Spain faces 1st recession in 15 years December 31, 2008
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Spain may post its second successive quarter of negative growth by the year’s end, the country’s economy minister said Tuesday, which would push the country into a recession for the first time in 15 years.
“The fourth quarter is a quarter that could see negative growth ? if it does the conclusion is obvious,” Economy Minister Pedro Solbes said.
Two successive quarters of negative growth are considered a sign of recession.
Solbes made the comments after the Bank of Spain said in its December report that the fourth quarter will likely follow the pattern of the third one, which saw the economy shrink by 0.2 per cent.
Spain is the No. 4 economy in the euro zone and, according to some indicators, the eighth biggest in the world.
Up to a few years ago, Spain was the EU’s top job creator, but it now has the region’s highest unemployment at 11.3 per cent.
No surprise here – fewer firms expect to hire in ‘09 December 31, 2008
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You might have a harder time finding work in 2009, according to a new survey of Canadian hiring intentions released Tuesday.
On the other hand, the CareerBuilder.ca survey suggests that if you do have a job next year, you have a better than three-out-of-four chance of getting a raise.
Although few Canadian companies say they expect to add to their workforce in 2009, 77 per cent said they figured to increase the pay for existing workers within the next 12 months.
Careerbuilder, a search consultancy, said that only 18 per cent of the 286 hiring professionals surveyed were looking to increase their payrolls in 2009 while 16 per cent wanted to pare back their workforces.
In last year’s results, 46 per cent of firms thought they would be increasing their staffs in 2008.
Of course, the global economy, already running in slowdown mode as the year began, hit the credit crunch wall in September. As a result, the survey, taken between Nov.12 and Dec. 1, caught company executives in a sombre mood.
“After steady growth for the first 10 months, the weakened U.S. and global economies appear to be having a negative effect on Canadian job growth in the final months of 2008,” said Remy Piazza, managing director of CareerBuilder Canada.
“Looking ahead to 2009, current recruitment trends are expected to continue at a slower pace, as companies wait to see what happens with the global economy,” he said.
More than half of the group surveyed, 51 per cent, did not foresee any change to their company headcounts in 2009.
Rising pay ? except for new hires
What has held up between the survey forecast for 2008 and the one for 2009 was the percentage of companies saying they would hike pay for their employees.
The dip in this indicator was only marginal, reaching 77 per cent for 2009 compared with 84 per cent in the survey of 2008.
Of this group, 47 per cent expected to boost paycheques by three per cent, while 13 per cent anticipated raising pay by a relatively hefty five per cent or more in 2009.
Fewer companies, however, expected to raise salaries for new hires, 41 per cent compared with 65 per cent in last year’s study.
The last result might not come as a surprise, as Canada’s unemployment rate is expected to average 7.3 per cent for 2009 versus 6.1 per cent for 2008, according to RBC Economics.
Higher unemployment means more potential workers chasing each new job and less need to use higher salaries to attract employees.
As well, companies tend to reward existing employees and ask them work harder before taking on new labour.
U.S. consumer confidence slumps in December December 31, 2008
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The U.S. Conference Board said American consumer confidence fell to a record low in December, an indication that the holiday season could be bleak for retailers.
The business think-tank, which publishes the monthly indicator, said December’s dip reversed November’s modest uptick in sentiment and showed the flagging economy throughout the fall has turned buyer sentiment distinctly negative.
“The further erosion of the [index] reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008,” said Lynn Franco, director of the Conference Board’s consumer research centre.
The Conference Board’s index stood at 38 in December, a drop of 15 per cent versus November’s reading of 44.7. For the index, the year 1985 equals 100 per cent. That means the current level of consumer confidence is 38 per cent of the reading taken 23 years earlier.
Disappearing hope
American retailers had been crossing their fingers in the hope that the gloom pervading the economy would not infect their customers in the last month of the year.
The Conference Board’s reading indicates that any hope of a decent Yuletide selling season might be fading.
The “present situation” portion of the survey fell precipitously in December, tumbling to 29.4 from November’s 42.3.
As well, those consumers who viewed business conditions as “bad” rose to 46 per cent in the last month of the year, up from 40.6 per cent one month earlier.
Retailers had been experiencing slowing sales in the months leading up to Christmas.
Wal-Mart Stores Inc., for instance, saw its November sales rise by 1.6 per cent in November. That rate compares with sales growth of 8.3 per cent for the preceding 39 weeks in 2008.
