Global markets plunge to two-year low
· TSX -297.59CP)Persistent worries about high energy-fuelled inflation and slowing earnings growth resulting from a 50% surge in oil prices this year slammed the Toronto stock market Monday and put the main index firmly in the red for the ytd
· Dow -56.58
· Dollar+.11c to $98.15US
· Oil -3.92 to $141.37US per barrel.
· Gold -4.60US to $927.30US per ounce
Canada's bosses worried about inflation
Email the author
Julian Beltrame The Canadian Press OTTAWA
Canadian businesses are sounding the alarm over inflation fears from rising fuel costs while remaining moderately upbeat about future economic prospects.
But the good news in the quarterly Bank of Canada survey of 100 companies was mostly a western phenomenon, with the preponderance of companies in the manufacturing-heavy East seeing slowing conditions ahead. And a separate survey -- this time of consumers conducted by the Conference Board of Canada -- has found gloom among Canadians spreading with the board's consumer confidence index dipping 6.2 points to 79.6, the lowest level since the fourth quarter of 1995. "I found it surprising that firms are more concerned about the inflationary impact of soaring oil prices than the growth impact,'' said Douglas Porter, deputy chief economist with BMO Capital Markets. "From the Bank of Canada's side there was a clear message they should be more concerned with inflation than growth at this point.''
Despite evidence the economy is slumping, executives polled between May 20 and June 13 were slightly more upbeat that their sales volumes would increase over the next 12 months than they were three months ago. 37% said sales would increase while 33 % said they would decline.
But there was more unanimity over the impact of energy prices, with 51 per cent predicting their input costs will rise due to soaring energy prices against 13 per cent who said costs would fall. As well, 42 per cent said they expect to pass on those higher costs to customers, as opposed to 22 per cent who predicted their output prices would fall. On a balance of opinion -- subtracting negative expectations from the positives -- both numbers were the highest ever recorded by the bank.
36% believed inflation will rise above 3% in the next two years, also a record response.
"The expected increase in input price growth over the next 12 months stems largely from the continuing strength in the prices of oil and other energy commodities, in combination with the higher prices of food and other non-energy commodities such as base metals,'' the bank said.
"Some firms also cited rising prices of imports from China.''
The rising price of gasoline was also a key factor in the Conference Board's finding of falling consumer confidence in Canada.
The survey of 2,000 conducted in early June found consumer confidence falling across all regions.
While concerns over fuel prices were expected, several economists said they were surprised businesses were not more pessimistic about the economy, which contracted by 0.3 per cent in the first quarter.
Bank of Nova Scotia economist Derek Holt suggested the positive sales increase numbers from executives may be due to the timing of the survey, which ended June 13, saying that market attitudes had soured since. "This update is unlikely to influence the Bank of Canada's rate decision on July 15th but reaffirms the bank's inflation concerns of late, at least in the short run,'' he said.
Porter also said he does not believe the central bank will move off its holding position on the overnight rate, but added governor Mark Carney now has added ammunition for the next move to be a hike later in the year.
Tuesday, July 8, 2008
Financial Update
· TSX lost Thursdays recovering falling another -133.18
· Dow closed for July 4th
· Dollar -.11c to $98.04US
· Oil -1.19 to $144.10US per barrel.
· Gold -9.00US to $930.75US per ounce
RBC issued national and provincial economic reviews Friday
Below is a quote from the National Report with the Provincial report for Ontario following.
“Canada's housing market is also poised to cool in the face of deteriorating affordability. Housing affordability in most major markets across the country have deteriorated to their worst levels in almost 20 years. However, the extent of any weakening is expected to be much less pronounced than what is occurring currently in the U.S. as the Canadian market did not experience many of the excesses evident south of the border.“
Transmitted by CNW Group on : July 3, 2008 05:00
Ontario's economy continues to struggle but some relief in sight, says RBC TORONTO, July 3 /CNW/ - According to the latest provincial forecastreleased today by RBC, a downbeat scenario continues to unfold in Ontario,with economic growth expected to hover around 0.7 per cent for 2008, theweakest pace of expansion for the province since the last recession in theearly 1990s.
"The unexpected decline in the national economy in the first quarter ofthis year was most likely the result of a notable contraction in activitywithin Ontario's trade sector," said Craig Wright, senior vice-president andchief economist, RBC. "The province's exports were pounded by the highCanadian dollar and downturn in the U.S. economy, as well as poor weatherconditions and a strike at a major U.S. motor vehicle parts manufacturer thatdisrupted auto production here."
