and gas extraction rose 3.3 percentage points to 84.0% in the second quarter, due to higher volumes of oil and gas extraction.

The capacity utilization rate in construction posted a third consecutive quarterly increase, rising from 86.4% to 87.7%. As in the previous quarter, the increase was mainly due to residential construction, and to engineering and repair work.

The capacity utilization rate in forestry and logging fell from 86.8% to 85.7% in the second quarter, a third consecutive quarterly decline. This decrease was attributable to a decline in activities in the industry.

Increases in the manufacturing sector are attributable to durable goods manufacturing
The manufacturing industry operated at 84.2% of its capacity, up 0.7 percentage points from the previous quarter. Durable goods manufacturing industries were the main source of this increase.

The capacity utilization rate rose in 15 of 21 major manufacturing industries, representing approximately 85% of the gross domestic product in the manufacturing industry.

Chart 2   Chart 2: Capacity utilization in manufacturing sector increases again
Capacity utilization in manufacturing sector increases again



The capacity utilization rate in the machinery manufacturing industry rose 5.1 percentage points to 85.3% in the second quarter, the largest gain since the fourth quarter of 2011. This increase was attributable to an overall gain in production in the industry.

The rate for transportation equipment manufacturers rose from 86.7% to 87.8%, due to increased production in most industry subsectors.

After declining in the first quarter, the capacity utilization rate for computer and electronic product manufacturers rose 4.4 percentage points to 86.8% in the second quarter. A widespread increase in production in all computer and electronic product manufacturing subsectors led to this gain.

The overall increase in the manufacturing sector was partially offset by declines in a few industries, notably in beverage and tobacco product manufacturing. This industry saw its capacity utilization rate fall from 87.0% to 82.2%, reflecting lower production.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170908/dq170908b-eng.pdf

StatCan. REUTERS. SEPTEMBER 8, 2017. Canada second-quarter industrial capacity rises to highest in 10 years

OTTAWA (Reuters) - Canada’s industrial capacity rose in the second quarter to its highest level since 2007 on higher volumes of oil and gas extraction, data from Statistics Canada showed on Friday.

Capacity utilization rose to 85.0 percent from a downwardly revised 83.2 percent in the first quarter. It was the highest level since the third quarter of 2007.

It was also the second straight quarter that the utilization rate exceeded the historical average of 83.1 percent, the statistics agency said.

Capacity utilization in the oil and gas sector rose to 84.0 percent after two quarters of declines. Industrial utilization also rose to 87.7 percent in the construction sector, helped by residential building.

The manufacturing industry saw its capacity utilization rise to 84.2 percent, driven by an increase in sectors that create durable goods. Overall, capacity utilization rose in 15 of the 21 major manufacturing industries.

Reporting by Leah Schnurr; Editing by Chizu Nomiyama

COMPANIES

The Globe and Mail. 8 Sep 2017. Canadian cities look to host Amazon HQ. Toronto, Vancouver, Montreal and Calgary are among those planning bids for tech giant’s second North American headquarters
JEFF GRAY
SEAN SILCOFF
With reports from Kelly Cryderman and Shane Dingman


