- 13 signs of economic woe
- Stocks, loonie, oil at a glance
- Glencore to cap coal output
- Samsung to unveil new phones
- From today’s Globe and Mail
13 economic signs
First, we’re not talking recession – certainly not at this point, anyway.
But we are talking slow growth to the point that “it wouldn’t take too much to tip the economy over,” as CIBC World Markets warned recently.
Which is why all eyes will be on the Federal Reserve this afternoon and Bank of Canada tomorrow.
This comes amid a string of sour economic readings the world over, and marked-down projections for global growth that have some observers wondering when the expansion ends. And, of course, amid the tremendous uncertainty over everything from the U.S.-China trade fight to Brexit.
“The run of economic data globally has been so awful lately,” said Bank of Montreal chief economist Douglas Porter as he rhymed off a series of trouble spots.
1: The Organization for Economic Co-operation and Development’s leading indicator fell last week for the 12th month in a row, putting it near its lowest in 10 years.
2: Gross domestic product contracted in November, by a mild 0.1 per cent, which “raises the distinct possibility of a two-month setback – all just before Alberta’s mandated oil production cuts began in January.”
3: “Perhaps the most pronounced change has been seen in Europe, which is now being flagged as ‘the most likely region to first sink into recession’ … Between budget wrangling in Italy, the Yellow Vest protests in France, Brexit, more political uncertainty in Spain, and Germany’s auto-sector difficulties, all major EU economies are facing challenges.”
3 (a): “Europe and Japan are slow, period.”
4: While analysts are questioning the credibility of the numbers, the latest reading of retail sales in the U.S. showed a hefty drop of 1.2 per cent for December.
5: “Initial jobless claims [in the U.S.] have been quietly drifting higher, moving to a one-year high on the rolling average and raising a flicker of doubt on whether even the vaunted job market is still so healthy.”
6: Manufacturing production in the U.S. fell 0.9 per cent in January.
7: Canadian manufacturing sales tumbled in December with volumes below their year-earlier levels for the first time since 2016.
7 (a): Canada’s economy “will do well to top 1-per-cent growth in both Q4 and Q1 given this lacklustre background.”
8: “China had already sent up flares around a cooler economy,” though last week’s January trade report was stronger than expected.
Add these to Mr. Porter’s list:
9: Trade numbers for Japan expected this week “are likely to point to weakness in both exports and imports,” according to Capital Economics.
10: Analysts expect a Statistics Canada report to show retail sales sagged in December by up to 0.7 per cent, though partly because of lower gas pump prices. Said CIBC senior economist Royce Mendes: “The drag from fewer car sales will likely also mean real retail trade will post a negative print for the third consecutive month, and make it eight monthly declines for 2018, the first year that’s happened since 2008.”
11: Gluskin Sheff + Associates chief economist David Rosenberg: “Consider for a moment that we are back to US$11-trillion of bonds around the world trading with a negative yield, fully a decade after the end of the financial crisis.”
12: The World Trade Organization’s trade outlook indicator, released Tuesday, was the weakest since March, 2010, pointing to slower growth in the current quarter. Said the WTO: “The simultaneous decline of several trade-related indicators should put policy makers on guard for a sharper slowdown should the current trade tensions remain unresolved.”
12 (a): Canada is suffering “a 14-year record of hum-drum export performance … a shortcoming that we’ve overcome by driving growth in consumer spending and housing,” CIBC’s Mr. Mendes and chief economist Avery Shenfeld said in a report Tuesday.
12 (b): The Canadian economy has “looked just fine over all this cycle,” they said, but “the imbalanced share of the economy tied to leverage in household spending and housing now leaves Canada vulnerable in terms of what comes next.”
13: Germany’s widely watched ZEW economic sentiment indicator perked up somewhat this month, according to the latest measure released Tuesday for Europe’s economic powerhouse, but remains “in negative territory” and far below its long-term average. Said the group: “At the moment, we do not expect a rapid recovery of the slowing German economy.”
All of which brings us back to CIBC’s warning that Canada could be looking at economic growth in the area of 1 per cent in this quarter, with final numbers showing about the same pace for the fourth quarter.
“Being in the 1-per-cent club means that it wouldn’t take too much to tip the economy over, a reason for central banks to be careful about adding further restraint,” CIBC’s Mr. Shenfeld said.
It’s certainly not all gloomy, particularly in Canada, where the jobs market has been solid and the housing market is stabilizing.
And on the trade front, talks between China and the U.S. have taken on a more optimistic tone. Much could be put to rest if that war is settled.
And BMO, for example, believes numbers expected later this month will show fourth-quarter growth in the U.S. of 2.6 per cent, though its economists expect that to slow to 1.6 per cent in the current quarter.
So watch as the Federal Open Market Committee, the U.S. central bank’s policy-setting group, releases the minutes of its last meeting this afternoon.
And as Bank of Canada Governor Stephen Poloz speaks to a business audience in Montreal tomorrow, followed by a news conference.
Markets will be watching for further information on the sudden abrupt-turn by the U.S. central bank at its January meeting, when a signaled a paused in its rate-hiking cycle.
“We will hear from the Fed in the FOMC minutes for the sea-change January meeting, as well as from BoC governor Poloz on Thursday,” BMO’s Mr. Porter said. “We doubt either will be declaring any emergency, but the tone is likely to take a much more cautious turn on both fronts, appropriately so.”
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