Harper delivers economic report Monday September 28, 2009
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Prime Minister Stephen Harper will deliver his government’s latest economic update in Saint John on Monday.
The Conservatives’ minority government was able to win approval for its economic stimulus plan in the House of Commons last spring by promising to deliver a series of economic report cards.
The latest update is sure to be watched closely since the government is dealing with the largest budget deficit in Canadian history.
Earlier this month, Finance Minister Jim Flaherty said the deficit this year will be more than $5 billion higher than originally thought, moving up to a projected $55.9 billion from $50.2 billion.
Parliament returns to work on Monday with the Liberals threatening a no-confidence vote and the NDP holding the balance of power.
During his speech in Saint John, Harper is expected to talk about the state of the economy and perhaps infrastructure projects ? where money is being spent and how many projects are underway. The Liberals have accused the government of spending only 12 per cent of the $4 billion set aside for immediate job-creating infrastructure projects.
Canadians may also hear more news about measures such as the home renovation tax credit, which has now passed because of a ways-and-means motion that was voted on a couple weeks ago.
Gerard Kennedy, the Liberal’s infrastructure critic, said he wants Harper to provide evidence, not just words, that the government is investing in getting the unemployed back to work.
“We have no real growth taking place in terms of jobs, yet we provided enough funding in the [January] budget for something in the order of 120,000 jobs. We’re down 178,000 jobs since the budget came out,” he said.
With files from The Canadian Press (more…)
Harper delivers economic report Monday September 28, 2009
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Prime Minister Stephen Harper will deliver his government’s latest economic update in Saint John on Monday.
The Conservatives’ minority government was able to win approval for its economic stimulus plan in the House of Commons last spring by promising to deliver a series of economic report cards.
The latest update is sure to be watched closely since the government is dealing with the largest budget deficit in Canadian history.
Earlier this month, Finance Minister Jim Flaherty said the deficit this year will be more than $5 billion higher than originally thought, moving up to a projected $55.9 billion from $50.2 billion.
Parliament returns to work on Monday with the Liberals threatening a no-confidence vote and the NDP holding the balance of power.
During his speech in Saint John, Harper is expected to talk about the state of the economy and perhaps infrastructure projects ? where money is being spent and how many projects are underway. The Liberals have accused the government of spending only 12 per cent of the $4 billion set aside for immediate job-creating infrastructure projects.
Canadians may also hear more news about measures such as the home renovation tax credit, which has now passed because of a ways-and-means motion that was voted on a couple weeks ago.
Gerard Kennedy, the Liberal’s infrastructure critic, said he wants Harper to provide evidence, not just words, that the government is investing in getting the unemployed back to work.
“We have no real growth taking place in terms of jobs, yet we provided enough funding in the [January] budget for something in the order of 120,000 jobs. We’re down 178,000 jobs since the budget came out,” he said.
With files from The Canadian Press (more…)
OECD sees signs of ‘broad economic recovery’ September 12, 2009
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The world economy is showing definite signs of recovery, according to data released Friday by the Organization of Economic Co-operation and Development.
The Paris-based OECD said its composite leading indicator of 29 economies rose to 97.8 in July from 96.3 in June.
“Clear signals of recovery are now visible in all major seven economies, in particular in France and Italy, as well as in China, India and Russia,” it said.
“The signs from Brazil, where a trough is emerging, are also more encouraging than in last month?s assessment.”
The OECD said Canada’s reading improved from 96.4 in June to 97.7 in July. That was still 2.2 percentage points below last July’s level.
The composite leading indicator tries to identify turning points in economic activity about six months before the change actually takes place.
Canada to outperform, CIBC says
Canada will lead the U.S. and other G7 economies in growth next year, CIBC World Markets said Friday. But the growth will be small and the recovery lengthy, it said.
In an economic report, the bank says the “relative resiliency” of the Canadian consumer will play a big role in helping Canada outperform other economies.