Cape Breton paper mill ‘OK’ for now: official December 30, 2008
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A paper plant in Cape Breton is running at full production, though concerns linger about its future and the hundreds of workers who rely on it.
NewPage Corporation took over the plant in Point Tupper from Stora Enso about a year ago. At the time, people in the area feared the U.S.-based company would close the operation.
Twelve months later, the plant remains in full swing, said company spokeswoman Patricia Dietz.
“So far, we’re doing OK considering the volatile state of the marketplace right now,” she said.
Dietz said the mill that produces newsprint and the one that produces paper for magazines are in full production. The company is even hiring workers to replace those who are retiring.
About 550 people are employed by the plant, though hundreds of others in spinoff jobs depend on it too.
Dietz said the lower Canadian dollar and the plant’s modern machines are two big reasons the operation remains open, though the company is keeping a wary eye on global financial developments.
“As we all know, the markets for paper, like most other products, are very challenging these days and we have to carefully monitor the situation, not only week by week, but even day by day,” she said.
Brent MacInnis, a forest contractor in Frenchvale, outside Sydney, said this uncertainty has prompted his company to cut back from two shifts to one.
“It’s like the higher-up said at NewPage that nobody is exempt from the way the economy is going and there’s nothing that’s secure nowadays,” said MacInnis, who does 85 per cent of his business with NewPage.
MacInnis said his crew will make do with aging equipment for the time being, but he would like to replace it if he learns the future of the mill is more secure.
NewPage announced last January it was closing mills in Maine, Wisconsin and Ohio, but would spare the Point Tupper plant from the axe.
Crew Gold stops, starts Guinea gold mine December 30, 2008
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A TSX-listed mining company said it restarted production at its gold property in Guinea Monday after a new military government in the West African country ordered the company to resume operations.
Crew Gold Corp. said the new military regime of Capt. Moussa Camara told the company to resume production at its Lefa gold mine one day after telling the London-based company to halt operations.
“The review of mining concessions by the new regime would proceed while operations continue as usual,” said Bill LeClair, Crew’s interim chief executive officer.
Three-month stock chart for Crew Gold Corp.
The new military regime, which took power in a coup on Dec. 23, ordered Crew on Sunday morning to stop lifting at the Lefa mine, located 700 kilometres northeast of Guinea’s capital city of Conakry, but reversed itself by the afternoon, saying the company should keep the mine in operation.
For its part, Crew said it wants to comply with whatever the new government decrees.
“We understand that this is a difficult time for the government,” LeClair said.
Crew, which mines gold in Greenland and the Philippines, noted that its Guinean mine had a net book value of $354 million US, according to its latest financial statements.
At that valuation, the Lefa operation represented 83 per cent of the book value of its mining properties.
U.K. jobless to jump 30% in ‘09 says new survey December 30, 2008
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The number of unemployed in the United Kingdom could jump by nearly one-third in 2009, according to a new survey released Monday.
The Chartered Institute of Personnel and Development (CIPD), a U.K. organization of personnel managers, said that job cuts in England and associated countries could reach as high as 600,000 next year as the economy slows dramatically.
In November, the number without work in those countries stood at 1.86 million. Thus, the ‘09 cuts would represent a 32 per cent increase in the ranks of the unemployed.
If correct, the prediction would be the worst year for layoffs since 1991, CIPD said.
“This time last year, in the face of some skepticism, the CIPD warned that 2008 would be the U.K.’s worst year for jobs in a decade. It was, but in retrospect it will be seen as merely the slow-motion prelude to what will be the worst year for jobs in almost two decades,” said the association’s chief economist John Philpott.
CIPD surveys personnel managers for its reports, a methodology used in the United States and considered to be a reasonably accurate gauge of near-term hiring plans.
Housing slowdown
Similar to the United States, the United Kingdom was hit by a housing sector slowdown which, in turn, hammered those financial products based upon continually rising home prices. The resulting credit crunch body-slammed major financial institutions and slashed the country’s growth prospects.
Scotiabank recently revised its forecast for the U.K. economy, predicting the regional GDP would shrink by 1.9 per cent.
English business groups now say most companies are barely hanging on in the current economic environment and looking to cut payrolls.
“Most businesses are prioritizing survival at the moment,” said David Frost, director general of the British Chambers of Commerce, in a press release arguing against an increase in the U.K. minimum wage.
