Venezuela hikes wages ahead of monetary overhaul

CARACAS, Venezuela — Venezuelan President Nicolas Maduro raised wages for the fifth time this year and said he wanted to peg prices to the nation’s fledgling cryptocurrency as part of a package of measures that economists say is likely to accelerate hyperinflation.

Maduro made the announcement in a televised address Friday night ahead of a previously announced monetary overhaul next week that will see five zeros lopped off from the nation’s currency, the bolivar, in a bid to fight inflation forecast by the International Monetary Fund to top 1,000,000 per cent this year.

Maduro set the new monthly minimum wage at 1,800 sovereign bolivars, the new currency that goes into effect Monday. That’s a 3,300 per cent increase over the wage of just over 5 million bolivars set in June with the old currency but still around $30 at the widely used black market rate.

Adding to confusion, he said he wanted to peg wages, prices and pensions to the petro — a cryptocurrency announced in February but which has yet to start circulating. He said one petro would equal $60, or 3,600 sovereign bolivars, with the goal of moving toward a single “floating” exchange rate in the future tied to the digital currency.

The embattled socialist leader is trying to rescue the OPEC nation’s economy from the brink against a backdrop of crippling U.S. financial sanctions, a foreign debt crisis and a plunge in oil production to levels unseen since the 1940s. Widespread shortages of food and medicine, as well as rolling blackouts that have kept the country’s second-largest city largely in the dark the past week, are adding to social tensions.

Maduro has long contended that Venezuela’s crisis is the product of an “economic war” waged by his enemies and the U.S. and he took the same line Friday.

“The U.S. government has been carrying out a war, in several ways, to stop the Republic from making international purchases and asphyxiating us internationally,” Maduro said as his top advisers looked on.

Venezuelans have grown accustomed to ambitious economic announcements that fall flat and Maduro’s long televised address Friday night was short on details.

But in raising wages so aggressively and announcing the crypto-pegged exchange rate he appeared to be acknowledging that the government was losing the battle to prop up the currency, economists said.

In setting a rate for the petro, Maduro was implicitly taking the country’s exchange rate to 6 million bolivars per U.S. dollar, on par with widely used black market exchange rates compared with the current official DICOM rate of 248,832 bolivars per dollar.

Economists said they expect more financial turmoil.

“The next few days will be very confusing both for consumers and the private sector,” said Asdrubal Oliveros, director of Caracas-based think-tank Ecoanalitica, which is highly critical of the government. “It’s a chaotic scenario.”

Maduro said the government would help small businesses and industry absorb the financial hit from the wage hike.

He also hiked the nation’s sales tax four points to 16 per cent and said he would take other measures to eliminate Venezuela’s fiscal deficit, which is believed to be about 20 per cent of gross domestic product. Oliveros called the goal admirable but illusory so long as the government continues to print money to finance runaway spending and hike wages.

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Kevin Carmichael: Remember inflation? It’s back to haunt us

TORONTO — You remember the Consumer Price Index, right? If not, time to reacquaint yourself. The indicator is newsy again.

The CPI rose three per cent in July from a year earlier, the biggest increase since 2011, Statistics Canada reported Friday.

So forget all you’ve been reading about disinflation; prices now are at the outer limit of the Bank of Canada’s comfort zone. All things equal, the latest figures increase the odds of a rate increase before the end of the year, adding to recent evidence the economy is running hotter than anticipated.

“Maintaining stable inflation is likely to require further rate hikes by the central bank, with the next one likely coming in October,” said James Marple, an economist at Toronto-Dominion Bank.

Canada’s central bank aims to keep inflation at about two per cent, but won’t panic as long as increases stay within a range of one to three per cent.

The CPI’s surprise jump emboldened the handful of analysts who think the central bank is in danger of falling behind the curve. Brett House, deputy chief economist at Bank of Nova Scotia, said the data reinforce Scotia’s call that borrowing costs will be headed higher when policymakers next gather to set rates in September.

Ranko Berich, head analyst for Europe and Canada at Monex, the foreign-exchange provider, said the 3.1-per-cent increase in the cost of services from a year ago show Canada’s economy no longer is the feeble thing that required special care after oil prices collapsed in 2014.

“It’s looking increasingly like the BoC’s September meeting is live for a rate hike,” Berich said in an email, adding that he puts the odds of an increase at 60 per cent.

Policymakers anticipated that a series of idiosyncratic factors would cause inflation to accelerate temporarily this year, so they might shrug at StatCan’s newest tally. In its latest quarterly economic outlook, in July, the central bank says higher gasoline prices, higher minimum wages, retaliatory tariffs and a weaker currency would push inflation beyond two per cent over the second half of the year. Still, it’s unclear whether the bank was ready for a jump to three per cent.