Canada’s financial system and mortgage market were in better shape than most, so this country was better able to absorb the shocks that rattled financial markets.
CIBC economists say that left Canadian consumers able to take advantage of the low interest rate environment engineered by the Bank of Canada. The central bank on Thursday left its key overnight interest rate at just 0.25 per cent.
“Canadians can count their blessings, from a sounder financial system, a federal government that can afford to run deficits after years of fiscal rectitude, and a household sector that, while facing sharply increased bankruptcies, has been less beaten up on housing and job prospects,” CIBC World Markets chief economist Avery Shenfeld wrote.
Export growth to fade in 2010
Still, CIBC economists see 2010 growth at a tepid 2.0 per cent as export growth fades because of a strong Canadian dollar and U.S. protectionism. Still, that will be a half-percentage point better than the U.S. growth next year and more than twice as good as most Eurozone economies.
Canada’s economy won’t return to robust health until 2011, with a forecast growth rate of 3.8 per cent.
The CIBC report says just over half of the output growth in the second half of this year and all of next year will be due to government spending, with the biggest impact of the stimulus taking place in 2010.
After that, interest rates around the world will likely begin rising again as the recovery takes hold. Shenfeld says even then, Canada will be in better shape than most to deal with higher rates.
“Even under the now more pessimistic outlook from the finance minister, the erosion in Canada’s federal debt-to-GDP ratio is nothing like the debt wall hit in the early 1990s, and miles below what could end up being an 80 per cent debt-to-GDP ratio for the U.S.,” he said.
Finance Minister Jim Flaherty revealed Thursday that the federal deficit in the current year would come in more than $5 billion higher than previously thought. He also said the country would not emerge from a deficit position until 2015 ? two years later than forecast.
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…)
Positive U.S. economic data buoys hopes for rebound August 26, 2009
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Positive news on the U.S. housing market, durable goods orders and consumer confidence on Wednesday has fueled hopes that the American economy may be emerging from its economic downturn.
On Wednesday, the New York-based Conference Board said its consumer confidence index rose to 54.1 in July, from an upwardly revised 47.4 the previous month. (Gary Malerba/Associated Press)
Orders for durable goods in the United States rose in July by the largest amount in two years, the Commerce Department said Wednesday. Orders for goods expected to last at least three years increased 4.9 per cent in July, the third rise in the past four months. Analysts expected a three-per-cent increase.
Orders for June were revised up to a 1.3-per-cent drop, from a 2.2-per-cent decline.
Elsewhere, the New York-based Conference Board said its consumer confidence index rose to 54.1, from an upwardly revised 47.4 the previous month. That reading reversed two months of decline and beat analysts’ expectations.
Economists closely monitor confidence because consumer spending accounts for about 70 per cent of U.S. economic activity.
Appliances are seen on display at Costco in Mountain View, Calif., Wednesday, May 27, 2009. The Commerce Department reported Wednesday that orders for durable goods rose by nearly 5 per cent in July, the largest amount in two years.(Paul Sakuma/Associated Press)
Consumer sentiment, fueled by signs the economy is stabilizing, has recovered a bit since hitting a record-low of 25.3 in February. A reading of 90 indicates the economy is on solid footing; anything above 100 signals strong growth.
Consumers’ expectations for the economy over the next six months rose to 73.5 from 63.4 in July, the highest level since December 2007, when the U.S. recession began.
Housing sales increase
On the housing front, Tuesday’s news that the Standard&Poor’s/Case-Shiller’s U.S. National Home Price Index posted the first quarterly increase in three years was followed by data on Wednesday showing new homes sales surged 9.6 per cent in July, beating expectations by rising for the fourth straight month.
Sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000, the Commerce Department announced.
It was the strongest sales pace since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005.
The median sales price of $210,100 US, however, was still down 11.5 per cent from $237,300 a year earlier.
