Briefing highlights
- Newfoundland forecasts widespread unemployment
- Alberta opts for spending, not austerity, in budget
- Mitel in $2-billion deal for Polycom
- Stocks tumble around the world
- Chinese economic growth dips
The Rock
The latest budget from Newfoundland and Labrador is an ugly document in what it says about the economy.
Like that of Alberta, it tells the tale of a crippled resource economy. Unlike Alberta, the province’s new government is opting for austerity, which will probably only serve to worsen already harsh conditions.
We saw how that played out in some of Europe’s basket cases.
As The Globe and Mail’s Rachelle Younglai reports, Liberal Finance Minister Cathy Bennett unveiled a series of tax hikes yesterday, implemented new fees and cut jobs, among other measures.
The severe fiscal issues aside, the forecasts for the next few years are exceptionally harsh in the region Canadians call the Rock.
Look, for example, at unemployment, which is projected to peak in a few years at 19.8 per cent. That’s one in five people without work.
“Faced with the prospect of prolonged weakness in commodity prices, and a declining population, Newfoundland’s economy is expected to continue to struggle in the coming years,” said Andrew Grantham of CIBC World Markets.
“While real GDP is expected to rebound slightly in 2016 following an estimated 2.3-per-cent decline in 2015, it is then expected to fall again in each of the next four years as ongoing investments in projects such as Muskrat Falls wind down.”
The oil patch
Alberta’s New Democratic Party, on the hand, took a distinctly non-European approach to the hit it is taking from the oil shock.
As The Globe and Mail’s Justin Giovannetti reports, Finance Minister Joe Ceci unveiled a string of deficits, and a plan to spur employment growth.
“The province of Alberta is continuing with a firm dose of government spending to support the economy as it deals with the fallout from the negative oil price shock,” said BMO Nesbitt Burns senior economist Robert Kavcic.
“The good news here is that, while the credit rating has already fallen under pressure, they entered this period with more capacity to run big deficits than any of its provincial peers.”
Mitel in deal
Canada’s Mitel Networks Corp. has struck a $2-billion (U.S.) deal for Polycom Inc., creating what they say will be a leading Ottawa-based player in communications.
Mitel is offering $3.12 cash and 1.31 Mitel shares.
Combined, the company will have more than 7,500 employees across the globe.
Stocks sink
A handful of markets are up today, but major exchanges are tumbling around the world.
Tokyo’s Nikkei lost 0.4 per cent, while Hong Kong’s Hang Seng and the Shanghai composite each lost 0.1 per cent.
In Europe, London’s FTSE 100, Germany’s DAX and the Paris CAC 40 were down by between 0.5 and 0.6 per cent by about 8:15 a.m. ET.
New York futures were also down.
Playing into the markets today are fresh economic readings from China and speculation over a meeting in Qatar Sunday of major oil producers, aimed at freezing production levels.
“A tangible sense of apprehension has swept across global markets today, with traders unwilling to hold positions into the weekend given the clear risk of events in Doha on Sunday,” said IG market analyst Joshua Mahony.
“Once more money is beginning to flock into safe haven assets such as gold and the yen.”
China inches down
China is reporting slowing economic growth, but observers see signs of better times.
As always, there are questions about the official numbers from Beijing, which reported economic growth of 6.7 per cent in the first quarter.
“While GDP growth edged down in Q1, there are at least signs in the more recent data that momentum was improving going into this quarter,” said Julian Evans-Pritchard, the China economist at Capital Economics.
“With monetary and fiscal conditions still being loosened and credit growth accelerating, we think this may signal the start of a cyclical recovery.”