STUART ISETT/THE NEW YORK TIMES
Pedestrians walk past a recently built trio of geodesic domes, which are part of the Seattle headquarters for Amazon, on Thursday. The online retail giant said it was searching for a second headquarters in North America, with Toronto, Vancouver, Montreal and Calgary among those planning bids.
The mayors of several Canadian cities say they want to compete for an irresistible economic prize: The right to become the home of Amazon.com Inc.’s socalled second headquarters, a massive complex the company says comes with up to 50,000 jobs and more than $5-billion (U.S.) in investment over the next 15 years.
The Seattle-based online retailing giant announced on Thursday that it was soliciting bids from cities across North America to house what it calls its “HQ2.” However, the odds of a Canadian city winning are low, some say, hampered by a shortage of skilled workers and less attractive government subsidies. Companies here also complain that money spent luring a foreign multinational could be better spent supporting smaller Canadian firms and startups.
Nonetheless, within hours of the Amazon announcement, the mayors of Toronto, Vancouver, Montreal and Calgary all declared that their cities would be great hosts for the tech giant. Ontario officials also said Thursday that high-tech centres Ottawa and Kitchener-Waterloo have been in touch with Queen’s Park about throwing their hats in the ring.
Canada’s hopefuls will face extremely steep competition south of the border. Dallas, Denver, Pittsburgh, Baltimore, Boston, New York, Nashville, Cincinnati and even hurricane-battered Houston are all said to be already contemplating bids. And many U.S. jurisdictions have also historically been more prepared to dole out millions in subsidies and tax breaks than their Canadian counterparts.
Amazon’s request for proposals for the project states that the winning city should have a population of more than one million, a “stable and business-friendly environment and tax structure,” the ability to attract and retain technical workers and a site with public transit and close to highways and airports. But it also makes clear the company expects big government handouts, asking bidders to spell out all of their incentive programs: “The initial cost and ongoing cost of doing business are critical decision drivers.”
Davin Raiha, an assistant professor at the University of Western Ontario’s Ivey School of Business, warns that Canadian governments may not have the stomach to match richer offers from U.S. cities and states. But he adds that many studies suggest governments end up overpaying when they bid this way for investment.
Plus, Amazon is already quite practised at winning handouts in the United States, he said, garnering hundreds of millions in tax breaks in exchange for building distribution centres in Texas, for example.
“Amazon has a history of being able to extract a lot in subsidies in almost wherever they go,” he said. “… I wouldn’t bet on Amazon coming here. I doubt that the offers they will receive from Canada will be especially competitive compared to the ones they will get in the U.S.”
Still, Ontario, for its part, has handed over cash to tech giants in recent years. In 2013, Premier Kathleen Wynne announced a deal that saw $220-million provided to Cisco Canada in exchange for a pledge of up to 1,700 new jobs.
Brad Duguid, Ontario’s Minister of Economic Development and Growth, says his government had given out $3-billion in various subsidies to businesses since 2004, resulting in $27-billion in private investment and 170,000 jobs.
He said his government was willing to put up significant subsidies if it meant Amazon would put its massive complex somewhere in the province: “You’re either in the game of attracting these kinds of jobs, or you’re not. … We’re no stranger to this kind of competition.”
The federal government was also expected to be involved. In a statement, Innovation Minister Navdeep Bains was noncommittal about providing subsidies for any Amazon bid, but appeared open to the idea.
“While other parts of the world are focused on building walls, Canada is focused on building bridges and opening doors. We are building the economy of the future and we welcome the opportunity to engage with our provincial and municipal counterparts to attract further investments and resilient jobs,” Mr. Bains said.
Toby Lennox, CEO of regional economic development agency Toronto Global, likens the process to an “Olympic bid.” He said Toronto should stress its innate strengths – such as its educated work force and vibrant city life – rather than focus on outbidding competitors with cash: “You can go and give them a gazillion dollars but it’s not going to give them the talent that they need.”
Some in Canada’s tech sector warn that throwing money at a foreign giant would have a negative effect on smaller Canadian companies already here, who do not enjoy similar handouts. Plus, Amazon’s arrival would only worsen the shortage of qualified tech workers the sector faces, sucking Canadians away from domestic firms and startups.
“It makes me angry,” said Carl Rodrigues, founder and CEO of tech firm SOTI, based in Mississauga. “We’re sitting right here in front of their nose. We’re trying to scale. Invest in Canada.”
Whatever the pitfalls, Amazon’s prize is something no bigcity mayor can afford to ignore. In an interview, Toronto Mayor John Tory said his city, with its burgeoning tech sector, universities and cultural attractions, would be an “outstanding fit” for Amazon and pledged to champion the effort.
“We have to be seen among the appropriate leading contenders from the beginning,” Mr. Tory said, noting Amazon’s boast that it had contributed $38-billion (U.S.) to the city of Seattle’s economy since 2010 and calling the proposed second headquarters “a megaproject of the highest order.”
Calgary Mayor Naheed Nenshi, whose city was hit with an oilprice slump that produced unemployment and vacant office space, says he, too, is interested.
Mr. Nenshi said his city is affordable, has plenty of office space, is a key Western transportation hub and has a highly educated work force: “I cannot imagine a better place than Calgary for this kind of investment, and I will be making that case strongly.”
Vancouver Mayor Gregor Robertson, who is travelling in China, said in an e-mailed statement that his city and its “world-class tech ecosystem” was an obvious contender, partly because it is so close to Amazon’s home base in Seattle: “As mayor, I – in partnership with the Vancouver Economic Commission – will put forward an outstanding bid for Amazon’s next North American HQ that will put Vancouver over and above other cities.”