There were 271,000 new homes for sale at the end of July, down more than three per cent from May. At the current sales pace, that represents 7.5 months of supply ? the lowest since April 2007.
With files from The Associated Press (more…)
2 economic indicators slow their decline, StatsCan says June 23, 2009
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Statistics Canada on Monday released two reports suggesting that the economic slowdown is easing.
Both indicated aspects of the economy got worse, but both also showed the rate of decline is slowing.
More people received regular Employment Insurance benefits in April, but the 2.7 per cent increase — up 18,600 to 697,000 — was the smallest in six months, Statistics Canada said.
A second statistic showed household net worth dropped $72 billion in the first quarter, but that was “a much slower rate of decline” than in the last two quarters of 2008, when losses totalled $438 billion, the agency said.
EI up most in West
The rate of increase in EI recipients increased fastest in Alberta and Saskatchewan — over 16 and 12 per cent, respectively — but the overall unemployment rate in the two provinces and British Columbia remained among the lowest in the country.
Alberta has 48,310 and Saskatchewan 13,200 people receiving EI.
Ontario reported a 4.4 per cent rise in April to 230,000, and is up 73 per cent from April 2008.
Stock market, real estate behind wealth drop
The stock market’s continued fall in the first quarter and declining real estate values caused the drop in wealth, Statistics Canada said.
“On a per capita basis, national net worth has fallen from $180,000 in the fourth quarter of 2008 to $178,800 in the first quarter of 2009,” the agency said.
However, the 1.3 per cent fall was only half the 2.6 per cent decline in the United States.
Both real estate and stock markets have risen since the end of the first quarter, March 31.
Scotiabank ups economic forecast June 5, 2009
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The Bank of Nova Scotia has revised its economic forecast upward, arguing in a report Thursday that “the global economy is transitioning from recession to recovery.”
The new forecast said Canada’s economy will shrink by 2.2 per cent this year and grow 2.5 per cent in 2010.
That’s an increase of 0.8 percentage points in the 2010 number, said Aron Gampel, the bank’s deputy chief economist.
But he also emphasized that the change in the bank’s sentiment was important. “We believe that the glass is half full, not half empty.”
After a year of cutting predictions — along with other forecasters — the bank now believes “the foundations for a recovery have been laid.”
The forecast puts the bank on the bullish side of some other published estimates. “We have gone from being a below-consensus forecast to an above-consensus forecast,” Gampel said.
The Bank of Canada in April predicted a drop of three per cent this year, to be followed by growth of 2.5 per cent in 2010.
The Toronto-Dominion Bank estimated June 2 that the decline would be 2.4 per cent this year, with growth of 1.3 per cent in 2010.
U.S. forecast raised 1%
Scotiabank said the better outlook for Canada follows “strengthening demand in the United States and internationally for manufactured and commodity-related products,” although the surging loonie and other issues will constrain the recovery.
But the U.S. economy will grow by 2.8 per cent in 2010, up a full percentage point from the bank’s previous estimate.
Canada and other countries “are expected to piggyback on the renewed momentum being generated by the globe’s primary economic engines, the United States and China,” the report said.
Scotiabank cited six reasons for its optimism:
Policymakers around the world have contained the financial crisis.Price discounting and lower energy costs are encouraging spending.An “unprecedented period” of cutting inventories is ending, and even a modest rebuilding will boost production.Central banks have provided stimulus through low interest rates and monetary injections.Governments are spending freely.Investors are showing confidence by boosting stock markets.
And while some observers are worried the government and central bank stimulus will raise inflation, the bank said that unemployed workers and excess industrial capacity will provide a cushion, so “inflationary pressures will be slow to build.”
U.S. Fed takes gloomier outlook on economic recovery May 20, 2009
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The U.S. central bank cut its outlook for America’s economic recovery, according to a shorthand transcript of the central bank’s latest meetings released Wednesday.