The July Monetary Policy Report predicts CPI increases will average 2.5 per cent in the third and fourth quarters before slowing at the start of 2019. Based on that, the bank raised rates last month, and said it will continue to do so, but at a “gradual” pace.

When the Bank of Canada raised the benchmark rate, Stephen Poloz, the governor, said uncertainty over trade policy was the biggest risk facing the outlook. So the next increase will come when central bankers decide that inflationary pressures outweigh whatever damping effect the renegotiation of the North American Free Trade Agreement and the trade wars are exerting on future exports and business investment.

It will be difficult to ignore a reading of three per cent, but Poloz and his deputies on the Governing Council likely will require more evidence before accepting that prices have become untethered.

The CPI gets pushed around by volatile items such as gasoline, so the central bank relies on a few measures of core inflation that correct for that volatility. All three of those gauges were around two per cent in July for the fifth month in a row, suggesting underlying inflation is on target.

The July numbers feature an unusually large 16-per-cent increase in the cost of air transportation from the previous month, reflecting higher oil prices, increased demand and a relative lack of competition. Air Canada, the near-monopoly carrier, said when it released its second-quarter results last month that it would be charging higher fares to offset jet-fuel prices that are more than 30 per cent higher than they were this time a year ago.

“It is worth reminding investors that the BoC usually does not react to such transitory factors, which tend to dissipate,” said Sébastien Lavoie, a former Bank of Canada economist who now leads economic analysis at Laurentian Bank.

Policymakers also will want more evidence of whether Canada’s tit-for-tat trade war with the U.S. is putting upward pressure on inflation.

StatCan said it found no effect after one month of duties. Lovers of American pickles might disagree: the hamburger topping cost $3.96 in July compared with $3.85 in June. (The cost of Canadian pickles dropped to $5.53 from $5.64.) However, lean ground beef was actually cheaper, even though U.S. beef is now subject to a 10-per-cent tariff.

Relatively stable food prices show the power of competition. One of the reasons the Bank of Canada thinks inflation was so slow for so long was the price war between legacy sellers and newer entrants such as Walmart and Amazon.

However, the trade war will test retailers’ willingness to keep shielding their customers from higher costs. Eric La Flѐche, chief executive of Metro Inc., told analysts on Aug. 15 that the various retaliatory tariffs would cause some inflation; at the same time, he made clear that either Metro or its suppliers will continue to absorb some of those costs. “We will deal with it supplier by supplier, category by category,” he said. “We will be competitive.”

The outcome of Metro’s negotiations, and thousands of others like them, will play a big part in deciding the path for interest rates.

Central bankers may need more than a few weeks to determine how many companies are behaving like Air Canada, and how many are more like Metro. But they won’t need that much time. It’s pretty clear interest rates are headed higher, probably this autumn.

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Ottawa to review Constellation Brands’ blockbuster investment in Canopy Growth

A deal that could see U.S.-based alcohol giant Constellation Brands Inc. take a majority ownership stake in leading cannabis producer Canopy Growth Corp. will be reviewed by the federal government, a spokesperson for Innovation, Science and Economic Development Canada confirmed on Friday.

Smiths Falls, Ont.-based Canopy and Victor, New York’s Constellation announced a proposed transaction Wednesday that involves Constellation investing approximately $5 billion in Canopy in a deal that could raise it’s stake in the marijuana firm to around 38 per cent.

The deal also includes warrants that could let Constellation buy even more shares of Canopy potentially growing Constellation’s ownership in Canopy above 50 per cent — at a cost of at least another $4.5 billion. What’s more, the proposed transaction would also allow Constellation to nominate four of the seven directors on Canopy’s board.

Pending shareholder and regulatory approval, the deal is scheduled to close by the end of October.

But the investment, which the companies said would be “the largest to date in the cannabis space,” will apparently draw scrutiny from the Canadian government as well. 

“We can confirm that U.S.-based Constellation Brands Inc.’s proposed investment in Canopy Growth Corporation is subject to review under the Investment Canada Act,” said Hans Parmar, a spokesperson for Innovation, Science and Economic Development Canada, in an email on Friday. “The proposed acquisition, like all foreign investment transactions, will be reviewed on its merits based on the overall economic benefit for Canada.”

That review is also likely to be a first for Canada, the spokesperson added.

“The proposed transaction would very likely be the first cannabis-related investment reviewed under the Act given the only recent passing of legislation to legalize cannabis,” Parmar said.

A presentation on the deal by Constellation had suggested the transaction may require approval under the Investment Canada Act, legislation that says it is intended to “provide for the review of significant investments in Canada by non-Canadians.” An order issued under the same act scuttled a proposed takeover of Canadian construction firm Aecon Group Inc. by a Chinese state-owned company earlier this year, albeit in the name of national security.