By way of comparison, a one-third increase in the ranks of Canada’s unemployed would represent an increase of 371,000 in the number of unemployed. A similar calculation in the United States would means another 3.3 million people in that country without work.
No fun with numbers
If one believes the CIPD prediction, however, the U.S. unemployment picture could wind up worse than the U.K. situation while Canada’s could be better.
‘09 GDP growth (%) Jobless increaseU.K. -1.9600,000U.S. -2.3 4.1 millionCanada -1.3 270,000Source: CIPD, BMO, Scotiabank
BMO Capital Markets currently forecasts that the American economy will contract by 2.3 per cent, 20 per cent worse than the United Kingdom. Canada, on the other hand, is expected to see its economy shrink by 1.3 per cent, almost 40 per cent less than across the Atlantic.
Reworking the math to incorporate the BMO growth rates would result in the United States losing more than four million jobs while Canada would see its jobless lines rise by approximately 270,000.
New Saskatchewan casino opens December 30, 2008
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Saskatchewan’s eighth casino opened its doors Monday amid optimism it will generate more revenue for First Nations.
The $35-million Living Sky Casino in Swift Current, a joint venture between the Saskatchewn Indian Gaming Authority and the File Hills Qu’appelle Tribal Council, will employ 340 people.
“The success of this casino will be broad and far-reaching,” tribal council chair Edmund Bellegarde said in a news release.
“In addition to creating jobs, it will generate important revenue for First Nations communities across Saskatchewan.”
The 50,000-square-foot complex has 220 slot machines, six game tables, a deli and a restaurant.
An adjacent performing arts centre is scheduled to open in February.
Profits from the casino are distributed to Saskatchewan First Nations.
SIGA also operates casinos in Prince Albert, Yorkton, North Battleford, White Bear First Nation and the Saskatoon area.
The Saskatchewan government runs casinos of its own in Regina and Moose Jaw.
Federal government posts $603M deficit in October December 29, 2008
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Jim Flaherty’s department released sobering fiscal news Tuesday, but the finance minister still had time to smile at his Toronto office. (Jim Ross/Canadian Press)
The federal government posted a $603-million deficit in October as tax revenues fell, according to figures released by the Finance Department on Tuesday.
Ottawa’s October shortfall was $87 million higher than the deficit for the same month last year and almost totally eliminated the government’s surplus for the April-to-October period.
For those seven first months of fiscal 2008, the government posted a surplus of $200 million, down from an excess of revenue over expenses for the same period last year of $6.1 billion.
The figures indicate that the amount Ottawa accumulates in tax revenue is falling faster as the year ? and the global recession ? progresses.
Finance Minister Jim Flaherty acknowledged Tuesday that the economy “is weakening significantly.”
The Canadian government will run a deficit as it strives to fend off a looming recession, Flaherty said, but it will offer detailed measures in the January budget on how it plans to balance the books once the ongoing economic crisis settles.
“We will ensure that spending that puts us into deficit is temporary, is for finite purposes, so that we will not be into a permanent deficit,” Flaherty said Tuesday before meeting with his newly assembled economic advisory panel in Toronto.
The finance minister said no decisions had yet been made about what exactly will be included in the 2009-2010 budget, to be presented Jan. 27, except that it will contain some sort of stimulus measures.
Nevertheless, he said it will show “how we’ll come out of deficit, so that it’ll be clear to Canadians that as the economy recovers the deficit will disappear and we’ll be in surplus again.”
Canada’s expanding pool of red ink in October was mostly attributable to falling tax revenues.
The government pulled in $18.76 billion in total revenue for the month, an increase of 3.7 per cent compared with October 2007.
Tax intake down
Considering only tax monies, however, the federal government actually gathered 1.6 per cent less for the public treasury this October compared with a year earlier. Ottawa posted tax revenue of $15.59 billion in those 31 days.
In this case, the goods and services intake was down a hefty 17 per cent, to $2.3 billion, in the month. The federal cut to the GST was the reason for lower revenues in this category throughout 2008, the Finance Department said.
“GST revenues were down $2 billion, or 11 per cent (for April to October), reflecting the one-percentage-point reduction in the GST rate effective January 1, 2008,” the department noted.
For the April-to-October period, Ottawa’s overall tax take stood at $111.6 billion, down 0.3 per cent compared with the same seven months a year earlier.
Of the $15.59 billion the government levied from Canadians in October, only 12.8 per cent, or $1.99 billion, came from corporate income taxes, down from 14.4 per cent for the same period one year earlier.
