These are stories Report on Business is following Friday, March 1, 2013.
U.S. braces for cuts
The United States is bracing for tens of billion in spending cuts that would go into effect automatically tonight and, among other things, are expected in time to snarl border traffic.
President Barack Obama met today with leaders in Congress to attempt to head off the $85-billion (U.S.) in cutbacks, but came away without a deal, The Globe and Mail's Kevin Carmichael reports.
As The Globe and Mail’s Kevin Carmichael and Brent Jang report, the automatic measures could mean cuts of more than 5,700 Customs and Border Protection inspectors and agents.
The Canada-U.S. border does business worth about $1-billion a day, and companies are watching closely.
The automatic cuts would deal a blow to the U.S. economy at a crucial period in the recovery. Just yesterday, the Commerce Department reported that gross domestic product expanded at an annual pace of just 0.1 per cent in the fourth quarter, though that was better than the first GDP estimate, while unemployment is still elevated.
“The implications of $85-billion being cut from U.S. spending would see projected U.S. growth fall from 2 per cent to 1.5 per cent, more than enough to derail the fragile recovery that is currently under way in the U.S.,” said market analyst Alastair McCaig of IG in London.
(Canadian cross-border shoppers, who just a few weeks ago were enjoying the buying power of a currency at par with the U.S. dollar, may as well avoid the expected border lineups and stay home, anyway. The loonie, as the dollar is known in Canada, has been falling and was at an eight-month low of under 97 cents this morning.)
- A dysfunctional U.S. government in spotlight as sequester talks stall
- Business braces for U.S. budget fallout
- IMF set to cut growth forecasts if U.S. ‘sequester’ trims spending
Economy at crawl speed
Canada’s economy is just inching along.
Gross domestic product expanded by just 0.6 per cent, on an annualized basis, in the fourth quarter of 2012, Statistics Canada said today, slightly better than expected but a weak end to a year that saw crucial commodity prices soften, the housing market slow down, and retail spending slip.
On a monthly basis, GDP contracted by 0.2 per cent in December alone, The Globe and Mail's Richard Blackwell reports.
The weak numbers were little surprise, especially after recent retail sales figures showed a 2.1-per-cent drop in December, the largest decline since April 2010.
The key question now is whether Canada’s economy can show some improvement in 2013, and come close to the Bank of Canada’s expectations of 2-per-cent growth over the year.
Many economists expect to see economic growth considerably below that level, especially after last Tuesday’s report from Statistics Canada on capital spending intentions for 2013.
- Canada's economy still 'sickly'
- Scott Barlow in ROB Insight (for subscribers): GDP weak but positive signs under the surface
Economic readings are coming in weak from Europe and China today, though better than expected from the United States.
Purchasing managers’ indexes from Europe continue to paint a soft picture, while China’s reading showed manufacturing still expanding, but at a slower pace.
A reading on the U.S. factory sector, however, showed a pickup.
At the same time, reports showed unemployment rising to 10.8 per cent in the 27-member European Union in January, and 11.9 per cent in the smaller, 17-nation euro zone.
According to the Eurostat agency, more than 26-million people can’t find work in the EU, almost 19 million of them in the countries that share the euro, which have been hammered by a debt crisis and severe austerity measures.
More than 5.5 million young people are out of work across the EU.
- Euro zone inflation eases as joblessness hits record 11.9%
- China factory growth fizzles as demand wanes
- U.S. factory sector grows at best pace in 1-1/2 years
- Greek slump near end, but jobless rate to stay high: Finance Minister
Magna hikes dividend
Already having hiked its forecast for sales this year, Magna International Inc. today boosted its dividend by 16 per cent.
That brings the payout to 32 cents a share, The Globe and Mail’s Greg Keenan reports.
The Canadian auto parts giant earned $351-million or $1.49 a share in the fourth quarter, up from $312-million or $1.32 a year earlier.
Streetwise (for subscribers)
- Iron Ore shareholder Labrador Iron faces activist pressure
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- Icahn grabs two seats on Herbalife board
- Superior Plus is staging an impressive rebound
ROB Insight (for subscribers)