2nd U.S. stimulus package not needed: economists August 31, 2009
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The U.S. economy does not require another bout of stimulus spending to turn the economy around, according to a survey released Monday.
More than three-quarters of the members of the U.S.-based National Association of Business Economists said additional government spending would not improve the country’s economic prospects.
The 266 members were asked their opinions on a number of economic questions during the period of Aug. 3 to Aug. 18, but were not asked specific reasons for their votes.
The survey, however, which was released on NABE’s website, also noted that Washington’s initial stimulus package of almost $800 billion US gained the economy approximately one-half of one per cent in additional GDP growth.
Some experts might consider that amount of additional growth insufficient considering the amount of money the administration spent to boost the economy.
In addition, many forecasters already have the U.S. economy moving into positive growth territory in the July-to-September period. The Bank of Montreal, for instance, is predicting American GDP will grow by 3.8 per cent compared with the second quarter of 2009.
Thus, many NABE economists appeared to view any additional spending as unnecessary to pull the United States out of the current recession.
“Economists surveyed earlier this month by the National Association for Business Economics expressed strong agreement with the current posture of monetary policy and viewed the current stance of fiscal policy somewhat more favourably. But, they indicated concerns about the paths both monetary and fiscal policy will take in the future,” said NABE in a press release.
Some economists worried that extra spending could harm the country’s long-term economic prospects.
The overwhelming majority of economists asked believe the current monetary stance of the U.S. Federal Reserve ? essentially holding interest rates at zero per cent while injecting money into the national financial system ? as “about right.”
But 41 per cent think the U.S. central bank’s moves could lead to future inflation, a situation hampered, not helped, by more government spending.
Canadian mining needs tax relief in tough ‘09, industry says August 31, 2009
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Canada’s mining companies need government help in order to prevent a sector worth $40 billion from contracting further, according to an industry submission released Monday.
The Canadian Mineral Industry Federation (CMIF) said Ottawa must make it more attractive for its members to invest in new machinery in order to keep valuable jobs processing various minerals in the country.
“The CMIF believes that, with appropriate tax measures for exploration and plant investment, Canada can build on its competitive advantages and continue to have an important presence in value-added activities,” the federation said in a report submitted to a conference of mines’ ministers in St. John’s, N.L.
The mining sector contracted in the first quarter of 2009.(CBC)
The federation is an umbrella group consisting of 17 mining organizations, including the Mining Association of Canada.
Over the past 25 years, Canada’s mining and extraction companies have been finding fewer rocks and liquids to extract, the federation said.
That has led some companies to seek new mines and wells in other countries.
Some firms have moved toward processing minerals as a way of staying in business, the CMIF said.
In the federation’s view, Ottawa could help these companies by, among other measures:
Introducing a tax credit for deep drilling.Improving tax depreciation allowances for firms modernizing their facilities.Making permanent an existing 15-per-cent mining exploration tax credit.
Canada’s extraction sector, which includes oil pumpers as well as miners, has seen its share of difficulties during the current recession.
The GDP of the country’s mining and oil and gas sectors declined in June over May and slumped 5.5 per cent between October 2008 and March 2009.
N.S. regulator probes complaints about Worldsource August 31, 2009
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The Nova Scotia Securities Commission is investigating multiple complaints from a group of investors in the Truro area who are worried about their money.
Scott Peacock, director of enforcement for the commission, confirmed Friday that there is an investigation into an Ontario-based investment group called Worldsource Financial Management.
“Individual investors have informed staff that they have made investments with a registered dealer, and there?s some question as to whether or not the money was appropriately invested,” Peacock said.
He would not give any details or identify any of people who lodged the complaints.
The commission first heard about the complaints from a branch manager at Worldsource, he said.
An investigator from the securities commission is looking into the matter.
“Given the complexity, I would think that this investigation is in its early stages. We haven?t yet determined the full scope of it, we don?t know how many people are involved, or the total number of dollars or how complex the matter is,” Peacock said.
“Certainly, it?s going to take a number of months before, I would say, we?re in a position to make a final determination.”
The Truro Police Service is also investigating.
Worldsource Financial Management is a division of Worldsource Wealth Management Inc., a fully integrated wealth management company that is focused on building financial prosperity, according to the company?s website.
“We are a company with a sound and stable history; from our firm beginnings in Guardian Capital Limited in 1962, we have grown to serve hundreds of advisors across Canada,” it states.
CREA increases 2009 housing sales estimate August 30, 2009
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People walk past new homes that are for sale in Oakville, Ont., on April 14, 2009. Low mortgage rates and more affordable homes in many markets are pushing first-time home buyers to enter the market in droves, Canadian real-estate experts say. (Nathan Denette/Canadian Press)Strong home sales in the summer have prompted the Canadian Real Estate Association to dramatically increase its forecast for sales figures for this year.