Ontario's manufacturing sector will continue to see international saleshindered in 2008 as a result of the high dollar and sluggish U.S. economy.Little improvement is foreseen for the province's important auto sector amidplummeting motor vehicle sales in the U.S. and ongoing restructuring of the"Big 3" North American producers. However a projected weakening in theCanadian dollar and reacceleration of growth in the U.S. economy should bringOntario's exporters some relief by the end of this year and in 2009. The rest of the province's domestic economy is far more encouraging, thereport noted. Residential construction is holding up better than expected andgrowth in consumer spending continues to be supported by a robust labourmarket. Despite heavy losses of manufacturing jobs, Ontario continues to seesteady employment growth overall, thus keeping the unemployment rate near aseven-year low. "The domestic economy remains in relatively good shape andshould allow Ontario's economic growth to stay in positive territory," notedWright.
The main theme of the Provincial Outlook continues to be the differentpaths the Eastern and Western parts of the country are taking. Record-highcommodity prices and strong global demand for resources sustain unprecedentedprosperity in the Western provinces, while the strong Canadian dollar,downturn in the U.S. economy and high energy prices continue to cause hardshipin key sectors in provinces east of Manitoba. Saskatchewan is projected tolead all of the provinces in economic growth for both 2008 and 2009, followedby Alberta, while Newfoundland and Labrador and Ontario are expected to lagthe group this year, but should show some improvement next year.
The RBC Economics Provincial Outlook assesses the provinces according toeconomic growth, employment growth, unemployment rates, personal incomegrowth, retail sales, housing starts, and the Consumer Price Index.
According to the report (available online as of 8 a.m. E.D.T.,
atwww.rbc.com/economics/market/pdf/provfcst.pdf)
· Dow closed for July 4th
· Dollar -.11c to $98.04US
· Oil -1.19 to $144.10US per barrel.
· Gold -9.00US to $930.75US per ounce
RBC issued national and provincial economic reviews Friday
Below is a quote from the National Report with the Provincial report for Ontario following.
“Canada's housing market is also poised to cool in the face of deteriorating affordability. Housing affordability in most major markets across the country have deteriorated to their worst levels in almost 20 years. However, the extent of any weakening is expected to be much less pronounced than what is occurring currently in the U.S. as the Canadian market did not experience many of the excesses evident south of the border.“
Transmitted by CNW Group on : July 3, 2008 05:00
Ontario's economy continues to struggle but some relief in sight, says RBC TORONTO, July 3 /CNW/ - According to the latest provincial forecastreleased today by RBC, a downbeat scenario continues to unfold in Ontario,with economic growth expected to hover around 0.7 per cent for 2008, theweakest pace of expansion for the province since the last recession in theearly 1990s.
"The unexpected decline in the national economy in the first quarter ofthis year was most likely the result of a notable contraction in activitywithin Ontario's trade sector," said Craig Wright, senior vice-president andchief economist, RBC. "The province's exports were pounded by the highCanadian dollar and downturn in the U.S. economy, as well as poor weatherconditions and a strike at a major U.S. motor vehicle parts manufacturer thatdisrupted auto production here."
Ontario's manufacturing sector will continue to see international saleshindered in 2008 as a result of the high dollar and sluggish U.S. economy.Little improvement is foreseen for the province's important auto sector amidplummeting motor vehicle sales in the U.S. and ongoing restructuring of the"Big 3" North American producers. However a projected weakening in theCanadian dollar and reacceleration of growth in the U.S. economy should bringOntario's exporters some relief by the end of this year and in 2009. The rest of the province's domestic economy is far more encouraging, thereport noted. Residential construction is holding up better than expected andgrowth in consumer spending continues to be supported by a robust labourmarket. Despite heavy losses of manufacturing jobs, Ontario continues to seesteady employment growth overall, thus keeping the unemployment rate near aseven-year low. "The domestic economy remains in relatively good shape andshould allow Ontario's economic growth to stay in positive territory," notedWright.
The main theme of the Provincial Outlook continues to be the differentpaths the Eastern and Western parts of the country are taking. Record-highcommodity prices and strong global demand for resources sustain unprecedentedprosperity in the Western provinces, while the strong Canadian dollar,downturn in the U.S. economy and high energy prices continue to cause hardshipin key sectors in provinces east of Manitoba. Saskatchewan is projected tolead all of the provinces in economic growth for both 2008 and 2009, followedby Alberta, while Newfoundland and Labrador and Ontario are expected to lagthe group this year, but should show some improvement next year.
The RBC Economics Provincial Outlook assesses the provinces according toeconomic growth, employment growth, unemployment rates, personal incomegrowth, retail sales, housing starts, and the Consumer Price Index.
