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business briefing

These are stories Report on Business is following Friday, Feb. 13, 2015.

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'When doves fly'
A fresh reading on Canada's manufacturing sector underscores a new reality: A weaker currency appears to be filtering through to the country's factories, although modestly at this point, while the energy industry suffers.

Manufacturing sales climbed 1.7 per cent in December, Statistics Canada said today.

And that's despite a plunge of 9.3 per cent in petroleum and coal.

In fact, sales rose in 17 of the industries measured, accounting for almost 80 per cent of the total.

"The volume of petroleum and coal products sold actually increased in December, as refineries that had undergone maintenance and turnaround work in the fall continued to ramp up production," the statistics agency said.

"However, an 11.6-per-cent decline in prices as reported by the industrial product price index erased all of those volume gains and resulted in the large decline."

December's gains, which marked a rebound from a slump a month earlier, were buoyed by increases in transportation industry, notably cars, up 9 per cent, and parts.

Sales of machinery climbed 5.2 per cent to hit the highest mark since November, 2011.

Regional showings also tell the tale: Sales climbed 2.3 per cent in Ontario, 1.5 per cent in Quebec and 2.9 per cent in British Columbia, which enjoyed a boost of 4.8 per cent from forestry products.

But sales slipped 4 per cent in Saskatchewan and 0.8 per cent in Alberta.

The gains from a weaker Canadian dollar, which rose after the report was released, have been modest to date, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

But "this is good, this is what we needed," she said.

Today's report, which showed broad-based gains, is a "healthy sign for the Canadian backdrop" amid the oil shock, Ms. Sutton added.

A stronger U.S. economy is also playing into what's happening.

"November's drop suggested that Canada might not be so quick to benefit from firming U.S. economic growth and a weaker loonie," said senior economist Benjamin Reitzes of BMO Nesbitt Burns.

"Those concerns can be put on the backburner for now."

The impact of a weaker currency lags, of course.

There has been a follow-through to non-energy exports but "the gains have been more modest than we would have hoped for," Ms. Sutton said.

The Canadian dollar has tumbled along with oil prices, which have regained some ground from the depths of the slump, and the shift in monetary policy from the Bank of Canada, among other things.

It plunged late last month when the central bank unveiled a surprise rate cut. Indeed, many of the world's central banks have been slashing rates, while the Federal Reserve heads toward a hike, possibly in June.

Markets also expect the Bank of Canada to cut its benchmark overnight rate again, a move that would bring it to just 0.5 per cent, and this is also weighing on the currency.

"There is now discussion on whether the reaction in the Canadian rates market is an overshoot," Greg Moore, senior currency strategist at RBC Dominion Securities, said in a report titled "When doves fly," referring to the exceptionally easy-going nature of the central bank.

"With the degree of cuts priced in, and with the medium-term stimulus that already expect from the weaker currency, we have some sympathy with that view," he added.

"However, we continue to believe that the positive news flow that could trigger a retracement of current pricing will take some time to appear."

All told, manufacturing still slumped over the course of the final quarter of last year, though were up by more than 5 per cent for all of 2014.

And for some industries, there are "headwinds" for the year ahead, said economist Dina Ignjatovic of Toronto-Dominion Bank.

"Lower oil prices through the first half of this year will likely to continue to weigh on petroleum manufacturing," she said.

"Meanwhile, motor vehicle assembly manufacturing will likely lose some ground during the first half of this year, as the Chrysler assembly plant in Windsor is slated to shut down for retooling for 14 weeks as of Monday," Ms. Ignjatovic added.

"That said, the outlook for Canadian manufacturers overall remains bright thanks to the ongoing strength in the U.S. economy, a weaker loonie and more accommodative monetary policy."

Fade to black
Sun News Network has gone dark.

The television station that launched in 2011 promising "hard news and straight talk" went off the air at 5 a.m. today, The Globe and Mail's James Bradshaw reports.

The closing will mean the loss of 150 full-time jobs and affect about 200 employees and contributors.

"This is an unfortunate outcome; shutting down Sun News was certainly not our goal," said Julie Tremblay, the chief executive officer of Media Group and Sun Media Corp., said today.

"Over the past four years, we tried everything we could to achieve sufficient market penetration to generate the profits needed to operate a national news channel. Sadly, the numerous obstacles to carriage that we encountered spelled the end of this venture."

TransCanada boosts dividend
TransCanada Corp. shareholders have so far been unable to get the Keystone XL pipeline. But they are getting a dividend hike and a stronger fourth-quarter report.

The Canadian company, whose controversial pipeline project has been stalled in the United States, today boosted its quarterly dividend by 8 per cent to 52 cents.

TransCanada profit rose in the quarter to $458-million, or 65 cents a share, from $420-million or 59 cents a year earlier.

Europe grows
There's life in the euro zone yet.

Well, there's life in Germany, which means there's life in the 18-nation monetary union.

The region's economy expanded in the fourth quarter of last year by a better-than-expected 0.3 per cent, driven by Germany, the euro zone's powerhouse, whose gross domestic product grew by 0.7 per cent.

Greece remains troubled, as do certain other countries.

"Over all, a decent quarter for Europe, butt underlying growth remains sub-1 per cent, which is certainly not good enough," said senior economist Benjamin Reitzes of BMO Nesbitt Burns.

"These figures won't change much for the [European Central Bank], but reinforce that broadening [quantitative easing] in January was the right move."

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