While it seems doubtful a cannabis deal poses any sort of similar concerns, Parmar said that the federal government is required to review proposed purchases of Canadian companies by foreign businesses when the value of the deal hits a certain level, which is currently $1.5 billion “for investments originating in trade-agreement-partner countries, such as EU member countries.”

Asked if Constellation’s ultimate goal is to take control of Canopy, the head of the pot producer said Wednesday that he couldn’t speak for his U.S. counterparts.

“But I suspect if we do what we’re going to do, which is build a global platform that generates massive amounts of (earnings before interest, taxes, depreciation, and amortization) over the next few years, that is a pretty amazing company that everybody would think is a good one to own,” said Canopy chairman and co-CEO Bruce Linton during a conference call with analysts.

The Canopy-Constellation deal also highlights Canada’s status as a leader in the marijuana industry. When Canada legalizes recreational pot on Oct. 17, it will be the first G7 country to do so, setting itself up as a test case for the rest of the world to watch.

Walid Hejazi, an associate professor of international business at the University of Toronto’s Rotman School of Management, warned that the Canadian government being too overprotective could harm the industry and consumers.

“If we want Canada to be globally competitive in cannabis, we should be open to foreign direct investment that will bring lots of capital and technology to Canada,” Hejazi said in an interview. “And it will force Canadian companies to adopt global best practices.”

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DULUX Paints by PPG Unveils Two Deep, Luxurious Greens as 2019 Colours of the Year

TORONTO — Homeowners craving a contemporary version of old-school elegance and sophistication can look to DULUX® Paints by PPG for trending paint colour inspiration. The leading national brand has named two deep green tones as Colours of the Year for 2019: Night Watch (DLX1145-7), a deep green-black from the brand’s new colour collection, and Mojito Shimmer (036VS), a glistening, frosted dark green from the Dulux Effects FinishesVENETIAN SILK™ collection.

“Both of these colours represent the ultimate in luxe, delivering a rich, striking look that brings sophistication and depth to living spaces,” said Martin Tustin-Fuchs, PPG brand manager, Dulux Paints by PPG. “An evolution from last year’s popular tinted black, these glamourous dark greens are symbolic of consumers’ desire for positive change – to move from darkness to twilight and to search for an element of rebirth in today’s complex, technologically-driven world.”

Night Watch, a colour truly inspired by nature, emulates the feeling of lush greenery and delivers a calming yet invigorating sense of euphoria. With the ability to be used as a neutral, yet having the intensity to also stand out as an accent colour, Night Watch couples well with soft grey-browns or warm sandy beiges, such as Elusion (DLX1005-2) or Earthy Cane (DLX1103-4), or intense rust tones like Lucky Penny (DLX1201-7) from the Dulux Paints by PPG colour palette.

Versatile enough to work in either a traditional or contemporary setting, Night Watch works best in bedrooms and living areas as well as on kitchen cabinetry. It also pairs particularly well with metallic finishes and pewter tones and creates a sophisticated “welcome” and dynamic statement against brick or stucco when painted on the front door.

According to Tustin-Fuchs, Mojito Shimmer is the perfect complement to Night Watch as it features a distinctive, lustrous, frosty-green coating that adds unprecedented class and wow factor to walls.

“As a stand-out colour in the Dulux Venetian Silk line, there is nothing else like Mojito Shimmer on the market,” Tustin-Fuchs explained.

Dulux Venetian Silk finish is made from new technology that enables users to transform their walls in a single day, infusing them with light-reflecting colour and texture to match any personal taste. Available in 40 striking, light-animating colours, the finish produces a silky layered effect that is smooth to the touch, creating a distinctive multi-toned and luminous surface that adds striking depth to walls.

Tustin-Fuchs recommends painting a feature wall in Dulux Venetian Silk Mojito Shimmer and the remaining walls in Night Watch. For a greater contrast, he suggests complementing Mojito Shimmer with a refined, urban neutral, such as off-white Hourglass (DLX1022-1), silver-blue Nautical Star (DLX1036-3) or a lighter grey like Thin Ice (DLX1001-3) by Dulux Paints.

“Even if you don’t change anything else in the room, the transformative effect of applying Dulux Venetian Silk finish to just one wall is remarkable,” Tustin-Fuchs said.

To receive more information about Dulux Paints’ 2019 Colours of the Year, explore the brand’s full 2019 colour palette or experiment with the creative possibilities of Dulux Venetian Silk finish, visit https://www.dulux.ca/diy/summer-projects.

Until September 9, 2018, Dulux Paints by PPG is offering major discounts on its Dulux Effects Finishes paint products. For more details and to find a store near you, visit www.dulux.ca/diy/promotions.