The agency is now predicting 432,600 units will change hands this year. That’s only 0.4 per cent below the 2008 figure, and it’s significantly more than the 14.7 per cent sales decline the agency was forecasting as recently as May.
“The difference in the resale housing market now, compared to the beginning of the year, is night and day,” CREA President Dale Ripplinger said. “And nowhere is this more evident than in the West.”
British Columbia and Ontario are now forecast to post annual increases in activity this year, reflecting weak demand last year and a subsequent rebound.
Forecast declines in annual activity were trimmed significantly in Alberta, Saskatchewan and Quebec and were also scaled back for New Brunswick and Nova Scotia.
For 2010, the agency is now forecasting a 5.3 per cent increase to 455,400 units. That figure is a smaller increase in activity than was previously forecast.
The main reason for the downgrade is that demand is shifting as buyers move ahead their purchase decisions to take advantage of low interest rates, said CREA chief economist Gregory Klump.
Slight price increase forecast
The agency is now forecasting the average home price to edge up 1.5 per cent in 2009, as the strong rebound in sales activity, not price, in some of Canada’s most expensive markets continues to skew the national, and some provincial, average prices upward.
At -4.4. per cent, Alberta is the only province with a forecast decline in average price in 2009. Average prices are forecast to rise in all other provinces except British Columbia, where prices are expected to be flat. CREA’s previous forecast predicted a decline in the national average price of 5.2 per cent in 2009.
The national average price is forecast to be up 2.1 per cent on a year-over-year basis in 2010.
Bank earnings offer hints of economic rebound August 30, 2009
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For those who view Canada’s banks as proxies for the economy as a whole, this week’s bank earnings reports are all but shouting that recovery is indeed at hand.
Bank after bank said their third-quarter profits came in better than analysts had been expecting. Three banks ? National Bank, Royal Bank, BMO ? actually reported record earnings in the quarter ending July 31.
Canadian bank profits – third quarter
Bank Q3/09 Q3/08
BMO $557 million $521 million
Royal $1.56 billion $1.26 billion
TD $912 million $997 million
CIBC $434 million $71 million
National $303 million $286 million
Scotiabank $931 million $1.01 billion
A look behind the numbers reveals how they managed to improve their numbers at a time when the country was fighting its way out of recession.
Analysts say many banks reported lower-than-expected loan losses. At BMO, its provision for credit losses ? the amount it set aside to account for loans gone bad ? dropped 14 per cent. At TD, the drop was almost 16 per cent.
‘Writeoffs aren’t as bad’
“Key to the bank numbers is the fact that writeoffs aren’t as bad,” said Irwin Michael, a portfolio manager at ABC Funds.
“So if the economy is getting better, thanks to a lot of the money that was thrown out into the marketplace by the monetary authorities, that helps the banks and if it helps the banks, it helps the economy, which helps labour and everything else. Bit of a chain reaction.”
Even banks that reported higher loan loss provisions, like CIBC, said they saw credit conditions improving in several areas.
“[Credit card] delinquencies have improved both on a quarter-over-quarter basis and a consecutive month-over-month basis throughout the third quarter,” CIBC Retail Markets president Sonia Baxendale said during a conference call.
Bank of Nova Scotia was another firm that saw its loan losses inch higher, to $554 million, up from $159 million last year, the bank said on Friday.
But Scotiabank, too, was downplaying the risk. “Provisions for credit losses, including an increase in the general allowance, are within our expectations and risk appetite,” CEO Rick Waugh said in a statement.
Bank CEOs were rushing to declare that the credit crisis that had hobbled their earnings before was easing. “Global capital markets continued to improve from last quarter and we have seen some signs of recovery in the general economy,” RBC chief executive Gord Nixon said during a conference call.
TD Bank CEO Ed Clark said if TD’s various business lines could perform well during a global recession, then it bodes well for the future. “We see tremendous potential upside in those earnings once conditions normalize,” he said.
‘Green shoots’ sprouting
There were other signs this week that suggest the Canadian economy has turned the corner, including:
the Canadian Real Estate Association dramatically increased its forecast for home sales this year.the Conference Board of Canada said consumer confidence surged to its highest level in more than a year.retail sales in June grew more than expected as Canadian consumers were in better shape than their U.S. counterparts.
Of course, there are still hurdles that remain ? both for the Canadian economy, Canadian consumers, and Canadians banks. Unemployment is poised to continue to climb, leading to more personal bankruptcies and retail credit losses.