According to the report (available online as of 8 a.m. E.D.T.,
atwww.rbc.com/economics/market/pdf/provfcst.pdf)
Thursday, July 3, 2008
Financial Update
Toronto stocks plunge broadly on worries of demand for commodities
· TSX -432.92(Reuters) plunged in a broad selloff as economic sentiment darkened and coal companies saw shares plunge alongside the price of the commodity. The selloff came as a US report found that U.S. private-sector employers slashed 79,000 jobs in June -- the largest drop since November 2002 and worse than expected by economists. Investors also worried that slowing economic conditions in North America and Europe will slash demand for metals and crude.
· Dow -166.75
· Dollar +.60c to $98.68US Canada’s dollar gained the most in almost 2 months as prices of the nation's commodity exports surged
· Oil + $2.60 shot to new records briefly above US$144 a barrel as the U.S. government reported a bigger-than-expected drop in supplies -2million barrels, and the threat of conflict with Iran weighed on traders' minds$143.57US per barrel.
· Gold +$2.30US to $944.80US per ounce overshadowed by record oil prices, gold has also risen significantly higher
The party's over for Canadian spendthrifts
TARA PERKINS AND KEVIN CARMICHAEL From Thursday's Globe and Mail
TORONTO and OTTAWA — Canadian consumers, facing softer job creation and a chill in the housing sector, are likely to rein in the spending that has fuelled the economy, economists say.
Record energy prices and rising food costs could spook consumers into an even sharper pullback, they caution, though the situation now is not dire.
“I do think consumer spending has really only got one direction to go in this kind of environment, and that's toward slower growth,” said Douglas Porter, deputy chief economist at Bank of Montreal, who noted that the country is coming off one of the strongest spending periods in decades.
Consumers have been having a field day in recent years thanks to strong employment, low interest rates, tax cuts and the strong Canadian dollar, Mr. Porter noted.
The booming housing market was driving demand for furniture, appliances and other big ticket items, said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.
“Households have been spending almost like drunken sailors over the past couple of years, which provided critical support to the economy when the export-oriented manufacturing sector had been suffering under the weight of a strong currency and flagging U.S. demand,” TD economists wrote in a report yesterday titled Canadian Consumers to Gear Down their Spending. “The central question is whether consumers can keep tipping pints or whether a hangover is in store.”
In April, when the Bank of Canada laid out its most recent thinking on the economy, policy makers said domestic demand was “expected to be the key source of economic growth” through 2010, offsetting weaker U.S. demand for exports.
Mr. Alexander believes the tide will finally turn for exporters in 2009 as the U.S. economy gradually improves, but Canadian consumer spending will grow at a slower rate than it is today. “You put those two offsetting factors together and it means that next year, economic growth in Canada will probably still be less than 2 per cent, and that's quite soft – a healthy pace of growth is probably about 2.8,” he said.
TD expects real personal expenditure to rise 4 per cent in 2008 and 2.6 per cent in 2009, down from 4.5 per cent last year.
There is some evidence that consumers are already reining in spending. Retail sales increased 4.2 per cent in April from the same period a year ago, the weakest growth in nine months, Statistics Canada reported on June 20.
Derek Nighbor, senior vice-president at the Retail Council of Canada, said sales figures were a bit soft across the board in March and things bumped up a little again in April.
“Overall, are we expecting things to be a bit softer in '08 and '09 than they have been in the last few years? Most definitely. That being said, this is not the early 1990s,” he said, noting that relatively speaking, Canada is still in pretty good shape.
Mr. Alexander said that “virtually every single key driver for consumer spending suggests that things are going to slow down.”
“In the housing market, we've already seen very clear signs that it's cooled down, and I think that this is going to translate into weaker spending on … housing-related items,” he said.
Employment growth is expected to slow to 1.6 per cent in 2008 and 0.5 per cent in 2009, compared to 2.3 per cent last year. The unemployment rate will likely edge up. And gains in personal wealth will moderate over the next two years, with real estate cooling and growth in financial assets slowing, the TD report said.
Moreover, the bank's economists expect soaring commodity prices to stabilize in coming months as beleaguered U.S. consumers tighten their own purse strings, crimping demand and sending ripples through the global economy.
Loonie headed toward US90 cents, predicts poll
The Canadian dollar will fall steadily versus the U.S. dollar during the next 12 months as commodity prices weaken and the gap between domestic and U.S. interest rates narrows, according to a Reuters poll released on Wednesday.
The domestic currency has held near par versus the greenback for much of the year, supported by record high oil prices and a surprise decision by the Bank of Canada last month to keep its key interest rate steady, rather than lowering it.