AMAZON. REUTERS. SEPTEMBER 7, 2017. Amazon opens bidding to cities for $5 billion 'HQ2', a second headquarters
Nandita Bose, David Randall

(Reuters) - Amazon.com Inc (AMZN.O) said on Thursday it would build a $5 billion second headquarters in North America, kicking off a competition between cities and states to offer tax cuts and incentives that could bring 50,000 new jobs.

The largest e-commerce company said it intended to create “HQ2”, a headquarters that would be a “full equal” to its Seattle office, Chief Executive Jeff Bezos said in a statement. The company wants a metropolitan area of more than a million people with an international airport, good education and mass transit.

Amazon was likely to land its second headquarters in a cheaper city than Seattle and score subsidies. The company promised up to 50,000 jobs averaging more than $100,000 in annual compensation over the next 10 to 15 years.

Cities and states immediately began saying they would bid. Dallas, Houston, Toronto, St. Louis, Kentucky and Miami are a few that are committed to bid. Chicago Mayor Rahm Emanuel has made a case for his city in discussions with Bezos, a Chicago spokesman said.

Companies with two headquarters are rare and distance could challenge the management abilities of Bezos and other leaders, but some investors and analysts also saw the geographical diversification as a way to cut costs and risk. It would also make it easier for the conglomerate to break up down the line if it so chooses.

“The company is changing radically and it depends so heavily on disruptive thinking. Moving to a new city and finding a new talent pool is a good idea,” said Antony Karabus, chief executive of HRC Retail Advisory.

Incentives from land to fee cuts to relocation packages will be a major part of the decision, Amazon said.

Local governments have gone to great lengths to secure jobs and investment. Wisconsin’s legislature, for instance, recently voted to give Taiwanese manufacturer Foxconn a $3-billion incentive package to build a $10-billion liquid crystal display factory in the state.

Amazon’s plan will also boost its political leverage at a time when it has been blamed for the decline of bricks-and-mortar retailers. President Donald Trump has criticized Amazon as doing “great damage”, costing jobs in cities and states. The Wisconsin Foxconn factory will be in the home district of Paul Ryan, Speaker of the U.S. House of Representatives.

Amazon said it was seeking proposals by Oct. 19 and would select the location next year.

More than 50 cities have the 1-million metropolitan area population Amazon targets. Likely contenders could include U.S. Midwest states, where Amazon has many warehouses; Texas, which is the base of the Whole Foods Market grocery chain it acquired this year; and other business-friendly states.

Amazon has been awarded more than $1 billion in state and local subsidies since 2000, according to estimates by watchdog Good Jobs First. Texas leads the way with the value of subsidies to Amazon, followed by Illinois, Kentucky, and Ohio, it said.

Seattle has become an expensive city, ranking 44th on the Economist Intelligence Unit global cost-of-living ranking.

“The high cost of living and the high cost of real estate, all of that adds up to why expanding in that market is not viable,” said Burt Flickinger, managing director of retail consultant Strategic Resource Group.

Amazon may be looking for “more affordable” locations such as Detroit or Atlanta, said Daniel Morgan, vice president and senior portfolio manager, at Synovus Trust Company in Atlanta. Synovus holds a “large” position in Amazon, he added.

Amazon’s shares closed up 1.2 percent at $979.47.

TWO AMAZONS, EVENTUALLY?

Amazon began as a bookseller and grew into the internet’s biggest retailer. It built an award-winning movie studio and has expanded around the world. Its workforce has exploded to more than 380,000 from under 25,000 since it moved to downtown Seattle in 2010.