Also uncertain is the pace of the U.S. recovery, where a majority of Canadian banks have a significant presence. While many analysts see the U.S. emerging from its almost two-year-long recession this fall, the bounce back is expected to be anemic at best.
So significant risks remain. But if this week’s bank earnings show anything at all, it’s that even in the toughest of environments, they have ways of generating revenues and profits than can offset losses in weaker business lines.
That strength allowed Canadian banks to continue operating through the financial crisis without direct government bailouts, unlike in the U.S. and Britain. It also led the World Economic Forum to declare the Canadian banking system the soundest in the world last year.
That resilience ? evident in this week’s bottom lines and in the lack of dividend cuts ? helps to explain why Canadian bank shares have, on average, almost doubled since March.
Less to hate?
Canadians typically love to hate the big banks and the millions they charge in service fees. But there’s research that suggests that the relative stability of the Canadian banking system amid all the global financial carnage may be softening some of those attitudes.
“We’ve seen an increase this year in the overall reputation of the banks according to Canadian consumers,” Dave Scholz of Leger Marketing told CBC News on Thursday. He said Canadians seem to dislike the banks less these days.
That warm and fuzzy feeling may evaporate, of course. But for now, Canadians seem to be acknowledging that the Canadian banking machine’s steady profits may have saved them from having to dig deep to pay for multibillion-dollar bailouts.
With files from The Canadian Press (more…)
Dell profit sinks 23% in slumping PC market August 30, 2009
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Dell Inc.’s second-quarter profit was whacked 23 per cent as the personal-computer industry’s slump dragged on this summer. The results beat Wall Street’s forecast, however, sending the shares up more than six per cent.
Dell’s results reinforce a trend outlined in the latest numbers from rival Hewlett-Packard Co., the world’s No. 1 PC seller, and supplier Intel Corp., the biggest computer chip maker: Consumer demand for PCs is perking up, but spending by corporations is still weak.
Dell’s shipments of consumer PCs increased 17 per cent over last year, while revenue in that category was down nine per cent to $2.9 billion US. Price-cutting explains the discrepancy. PC makers have been slashing prices to preserve market share. Consumers also have been favouring little “netbook” laptops that generate lower profit margins for manufacturers.
Dell’s sales to corporations fell 32 per cent from last year to $3.3 billion.
Round Rock, Texas-based Dell is especially vulnerable to anemic business spending, because 80 per cent of its revenue comes from corporations, government agencies and other institutions.
Dell’s profit was $472 million, or 24 cents per share, in the three months ended July 31. That compares with profit of $616 million, or 31 cents per share, in the year-ago period.
The latest profit figure includes 4 cents per share in pretax expenses connected to Dell’s ongoing restructuring.
Sales fell 22 per cent to $12.8 billion.
Analysts polled by Thomson Reuters expected profit of 23 cents per share on $12.6 billion in sales. Analysts generally exclude one-time charges, like restructuring charges, from their estimates.
Dell’s latest numbers were released early, right before the market closed, and Dell stock jumped 6.7 per cent to end regular trading up 98 cents at $15.65 US.
Canada to issue up to $3B in U.S. dollar bonds August 29, 2009
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The federal government plans to issue up to $3 billion in U.S. dollar-denominated bonds, its first foreign-currency global bond issue in more than a decade, the finance ministry announced Friday.
The bond issue will be made in the near future, subject to market conditions, the ministry said in a release on its website.
It said the issue will provide funds to supplement Canada’s foreign exchange reserves and to meet foreign currency requirements to support current and anticipated lending by the International Monetary Fund.
Canada holds its foreign exchange reserves in the Exchange Fund Account (EFA), which provides foreign currency liquidity and supports the promotion of orderly conditions for the Canadian dollar in foreign exchange markets, the ministry said.
Funds for the EFA can be raised through cross-currency swaps of Canadian-dollar borrowings, foreign-currency-denominated debt issues, and outright purchases of foreign currency.
“In recent years, the government has relied primarily on cross-currency swaps to finance the EFA,” the ministry said. “The global bond issue will prudently diversify the government?s sources of foreign currency financing.”
Union demands details on Vale’s plan to reopen Sudbury mine August 29, 2009
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Federal NDP Leader Jack Layton has met with striking miners in Sudbury, Ont., who are angry over their employer Vale Inco’s plans to reopen mining operations using management and non-union labour.
On July 13, more than 3,100 mining and processing workers at Vale’s operations in Sudbury hit the picket lines after voting to reject the company’s contract offer.
More than six weeks on, reports say Vale plans to use management and other non-union workers to restart some operations in Sudbury.