But the factors that last year fuelled the Canadian dollar's 17.5 % rally versus the U.S. dollar are expected to unravel and send the currency back down closer to the US90 cents level.
The Canadian currency is expected to be worth C$1.020 to the U.S. dollar, or 98.04 U.S. cents, in a month, and remain at that level for three months, according to the median estimate of 49 strategists polled between June 30 and July 2.
In 6 months, it is seen at C$1.050 to the U.S. dollar, or 95.24 U.S. cents, and in 12 months it is expected to be at C$1.070 to the U.S. dollar, or 93.46 U.S. cents.
Those estimates indicate the Canadian dollar will fall 5% over the next year from current levels around C$1.0155 to the U.S. dollar, or 98.47 U.S. cents.
Last year's rally was fuelled by a steady stream of strong Canadian economic data, Bank of Canada rate increases, a weaker U.S. dollar, merger-related activity and rising commodity prices.
Recently, domestic data has started to signal a weaker economy, rate cuts have been in vogue all year, commodity prices have not been as closely linked to the currency as last year and merger-related activity has fizzled.
Some participants in the poll said the Canadian dollar is too high and will soon lose steam as the U.S. Federal Reserve starts raising its key lending rate more aggressively than the Bank of Canada. The Bank of Canada's key rate is 3.00% while the Fed's rate is 2.00%.
"At current levels the Canadian dollar is overvalued versus the U.S. dollar," said Intesa Sanpaolo, one of the firms that participated in the poll. "With the Fed likely to raise rates in a more aggressive way than the Bank of Canada, the Canadian dollar should therefore start do depreciate gradually."
The Bank of Canada will make its next scheduled interest rate announcement on July 15, but most market participants are not expecting any change to rates until sometime in 2009.
Lofty prices for oil, a key Canadian export, could soon drag on the commodity-linked Canadian dollar since concerns about global growth would take a bite out of demand for oil.
Oil prices, which were a major catalyst behind the Canadian dollar's rally last year, remained with sight of the record high of $143.67 a barrel reached on Monday.
"We expect the positive influence from rising commodity prices to fade over the next three to six months reflecting slowing global growth," said BTMU, another firm that took part in the poll.
"In these circumstances, the negative spillover effects on Canadian economic activity from anemic U.S. domestic demand will weigh more heavily on the Canadian dollar."
© Thomson Reuters 2008
· TSX -432.92(Reuters) plunged in a broad selloff as economic sentiment darkened and coal companies saw shares plunge alongside the price of the commodity. The selloff came as a US report found that U.S. private-sector employers slashed 79,000 jobs in June -- the largest drop since November 2002 and worse than expected by economists. Investors also worried that slowing economic conditions in North America and Europe will slash demand for metals and crude.
· Dow -166.75
· Dollar +.60c to $98.68US Canada’s dollar gained the most in almost 2 months as prices of the nation's commodity exports surged
· Oil + $2.60 shot to new records briefly above US$144 a barrel as the U.S. government reported a bigger-than-expected drop in supplies -2million barrels, and the threat of conflict with Iran weighed on traders' minds$143.57US per barrel.
· Gold +$2.30US to $944.80US per ounce overshadowed by record oil prices, gold has also risen significantly higher
The party's over for Canadian spendthrifts
TARA PERKINS AND KEVIN CARMICHAEL From Thursday's Globe and Mail
TORONTO and OTTAWA — Canadian consumers, facing softer job creation and a chill in the housing sector, are likely to rein in the spending that has fuelled the economy, economists say.
Record energy prices and rising food costs could spook consumers into an even sharper pullback, they caution, though the situation now is not dire.
“I do think consumer spending has really only got one direction to go in this kind of environment, and that's toward slower growth,” said Douglas Porter, deputy chief economist at Bank of Montreal, who noted that the country is coming off one of the strongest spending periods in decades.
Consumers have been having a field day in recent years thanks to strong employment, low interest rates, tax cuts and the strong Canadian dollar, Mr. Porter noted.
The booming housing market was driving demand for furniture, appliances and other big ticket items, said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.
“Households have been spending almost like drunken sailors over the past couple of years, which provided critical support to the economy when the export-oriented manufacturing sector had been suffering under the weight of a strong currency and flagging U.S. demand,” TD economists wrote in a report yesterday titled Canadian Consumers to Gear Down their Spending. “The central question is whether consumers can keep tipping pints or whether a hangover is in store.”
In April, when the Bank of Canada laid out its most recent thinking on the economy, policy makers said domestic demand was “expected to be the key source of economic growth” through 2010, offsetting weaker U.S. demand for exports.