Total revenue was $136 billion at the end of last year, up sharply from $34 billion in 2010. Amazon recently snatched up Whole Foods Market for $13.7 billion.

Ashim Mehra, an analyst who works on the $256 million Baron Opportunity Fund, said the dual-city strategy pushed Amazon toward an eventual split between its Amazon Web Services business and its retail business.

Such a move would ease the threat of increased regulations on the company and cut internal competition for the best engineers, he said.

The “HQ2” project would initially need more than 500,000 square feet and up to 8 million square feet beyond 2027, Amazon said. Its Seattle campus spreads across 8.1 million square feet in 33 buildings and employs more than 40,000 people.

The second headquarters also allows the company to lower its operational risks should a natural disaster hit Seattle, said Josh Cummings, an analyst who works on several funds at Denver-based Janus Henderson funds.

He also saw the potential for an eventual split. “I think that immediately this is about staging the next leg of growth at Amazon as it exists today, but down the road this gives them an additional degree of freedom if they decide or are forced to separate the company,” he said.

Writing by Peter Henderson, Additional reporting by Karen Pierog in Chicago, Supantha Mukherjee and Aishwarya Venugopal in Bengaluru, Richa Naidu and Karen Pierog in Chicago, Stephanie Kelly, Caroline Valetkevitch, David Randall and Daniel Bases in New York; Editing by Saumyadeb Chakrabarty, Nick Zieminski and David Gregorio

EMPLOYMENT

The Globe and Mail. REUTERS. ECONOMY. SEPTEMBER 8, 2017. Canada’s jobs growth picks up, unemployment rate falls
FRED LUM/THE GLOBE AND MAIL
LEAH SCHNURR

OTTAWA - The Canadian economy added more jobs than expected in August, sending the unemployment rate to its lowest since the financial crisis, but part-time hiring accounted for all of the gains.

The unemployment rate dipped to 6.2 per cent from 6.3 per cent, its lowest since October 2008, while the participation rate held steady, Statistics Canada said on Friday.

Part-time jobs increased by 110,400 last month, while the economy shed 88,100 full-time positions.

Read more: Better wage gains? They're coming, eventually

Job growth picked up by 22,200 positions overall, topping expectations for an increase of 19,000.

Economists said the mixed report was not surprising, given the strong run of job gains over the last year. The employment report can be volatile from one month to the next.

"It's ... a slightly more moderate pace than what we've been looking at in the first half of the year, but it still represents solid hiring by Canadian firms," said Paul Ferley, assistant chief economist at Royal Bank of Canada.

There were also signs that wage pressures were rising, with average hourly pay up 1.7 per cent from a year earlier, the strongest annual increase since last October. Wage growth has been muted despite solid gains in the labor market.

"That's a pretty solid appreciation in the pace of wage growth," said Derek Holt, head of capital markets economics at Scotiabank. "I think we are on the path to 2.5 to 3 per cent wage growth off into next year."

The mixed report led the Canadian dollar to pare gains against its U.S. counterpart. Markets trimmed expectations that the Bank of Canada could raise interest rates next month but increased bets on a December move.

Surprisingly strong economic growth prompted the central bank to increase rates earlier this week for the second time this year and left the door open to more hikes.

Service sector industries led employment gains in August, with an increase of 14,600 jobs in the finance, insurance and real estate category. Employers also added 9,800 positions in transportation and warehousing, and 8,900 in accommodation and food services.

Most of the decrease in full-time employment occurred among workers between the ages of 15 and 24. In the last year, employers have added 213,000 full-time jobs, compared with 161,000 part-time positions.

Separate data showed Canada's industrial capacity rose to 85.0 per cent in the second quarter, its highest level since 2007, on increased volumes of oil and gas extraction.

BLOOMBERG. 8 September 2017. Canada Wages Speed Up as Jobs Gain for Ninth Month
By Theophilos Argitis

• Measure of productive capacity reaches highest since 2007
• Labor market numbers may encourage central bank to keep hiking
• Canada’s economy just keeps on producing.

