Briefing highlights
- More interested in spending than saving
- Ottawa to unveil softwood aid package
- Markets at a glance
- PPG suspends quest for Akzo Nobel
- Deere to buy Wirtgen for $5.2-billion
Hey, big spender
Deep down in Statistics Canada’s report on first-quarter economic growth is this tidbit: We’re more interested in buying than saving.
When you couple that with a surge in consumer spending, you get the picture.
“The household savings rate dipped to 4.3 per cent, but remained within the post-crisis range,” Citigroup economist Dana M. Peterson said of Wednesday’s report, which showed that rate down by a full percentage point.
“While real pre- and post-tax income growth continued to slow (with wage growth), it appears that consumers are funding purchases with a combination of wealth and credit.”
As The Globe and Mail’s David Parkinson reports, Canadian consumers certainly helped fuel first-quarter economic growth of 3.7 per cent annualized.
Spending was perky on both the consumer goods and services side of the ledger, moreso on the former.
“Notably, households splurged on discretionary items like clothing, cars, furniture and recreation,” Ms. Peterson said.
Many of observers believe Canadians can’t keep up that pace. And, remember, Canadians have been warned time and time again about their record debt levels.
“Consumers are likely to keep their wallets open, helped by past gains in housing wealth,” said senior economist Brian DePratto of Toronto-Dominion Bank.
“But, it is again unlikely that the pace of first-quarter growth, particularly for durable goods spending, can be maintained, and the credit-fuelled nature of recent spending growth remains concerning.”
Looked at another way, consumers added almost 2.6 points to the first-quarter pace of economic growth, noted Derek Holt, Bank of Nova Scotia’s head of capital markets economics.
“You’ve heard concerns about the durability of consumer spending gains for years, and yet somehow the Canadian consumer keeps steaming ahead,” Mr. Holt said.
“My inclination is still to view this as not terribly durable in light of the temporary infusion of cash from the increase in child benefit payments and super-charged job growth since last summer in the face falling real wages.”
Ottawa to support softwood
Ottawa is coming to the aid of softwood lumber producers in the wake of the Trump administration’s duties on the industry.
As The Globe and Mail’s Steven Chase, Brent Jang and Justine Hunter report, the Trudeau government is expected today to announce about $860-million in support for the sector.
Cautious lest this be seen as a bailout, which would not sit well in a trade fight, the Liberals will increase employment insurance support for those thrown out of work by the duties. Also on tap will be loan guarantees and aid for innovation and marketing.
Markets at a glance
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