Find DuluxPaints by PPG in more than 260 company-owned Dulux Paints and BÉTONEL® / Dulux Paints stores across Canada serving the consumer and professional markets. No matter where the Dulux brand is sold in Canada, it offers an extensive portfolio of high-quality products and services to the marketplace.

PPG’s architectural coatings business in the U.S. and Canada is an industry leader in residential and commercial coatings, delivering the latest technologies and operational advancements through its strong portfolio of brands. It manufactures and sells interior and exterior paints, stains, caulks, repair products, adhesives and sealants for homeowners and professionals. Its distribution network includes more than 15,000 touchpoints through company-owned stores, independent dealer locations and major home improvement centers across the U.S. and Canada. Visit ppg.com/ac for more information.

PPG: WE PROTECT AND BEAUTIFY THE WORLDв„ў

At PPG (NYSE:PPG), we work every day to develop and deliver the paints, coatings and materials that our customers have trusted for 135 years. Through dedication and creativity, we solve our customers’ biggest challenges, collaborating closely to find the right path forward. With headquarters in Pittsburgh, we operate and innovate in more than 70 countries and reported net sales of $14.7 billion in 2017. We serve customers in construction, consumer products, industrial and transportation markets and aftermarkets. To learn more, visit www.ppg.com.

We protect and beautify the world is a trademark and the PPG Logo is a registered trademark of PPG Industries Ohio, Inc.
Dulux is a registered trademark of AkzoNobel and is licensed to PPG Architectural Coatings Canada, Inc., for use in Canada only.
Venetian Silk and Liquid Metal are trademarks of PPG Architectural Finishes, Inc. BГ©tonel is a registered trademark of the PPG Group of Companies.

Contacts

PPG Media Contacts:
Lynne Evosevich, 724-742-5475
Architectural Coatings
[email protected]
or
Gail Bergman PR
Gail Bergman, 905-886-1340
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www.ppg.com/AC

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Inflation hits highest level since 2011 in test to Bank of Canada’s rate hike plan

OTTAWA — Canada’s annual inflation rate in July hit its highest level in nearly seven years as gasoline prices and the cost of air transportation pushed prices higher.

Statistics Canada said Friday the consumer price index for last month was up 3.0 per cent on a year-over-year basis, compared with a 2.5 per cent increase in June.

Economists had expected a year-over-year inflation rate of 2.5 per cent, according to Thomson Reuters Eikon.

The result, the highest reading since September 2011, put inflation at the top end of the Bank of Canada’s target range of one to three per cent.

CIBC economist Andrew Grantham said the reading “at least modestly” increased the odds of a September interest rate hike by the Bank of Canada.

“We continue to lean toward an October rate hike rather than September. However, a big upside surprise in Q2 GDP could tip the balance on that,” Grantham wrote in a report.
Second-quarter GDP figures are set to be released Aug. 30.

The Canadian dollar rose after the latest inflation report was released, reflecting the increased chance of higher interest rates.

Earlier this summer, the Bank of Canada predicted inflation to move as high as 2.5 per cent — due to temporary factors like higher gas prices — before it settles back down to two per cent late next year.

The Bank of Canada can raise interest rates to help prevent inflation from climbing too high. The central bank raised its trend-setting interest rate to 1.5 per cent earlier this summer.
However, the average of Canada’s three measures of core inflation, which leave out more-volatile data like pump prices and are closely watched by the central bank, rose last month to 2.0 per cent compared with 1.96 per cent in June.

Benjamin Reitzes, Canadian rates and macro strategist at the Bank of Montreal, said one month did not make a trend and added that core inflation remains stable.

“At this point it would take more than one month I think to really change the narrative generally around inflation,” he said.

“The overall backdrop for inflation hasn’t changed all that much.”

Reitzes noted the Bank of Montreal continues to expect the central bank to keep its key interest rate target on hold at its Sept. 5 announcement, but raise it in October.

All eight major components of the consumer price index rose on a year-over-year basis in July with the transportation index being the largest contributor with an 8.1 per cent increase.

A 25.4 per cent increase in the price of gasoline and a 28.2 per cent increase in the cost of air transportation compared with a year ago helped push overall prices higher.

Food purchased from restaurants also gained 4.4 per cent, while mortgage interest costs rose 5.2 per cent.

On the flip side, telephone service costs were down 5.1 per cent and traveller accommodations slipped 4.1 per cent compared with a year ago.
I
n a separate report, Statistics Canada estimated the direct impact of tariffs on U.S. imports implemented earlier this year on the consumer price index to be up to 0.07 percentage points.

“An amount of up to $600 million of tariffs per year may be passed through to consumer prices, which may cause a decimal place increase in the posted CPI change during a limited period of time,” the agency said.

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