Mr. Alexander believes the tide will finally turn for exporters in 2009 as the U.S. economy gradually improves, but Canadian consumer spending will grow at a slower rate than it is today. “You put those two offsetting factors together and it means that next year, economic growth in Canada will probably still be less than 2 per cent, and that's quite soft – a healthy pace of growth is probably about 2.8,” he said.
TD expects real personal expenditure to rise 4 per cent in 2008 and 2.6 per cent in 2009, down from 4.5 per cent last year.
There is some evidence that consumers are already reining in spending. Retail sales increased 4.2 per cent in April from the same period a year ago, the weakest growth in nine months, Statistics Canada reported on June 20.
Derek Nighbor, senior vice-president at the Retail Council of Canada, said sales figures were a bit soft across the board in March and things bumped up a little again in April.
“Overall, are we expecting things to be a bit softer in '08 and '09 than they have been in the last few years? Most definitely. That being said, this is not the early 1990s,” he said, noting that relatively speaking, Canada is still in pretty good shape.
Mr. Alexander said that “virtually every single key driver for consumer spending suggests that things are going to slow down.”
“In the housing market, we've already seen very clear signs that it's cooled down, and I think that this is going to translate into weaker spending on … housing-related items,” he said.
Employment growth is expected to slow to 1.6 per cent in 2008 and 0.5 per cent in 2009, compared to 2.3 per cent last year. The unemployment rate will likely edge up. And gains in personal wealth will moderate over the next two years, with real estate cooling and growth in financial assets slowing, the TD report said.
Moreover, the bank's economists expect soaring commodity prices to stabilize in coming months as beleaguered U.S. consumers tighten their own purse strings, crimping demand and sending ripples through the global economy.
Loonie headed toward US90 cents, predicts poll
The Canadian dollar will fall steadily versus the U.S. dollar during the next 12 months as commodity prices weaken and the gap between domestic and U.S. interest rates narrows, according to a Reuters poll released on Wednesday.
The domestic currency has held near par versus the greenback for much of the year, supported by record high oil prices and a surprise decision by the Bank of Canada last month to keep its key interest rate steady, rather than lowering it.
But the factors that last year fuelled the Canadian dollar's 17.5 % rally versus the U.S. dollar are expected to unravel and send the currency back down closer to the US90 cents level.
The Canadian currency is expected to be worth C$1.020 to the U.S. dollar, or 98.04 U.S. cents, in a month, and remain at that level for three months, according to the median estimate of 49 strategists polled between June 30 and July 2.
In 6 months, it is seen at C$1.050 to the U.S. dollar, or 95.24 U.S. cents, and in 12 months it is expected to be at C$1.070 to the U.S. dollar, or 93.46 U.S. cents.
Those estimates indicate the Canadian dollar will fall 5% over the next year from current levels around C$1.0155 to the U.S. dollar, or 98.47 U.S. cents.
Last year's rally was fuelled by a steady stream of strong Canadian economic data, Bank of Canada rate increases, a weaker U.S. dollar, merger-related activity and rising commodity prices.
Recently, domestic data has started to signal a weaker economy, rate cuts have been in vogue all year, commodity prices have not been as closely linked to the currency as last year and merger-related activity has fizzled.
Some participants in the poll said the Canadian dollar is too high and will soon lose steam as the U.S. Federal Reserve starts raising its key lending rate more aggressively than the Bank of Canada. The Bank of Canada's key rate is 3.00% while the Fed's rate is 2.00%.
"At current levels the Canadian dollar is overvalued versus the U.S. dollar," said Intesa Sanpaolo, one of the firms that participated in the poll. "With the Fed likely to raise rates in a more aggressive way than the Bank of Canada, the Canadian dollar should therefore start do depreciate gradually."
The Bank of Canada will make its next scheduled interest rate announcement on July 15, but most market participants are not expecting any change to rates until sometime in 2009.
Lofty prices for oil, a key Canadian export, could soon drag on the commodity-linked Canadian dollar since concerns about global growth would take a bite out of demand for oil.
Oil prices, which were a major catalyst behind the Canadian dollar's rally last year, remained with sight of the record high of $143.67 a barrel reached on Monday.
"We expect the positive influence from rising commodity prices to fade over the next three to six months reflecting slowing global growth," said BTMU, another firm that took part in the poll.
"In these circumstances, the negative spillover effects on Canadian economic activity from anemic U.S. domestic demand will weigh more heavily on the Canadian dollar."
© Thomson Reuters 2008
Subscribe to:
Posts (Atom)