The national statistics agency released figures Friday that showed the labor market is in its longest run of employment gains since the 2008-2009 recession, with signs also emerging that sluggish wages are also on the rise and companies are quickly running out of capacity.

The data could add to expectations the Bank of Canada -- which raised borrowing costs Wednesday -- is poised to continue tightening to prevent the surge in growth from fueling inflation. The Canadian dollar is up a full two-cents since Monday.

Highlights of the Jobs Report

• The country added 22.2k jobs in August, the ninth straight monthly gain, versus market expectations for a 15k gain
• Annual average hourly wage gains hit 1.8%, the highest since October 2016
• The jobless rate fell to 6.2%, the lowest since 2008

Canada’s labor market has been on a tear since the second half of last year, with employment gains rising at the fastest pace in almost a decade. That in turn is boosting incomes and helping fuel a consumption binge that’s made the country’s economy the fastest growing in the Group of Seven.

“One more month, and one step closer towards full employment,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a note to investors.

Friday’s report will also ease worries -- expressed by the Bank of Canada this week -- about subdued wage gains, which are among the few bits of data left hinting at excess capacity. Average hourly wage gains are still below the average of 2.6 percent since 1998.

Separately, Statistics Canada reported industrial production has reached 85 percent of capacity, the highest 2007.



The report was less positive than the headline number suggests, muting gains Friday in the dollar. The total gain masked a sharp drop in full-time work, which was down by 88,100 in August. Part-time employment was up 110,400.

Self-employed workers were responsible for the full increase in total employment, recording a 32,700 gain during the month. So-called employees recorded a drop of 10,400.

Another negative was that goods-producing industries saw their five-month run of employment gains end, posting a 13,700 drop. That was due to an 11,100 decline for manufacturers.

Canada’s currency was little changed after the report, trading at C$1.2117 against its U.S. counterpart at 8:50 a.m. Toronto time. Yields on government two year bonds climbed 3 basis points to 1.51 percent.

Still, over the past 12 months, gains have been driven by full-time employment. Since August 2016, Canada has recorded a 374,300 gain in total employment led by a 213,400 gain in full- time workers. Employees accounted for 273,500 of the total gain.

Hours worked were up 2.2%, the biggest gain since August 2015.

— With assistance by Erik Hertzberg

MINING

The Globe and Mail. REUTERS. Bloomberg. SEPTEMBER 8, 2017. Brookfield prepared to exit stake in North American Palladium as metal soars

Brookfield Asset Management Inc. is laying the groundwork for the possible sale of one of the world's only dedicated palladium companies even as prices for the metal used in car pollution control devices soar.

Canada's largest alternative asset manager is the majority owner of North American Palladium Ltd., whose main asset is a mine near Thunder Bay, Ontario with reserves of 21 million metric tons. Brookfield's involvement began in 2013 when the company almost collapsed amid a poorly conceived expansion.

What began as a $130-million loan became a 92 per cent equity stake after the company's situation deteriorated further and it failed to find a buyer. Since then, North American Palladium has redesigned the asset and managed to post its first quarterly profit in six years as prices of the precious metal rallied.

Asked if Brookfield intends to hold the asset to reap rewards over the long term, Brookfield Managing Partner Peter Gordon, who is chairman of the board at Northern American Palladium, suggested the firm would look to exit once its strategy is achieved.

"We're disciplined investors," he said in an interview this week. "When the turnaround is complete and we feel the company's value is fairly reflected in the share price, we'll consider our opportunities and alternatives."

The objectives Brookfield set out for North American Palladium two years ago – namely getting production up to the mill's capacity and having a long-term plan for the mine site – will largely be completed this year, he said.

Meanwhile, Brookfield has been encouraging Chief Executive Officer Jim Gallagher to get the message out to investors who are still wary after the company's near collapse and given the small 8 per cent free float.

"A number of investors were burnt obviously in 2015 with the restructuring," Gallagher said in the interview. "There's a lot of baggage out there and we're just now back talking to people."

Those talks included a road show this past June, he said.

Palladium – used to help clean exhaust gases in gasoline engines – is the best-performing major metal this year, with a 38 per cent jump. Demand for such engines has soared in the wake of Volkswagen AG's diesel-emissions scandal.