Corporate income taxes were off 23 per cent in the month and 12.6 per cent in the April-to-October period, compared with one year earlier.
Corporate taxes can be volatile in a single month. But shrinking corporate tax figures over a longer period can indicate a slowing economy.
Costs up
What Ottawa gives back to Canadians in the form of transfer payments to provinces and individuals rose in October.
The federal government had program expenses of $16.77 billion in the month, up 5.9 per cent versus October 2007. For the April-to-October period of 2008, Ottawa spent an additional 7.2 per cent compared with the same period one year earlier.
Welfare payments and higher medical transfers to provincial governments were the categories exhibiting the biggest increases in October.
In addition, employment insurance payments rose by 4.2 per cent in the April-to-October span, reaching $8.1 billion. For October, however, EI costs fell to $1.05 billion.
Still, the number of Canadians without work increased by slightly less than 110,000 in November compared with January. As a result, fiscal experts believe Ottawa might need to fork out more in terms of unemployment benefits in the coming months.
With files from the Canadian Press (more…)
Franco-Nevada to buy stake in U.S. gold field for $103M US December 29, 2008
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Franco-Nevada Corp. will pay $103.5 million US for a small piece of a prominent Nevada gold field, the Canadian miner said Tuesday.
Franco-Nevada has entered into a cash agreement with private individuals to buy a 7.29 per cent interest in the Gold Quarry Royalty property. The 209-hectare property, in the north-central part of Nevada, represents a portion of the lucrative Gold Quarry field.
The Gold Quarry open-pit mine is operated by Newmont Mining Corp., which calls the field “the most prolific gold field in the Western Hemisphere”.
Newmont operates the Carlin Trend site, which includes Gold Quarry, and said the Carlin mine had 9.5 million ounces of gold reserves at the end of 2007.
Franco-Nevada said this deal should help the company’s financials in the long run and still leave the miner with more than $500 million in cash to fund more takeovers.
“The Gold Quarry Royalty is expected to complement Franc-Nevada’s other gold royalties in Nevada and become a core addition to Franco-Nevada’s portfolio of over 285 royalty properties,” the company said in a release.
Facing lower prices
Franco-Nevada, which was spun off from Newmont in an initial public stock offering in 2007, earned $9.9 million, or 10 cents a share, for the third quarter of 2008. The company said it was facing lower gold prices in the final three months of the year, compared with the third quarter.
Purchasing the new royalty interest gives the company an opportunity to boost its cash flow in the face of lower bullion prices.
Three month stock chart for Franco-Nevada Corp.
Franco-Nevada expects to receive royalties on more than 11,200 ounces of gold each year from the royalty property, the company said. At a mid-December gold price in the range of $840 US an ounce, that level of production translates into almost $10 million of bullion production a year.
Global prices have fallen from a peak of $1,032 an ounce in March 2008, partly because of fears of deflation, especially in the United States.
In recent months, however, gold buyers have assumed their traditional stance of holding bullion as a defence against inflation, Scotiabank says.
According to this line of thinking, recent huge injections of financial resources by the U.S. Federal Reserve and other central banks will eventually lead to higher prices in many countries.
The deal is set to close on Dec. 31, subject to certain conditions, Franco-Nevada said.
U.S. housing market takes more sales hits December 28, 2008
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The U.S. housing market got a double-barrelled blast of bad news Tuesday as sales of new and existing homes had big tumbles last month.
The U.S. National Association of Realtors reported that sales of existing homes for November fell by 8.6 per cent to an annual rate of 4.49 million, down from October’s 4.91 million units.
Economists had been expecting November’s annual rate to come in at 4.9 million units, according to Thomson Reuters.
With falling sales, existing home prices also retreated, dropping by 13.2 per cent last month to a median of $181,300 US. Prices have not been that low since February 2004, and the November drop was the biggest year-over-year plunge since recordkeeping began in 1968.
The second piece of bad news came as the U.S. Commerce Department said new home sales last month came in at their weakest pace in almost 18 year.
The U.S. government said new home sales dropped by 2.9 per cent to a seasonally adjusted annual pace of 407,000 units. That was the weakest pace since January 1991.
Median prices for new homes also fell year over year by 11.5 per cent to $220,400 US. The drop was the largest since March of this year.
The U.S. housing market has been battered by rising defaults and foreclosures, and falling prices and sales, stemming from the subprime mortgage crash and the plunge in the U.S. economy.
