Things are looking up within Canada’s economy.
That’s according to data from Statistics Canada, which reported this month that inflation in December was 6.3%, down from 6.8% in November and 6.9% in October. Inflation peaked last summer at 8.1%, during a series of interest rate hikes by the Bank of Canada. In December, Canadians paid less for gasoline and groceries when compared to November, though mortgage interest was up 18% and rent up 5.8% compared to December 2021.
But with inflation slowing generally, the central bank has now indicated a pause on further increases for the time being after a hike of the key interest rate to 4.5% on Jan. 25, the highest it’s been in 15 years.
“We’re turning the corner on inflation,” Bank of Canada Governor Tiff Macklem told reporters this week. “We’re still a long way from our target, but recent developments have reinforced our confidence that inflation is coming down.”
It follows an optimistic jobs report from December, when the economy added 104,000 positions and the jobless rate fell to 5%. The same month, retail sales rose about 0.5% from the month prior, which “suggests sales recovered … as Canadian consumers continue to prove resilient in the face of aggressive rate hikes,” Shelly Kaushik, an economist at BMO Capital Markets, wrote in an analysis of the data.
Still, there’s lingering concern over the massive layoffs in the tech industry that started late last year. Among the largest affected firms are Amazon, which will soon lose 18,000 jobs, and Google, which will let go of 12,000 people; for both firms, the decisions mark their largest layoffs in company history. Microsoft will be shedding 10,000 jobs through March 31, and Meta announced in November it would be letting go of 13% of its staff.
Laura Hansen, president of Image Group (asi/230059), says the tech layoffs have been “unnerving,” adding that “we can’t tell yet if this will have a ripple effect to other sectors. I wish we had a crystal ball.” However, improved consumer sentiment across the board – and a welcome return of in-person events – helped company sales hit a 30% year-over-year increase for the first two weeks of January.
“Year-end parties and celebrations resumed, so company dollars pivoted back to those types of events,” says Hansen. “The silver lining for us and the industry as a whole is that many of our projects are conference- and event-driven now.”
“Buyers are confident in the value that our products offer for both brand awareness and employee support. Kitting is continuing to be a priority for gifting, product launches, team-building and incentive contests.” Ann Baiden, Innovatex Solutions
Mark Jackson, president of SwagDrop (asi/300621), says they had a healthy 2022, and the enthusiasm among end-buyers is continuing into the new year.
“We came off a strong year with sales up just over 100% [in December], largely due to new client acquisitions and a legacy customer that had a significant rebrand,” says Jackson. “Even with the tech layoffs, total employment is strong nationally and companies are looking to engage in employee onboarding, appreciation and culture-building. We thought there might be a pause at the beginning of 2023, but new projects have continued to be brisk.”
The rise in retail sales last month signals an improvement in consumer confidence, and Ann Baiden, CEO and founder of Innovatex Solutions Inc. (asi/231194), says the promo industry is experiencing the same.
“Buyers are confident in the value that our products offer for both brand awareness and employee support,” she says. “Kitting is continuing to be a priority for gifting, product launches, team-building and incentive contests. We’re not seeing any signs of this slowing down, but it’s definitely a tricky time to navigate sales with some suppliers implementing major price increases on already-quoted products.”
Indeed, contending with inflation’s impact on prices is going to be a challenge this year. “For the first time in many of our careers, we’re in an inflationary environment where customers are expecting to pay more than they did last year,” says Aaron Moscoe, CEO of TPS Promotions & Incentives (asi/341409). “This presents a strategic opportunity, but we need to be careful not to cross a threshold that moves customer buying patterns away from our companies and our industry.”