The Federal Open Market Committee, the group within the Federal Reserve that makes interest rate decisions, now believes that the U.S. economy will contract by between 1.3 per cent and two per cent in 2009.
The new bank thinking was contained in minutes of the FOMC meetings of April 28-29 which were released publicly this week.
The Fed’s revised outlook was more than half-a-percentage point poorer than January’s forecast, when the American central bank predicted the national gross domestic product would shrink by at least 0.5 per cent and by at most 1.3 per cent.
Stocks rising
The darkening mood of the Fed’s governors was in sharp contrast to analysts who had been calling the end of the recession in recent moths.
Indeed, by April 28, the first day of the FOMC get-together, the TSX had already gained 25 per cent compared to the index’s 52-week low.
Since the central bank’s discussions, the TSX rose another five per cent.
The Federal Reserve also blackened its view of the 2009 jobless rate by a similar amount. The bank now believes U.S. unemployment, once set between four and five per cent, will hit between 9.2 and 9.6 per cent.
In January, the central bank forecast the jobless level at between 8.5 and 8.8 per cent. The Federal Reserve now believes it will take until 2011 before the American unemployment rate has a chance of slipping below the eight per cent mark.
Currency traders noted that the U.S. dollar began losing steam as soon as the new outlook became known.
“The minutes show that the FOMC expects a deeper recession in 2009, a slower rebound in 2010, a greater rise in unemployment,” said Terri Belkas, accuracy strategist writing on the website Daily FX.
The Dow Jones Industrial Average was holding on to its gains in the afternoon session, up approximately 25 points.
Shrinking auto production will cut economic growth: Scotiabank February 2, 2009
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The North American auto industry virtually shut down in January, and the resulting cutbacks in vehicle production will reduce economic activity by roughly 2.5 percentage points in the U.S and one percentage point in Canada, according to a new report from by Scotia Economics.
“Vehicle output in Canada, the United States and Mexico will plunge nearly 50 per cent below a year earlier in the opening month of 2009, as many companies extended their holiday shutdowns through most of January,” said Carlos Gomes, Scotiabank Senior Economist and Auto Industry Specialist in his latest Global Auto Report.
“We estimate that these cutbacks will reduce North American vehicle output to less than an annualized eight million units in January, a sharp fall-off from a full-year 2008 total of 12.9 million.”
‘In the absence of a hefty pick-up in vehicle production, job losses in the parts sector could accelerate.’?Carlos Gomes, Scotiabank senior economist
Besides loss of production, Gomes believes the shutdowns will have a further negative effect on the Detroit automakers.
Although the Asian and European car companies suffered a 30 per cent year-over-year decline in production this month, they will likely ramp up output faster than the North American automakers.
As a result, these “New Domestic” automakers will produce more vehicles in North America in the first quarter than the “Detroit Three.”
Parts suppliers job losses
Lower vehicle production is also taking its toll on parts suppliers. Employment in the sector has been slashed by more than 22,000 in Canada since late 2003.
?We estimate the value of Canadian-made parts in each North American-built vehicle has dropped to less than $1,700 from more than $2,000 as recently as 2004,” said Gomes. “In the absence of a hefty pick-up in vehicle production, job losses in the parts sector could accelerate.”
The report found Canadian auto sales also dropped in December, with purchases slumping 21 per cent below a year earlier. U.S auto sales plunged 35 per cent during the same time.
Gomes expects sales to remain weak in the first half of 2009 and forecasts full-year 2009 purchases to slump to 1.475 million units, the lowest annual total since 1998.
Porsche results
The luxury car market wasn?t spared from the downturn. German sports and luxury carmaker Porsche said Friday that sales for the first six months of its fiscal year fell 14 per cent.
The Stuttgart-based automaker said sales fell to $4.8 billion Cdn, according to preliminary first-half results. The company said its sales volume dropped 27 per cent to 34,000 vehicles during the period.
The company’s chief executive, Wendelin Wiedeking, said the company would introduce further production cuts, including reducing the number of days worked at its main plant in Stuttgart this summer.