Shares Underperform North American Palladium shares have gained just 10 per cent this year and are largely unchanged since Brookfield took over. Its market value is C$343-million ($280-million). As the Toronto-based company posts some good headlines going forward, "I think you're going to see some life in our share price," Gallagher said.

Both men expect palladium prices to remain high as demand continues to outstrip supply, with Europe increasingly moving away from diesel engines in favor of gasoline and the electric-car revolution still in its infancy. Gallagher said hybrid cars still require as much palladium, or more, as those powered by traditional engines.

Asked if higher prices, combined with North American Palladium's restructuring, could make the company a takeover target, Gordon said it's a fair question. "This is a terrific asset and should generate a lot of interest within the mining industry today."

INFLATION

StatCan. REUTERS. SEPTEMBER 8, 2017. Inflation targets still proving elusive
Jonathan Cable

LONDON (Reuters) - Bank of England rate setters won’t shock markets with any policy moves when they meet next week as a struggling economy and Brexit fears offset any concerns over inflation sailing well above target.

Britain’s economy initially withstood the shock of last year’s decision to quit the European Union but slowed sharply in early 2017 and is expected to grow by just 0.3 percent this quarter, half the rate of the euro zone.

That poses a challenge for the central bank as, rather than targeting growth, its main remit is to keep inflation -- currently running at 2.6 percent -- at 2 percent.

“We expect the Bank of England to leave monetary policy unchanged, given the subdued growth story and ongoing Brexit uncertainty,” said James Knightley at ING.

“Nonetheless, there are going to be members who continue to vote for a rate hike, given that consumer price inflation is likely to move higher once again.”

At the last meeting two members of the Monetary Policy Committee voted to increase rock-bottom interest rates, but none of their seven colleagues are expected to join them on Thursday in calling for higher borrowing costs.

“Our own view is that rates won’t rise this year or next. But that doesn’t mean the rollercoaster ride for expectations is over,” said Liz Martins at HSBC.

“An unexpectedly hawkish tilt from the MPC in September could mean a kneejerk reaction which pushes sterling and rates higher -- if only temporarily.”

The risk of a “bumpy Brexit” does not mean the Bank should keep interest rates at their record low, MPC member Michael Saunders said last week, as the central bank risked being rushed into sharper rate hikes in future, potentially hurting growth.

Inflation broke through target earlier this year, largely because sterling’s plunge in value since Britons voted to leave the European Union in June 2016 has pushed up import prices.

Policymakers at the European Central Bank are facing the opposite problem -- they are struggling to get inflation up to their 2 percent target ceiling as a strengthening euro has kept price rises in check.

They left their own ultra-easy monetary policy alone on Thursday but will decide next month how to proceed with the Bank’s massive stimulus program in 2018.

ECB President Mario Draghi said the euro’s exchange rate is “very important” and needs careful monitoring.

His cautious comments raise the chances the ECB will opt to phase out its 2.3 trillion euro bond buying scheme only very slowly next year, despite solid economic growth.

“The current economic conditions warrant a slightly less accommodative monetary policy in the near future, provided the euro or any other disturbing element do not derail the euro zone’s recovery,” said Louis Harreau at Credit Agricole.

In the United States, the Federal Reserve has already started on a tightening cycle but appears to be getting more dovish in the face of weak economic data.

Recent comments from Fed policymakers show a split on the outlook for inflation and how that will play out for future interest rate increases so August price data due on Thursday should give markets more of a steer.

The Swiss National Bank also meets on Thursday but is unlikely to move, with political tensions and low inflation keeping their hands tied.

Switzerland’s franc is susceptible to appreciation during periods of increased geopolitical tension and the potential for conflict in the Korean peninsula will weigh on minds.

North Korea has stepped up the development of weapons in defiance of U.N. sanctions and tested several missiles this year, including one that flew over Japan. Pyongyang conducted its sixth and biggest nuclear test on Sept. 3.

A survey on Friday showed most South Koreans doubt North Korea will start a war, although President Donald Trump again highlighted the possibility of a U.S. military response.

Editing by Catherine Evans

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