‘How is it a net benefit to Canada to force people to work in conditions they’re not trained to work in?’?NDP Leader Jack Layton
Representatives of the United Steelworkers and Vale Inco are expected to sit down at the table again soon, but it won’t be to resume contract negotiations, according to a report in the Sudbury Star.
The union wants details on the company’s plan to resume operations.
“It’s dangerous work we’re talking about: working on muck piles and installing roof bolts for ground support,” miner Jack Simons told CBC News. “These guys have no idea what they’re getting into, but they have no choice.”
No benefit, Layton says
When the federal government approved Vale’s takeover of Inco almost three years ago, it said it gave the deal the green light because it would provide a “net benefit” to Canada as required under the Investment Canada Act, Layton said as he paid a visit to the picket line Thursday.
“How is it a net benefit to Canada to force people to work in conditions they’re not trained to work in?” Layton said. “And then forcing them to take the training, telling them that if you don’t ? you’ll lose your job?”
Vale said staff are being assigned to work based on their skills and previous experience.
At issue in the strike is Vale’s proposal to reduce a bonus tied to the price of nickel, as well as a plan by the company to exempt new employees from its defined-benefit pension plan, moving them instead to a defined-contribution plan.
It is the first strike at the Sudbury operations since Brazil-based Companhia Vale do Rio Doce bought the former Inco Ltd. for $19 billion in October 2006.
TD beats estimates despite profit decrease August 29, 2009
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TD Bank Financial Group profits declined more than eight per cent during the third quarter, the bank revealed on Thursday.
The Toronto-based bank said it earned $912 million, or $1.01 per share, for the quarter ended July 31, down from year-earlier profits of $997 million, or $1.21 per share.
Three-month stock chart for Toronto-Dominion bank.(CBC)
But stripping out one-time items, TD said its adjusted earnings improved to $1.3 billion ($1.47 per share), compared with $1.1 billion ($1.35 per share) reported a year ago. The adjusted results beat the estimates of analysts surveyed by Thomson Reuters, who predicted earnings would come in at $1.23 per share.
TD chief executive officer Ed Clark said the results exceeded his expectations given the effects of the global recession.
“We’re obviously feeling pretty good about these results, which really showcase TD’s earnings power and why we see tremendous potential upside in those earnings once conditions normalize,” Clark said.
The Canadian personal banking division posted record earnings of $677 million during the quarter, a five per cent increase from last year. Results got a boost from the company’s wholesale banking operations, where profits soared nearly 90 per cent to $327 million.
The bank set aside $557-million for loan losses during the quarter, below the number of the previous quarter but much higher than the $288 million it did during the same period last year.
Total quarterly revenue rose to $4.66 billion from $4.32 billion, while the bank’s Tier 1 capital ratio was 11.2 per cent at quarter’s end.
The bank also kept its quarterly dividend unchanged at 61 cents per share.
With files from The Canadian Press (more…)
Scotiabank profit dips 8% despite higher revenue August 28, 2009
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The Bank of Nova Scotia says its profit decreased nearly 8 per cent in the third quarter, falling to $931 million from $1.01 billion a year earlier despite higher revenues.
An increase in the amount the bank books for credit losses was the main cause of the decline.
Three-month stock chart for the Bank of Nova Scotia.(CBC)
Toronto-based Scotiabank says it earned 87 cents per share, down from 98 cents per share in the same period last year as revenues rose 11 per cent to a record $3.84 billion.
Despite the profit dip, Scotia’s earnings bested the consensus estimate of 84 cents per share, compiled by Thomson Reuters.
The bank’s core Canadian operations saw a seven per cent rise in revenue from the same quarter last year.
But loan-loss provisions more than tripled to $554 million, Scotiabank said. That compared to loan-loss provisions of $159 million in the year-earlier period.
Credit losses
Loan-loss provisions are the amount banks set aside to deal with money in bad loans.
“Provisions for credit losses, including an increase in the general allowance, are within our expectations and risk appetite, and we are continuing to prudently manage our loan portfolios across geographies and industries,” CEO Rick Waugh said in a statement.
“Economic conditions in the second half of 2009 are improving. With the solid results achieved during the first nine months of the year, the bank is maintaining the objectives established at the beginning of the year.”
Scotiabank’s dividend was kept unchanged at 49 cents per share.
Return on equity for the period was 18 per cent, compared to 21 per cent in the prior-year period and the bank’s Tier 1 capital ratio ? a measure of the amount of money the bank holds in reserve ? rose to 10.4 per cent from 9.6 per cent.
Shares in the bank were down $1.71 nearly four per cent at $46.40 in afternoon trading on the Toronto Stock Exchange.
With files from The Canadian Press (more…)