U.S. House passes $819B economic stimulus January 30, 2009
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The Democratic-controlled U.S. House of Representatives has approved President Barack Obama’s $819-billion stimulus package.
The 244-188 vote on Wednesday night will now send the legislation to the Senate for consideration.
“We don’t have a moment to spare,” Obama declared at the White House as congressional allies hastened to do his bidding in the face of the worst economic crisis since the Great Depression.
Businesses and workers are counting on Washington for “bold and swift” action to steady the country’s struggling economy, Obama said.
The Senate is expected to begin examining the proposed package on Monday, said U.S. Senate majority leader Harry Reid.
Reid told Reuters he would like to see the debate concluded by the end of next week.
Obama hopes to have the legislation signed into law by mid-February.
The White House-backed legislation includes an estimated $544 billion in federal spending and $275 billion in tax cuts for individuals and businesses.
Included is money for traditional job-creating programs such as highway construction and mass transit projects.
There are also increases to unemployment benefits, health care and food stamps that are designed to aid victims of the economic downturn.
The centrepiece tax cut calls for a $500 break for single workers and $1,000 for couples, including those who don’t earn enough to owe federal income taxes.
If passed, tens of billions of additional dollars will also go to the states to ease the recession’s impact on schools and law enforcement.
Obama hopes the plan will generate or save up to four million new jobs.
Obama thanked the House for its quick passing of the economic stimulus package. In a written statement, he added, “What we can’t do is drag our feet or allow the same partisan difference to get in our way.”
New era in U.S.
The passing of the legislation through the House marks a new era in the U.S., said Speaker Nancy Pelosi.
“The ship of state is difficult to turn,” Pelosi said. “But that is what we must do. That is what President Obama called us to do in his inaugural address.”
With unemployment at its highest level in a quarter-century, the banking industry wobbling despite the infusion of staggering sums of bailout money and states struggling with budget crises, Democrats said the legislation was desperately needed.
“Another week that we delay is another 100,000 or more people unemployed. I don’t think we want that on our consciences,” said Democratic Representative David Obey of Wisconsin, chairman of the House appropriations committee and one of the leading architects of the legislation.
But Republicans said the bill was short on tax cuts and contained too much spending, much of it wasteful and unlikely to help laid-off Americans.
The party’s leader, Representative John Boehner of Ohio, said the measure “won’t create many jobs, but it will create plenty of programs and projects through slow-moving government spending.”
A Republican alternative, consisting almost entirely of tax cuts, was defeated, 266-170, moments before the final vote.
On the final vote, the legislation drew overwhelming support among Democrats while Republicans unanimously opposed the legislation despite Obama’s frequent pleas for bipartisan support.
A more bipartisan measure is taking shape in the Senate.
Obama personally pledged to House and Senate Republicans in closed-door meetings on Tuesday that he is ready to accept modifications as the legislation advances.
Canadian implications
The Senate is expected to expand on a clause that indicates that none of the funds made available by the legislation can be used for a project unless all of the iron and steel used in it have been produced in the United States.
Perrin Beatty, president of the Canadian Chamber of Commerce, told CBC News if the protectionist clause is not removed before the bill is passed into law it could have implications for Canada.
“If we’re shut out of that, it will potentially be quite damaging for Canada,” Beatty said. “It will slow down the recovery.”
American businesses have also sent a letter to congressional leaders urging that the inclusion of such a clause could result in retaliation from other countries.
But trade treaties, including the North American Free Trade Agreement, forbid the kind of protectionism contained in the clause.
“I’m calm about these things,” said Industry Minister Tony Clement. “Lots of bills go before Congress ? there’s always room for debate and amendment to those bills.”
Canadian diplomats have also been lobbying to have the language removed because NAFTA violations can take a long time to appeal if the clause were to be included.
With files from the Associated Press (more…)
