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Economic, career blues may be driving up your electricity bills

These are stories Report on Business is following Thursday, Sept. 4, 2014.

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Blues and light
People who are glum about their economic prospects may be inadvertently driving up their electricity bills because of their need for brighter lighting, a Canadian-led study suggests.

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A team of researchers who conducted four studies, looking at everything from the impact of soft couches to wall paintings and light, found the latter to be a significant factor.

"We demonstrated that people's hopelessness about the economy and career prospect increased their preferences for ambient brightness," according to the paper by Ping Dong, a doctoral study at the University of Toronto's Rotman School of Management, assistant marketing professor Xun Huang at China's Sun Yat-sen University, and Chen-Bo Zhong, an associate professor of organizational behaviour and human resource management, also at Rotman.

"No significant correlations were found between hopelessness toward the economy and preference for softness of sofa … or size of wall paintings," they added in the paper, published this summer.

The results are key because such behaviour could prompt people to spend more on electricity when they can ill-afford it, the researchers said in a highly-technical paper that was noted by the Harvard Business Review.

And, of course, because the post-crisis era is plagued by high unemployment and stagnant pay levels.

"To quantify the potential cost of hopelessness on electricity consumption, we regressed the preference of the ideal wattage for a ceiling fixture onto the hopelessness scale and found that it costs participants on average 20.6 per cent more electricity to feel one point less hopeful toward the economy and career prospect."

Their findings, they said, are important in more ways than one, notably for policy makers.

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"It is worth noting that the ambient brightness may be an effective strategy to light up the hope for people's future," they wrote.

"Thus, during economic recession, increased ambient lighting in public places may rekindle people's optimism toward the prospect of the economy. In addition, campaigns to raise awareness of energy conservation should take into account people's emotional state when thinking about the effectiveness of campaign strategies."

ECB cuts rates
The European Central Bank surprised markets today with cuts that bring interest rates to record lows.

The central bank trimmed its key rate by 10 basis points, to 0.05 per cent, cutting other major rates alongside and introducing a program to buy asset-backed securities, our European correspondent Eric Reguly reports.

"After months of denial, it appears that the ECB has sat up and paid attention to the sluggish euro zone recovery and disinflationary pressures," said chief market strategist Brenda Kelly of IG in London.

While the ECB took moves economists had not expected, the Bank of England and the Bank of Japan held firm today.

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ECB chief Mario Draghi also painted a bleaker economic forecast for this year and next than the central originally projected.

It now expects economic growth of 0.9 per cent this year and 1.6 per cent in 2015, perking up to 1.9 per cent in 2016. The first two figures are downgrades, and the latter an upgrade.

This comes amid gathering gloom in the countries that make up the euro zone, which is struggling with high unemployment and low inflation.

Just yesterday, the Bank of Canada noted in its policy statement that "the recovery in Europe appears to be faltering as the situation in Ukraine weighs on confidence."

And the Organization for Economic Co-operation and Development forecast that unemployment will come in at 11.7 per cent by late this year, and 11.2 per cent by late 2015.

"Ultimately, with the growth of geopolitical threats, primarily driven by further sanctions in Russia, growth is almost certain to be on a downward trajectory and as such, it is right to front run such a move and attempt to prop up the economic recovery in the euro zone," said Alpari research analyst Joshua Mahony.

Trade surplus widens
Canada's exporters are basking in the glow of a pickup, underscoring the Bank of Canada's message only yesterday.

Canadian exports climbed 1.4 per cent in July while imports inched down, pumping up the country's trade surplus to $2.6-billion in July from $1.8-billion in June.

Where the surplus is concerned, it's the best showing since the reading of $2.4-billion in December, 2011, and just about matches the $2.6-billion of October, 2008, when the financial crisis was setting in.

Export volumes rose 1.1 per cent in July, and prices 0.3 per cent, Statistics Canada said today.

On the import side of the ledger, volumes actually rose, by 0.4 per cent, but prices slipped 0.6 per cent.

Exports to the United States climbed 1.9 per cent, largely on the autos and related parts industries, while those to other countries inched up 0.1 per cent.

Yesterday, the Bank of Canada noted a surge in exports in the second quarter of the year after a winter slump, and said many related industries were turning the corner.

But, as The Globe and Mail's Barrie McKenna reports, the central bank said investment and hiring were yet to follow suit.

"That's the biggest Canadian surplus since late 2011, and should lend some credibility to the staying power of the recent export outperformance - which will be needed in convincing the Bank of Canada that at least part of their rotation away from the consumer is underway," said Nick Exarhos of CIBC World Markets.

The U.S. trade deficit, in turn, narrowed in July, to its lowest in half a year, according to the Commerce Department today.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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