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morning business briefing

Sorting it out

You’re to be forgiven if you can’t quite figure out the state of Canada’s economy from Wednesday’s snippets.

Prime Minister Justin Trudeau appeared optimistic in Davos, Bank of Canada Governor Stephen Poloz sounded upbeat in Ottawa even as he painted a bleaker picture, and economists seemed divided in Toronto.

As The Globe and Mail’s Robert Fife reports, Mr. Trudeau took the stage at a key economic and political gathering to sell the crowd on Canada’s attributes.

And as The Globe’s Barrie McKenna and Bill Curry report, Mr. Poloz warned of a stalling economy in the fourth quarter even as he held his benchmark rate steady and pinned his hopes on government stimulus, at the same time pointing to better times ahead.

As for the economists, they ranged in their outlook for the economy.

What’s going on here, of course, is that Mr. Trudeau campaigned on an infrastructure spending program, the details of which aren’t yet known.

And Mr. Poloz said that played a role in the decision he and his Bank of Canada colleagues unveiled Wednesday, saying that “the likelihood of new fiscal stimulus” was an important factor.

“This could signal that a very large fiscal stimulus should be announced soon,” said Charles St-Arnaud of the Nomura economics group.

Some observers believe the Bank of Canada made the wrong move, while others believe the decision was a correct one. And some believe the possibility of a rate cut still stands.

Here’s what they said:

Mr. Trudeau, with a glass half full: “We have social stability, financial stability and a government to invest in the future ... The low oil prices are a challenge but the Canadian economy is a lot more than just natural resources.”

Mr. Poloz, with a glass half empty: “The drop in oil and other commodity prices constitutes a significant setback for the Canadian economy and has set in motion a protracted adjustment process. ... It is disrupting the lives of many Canadians, whether through job losses or through higher prices for imported goods. ... Although the economy may grow more slowly than we would like during that transition, it can still achieve above-potential growth and absorb its excess capacity.”

David Madani of Capital Economics, one of the more pessimistic analysts, with a glass that’s empty: “We think the bank’s latest GDP forecasts of 1.4 per cent in 2016 and 2.4 per cent in 2017 are woefully optimistic. ... With the low level of business confidence pointing to a shrinking economy rather than a growing one, we think the economy will be lucky to grow by even 1 per cent in 2016.”

Here’s a glass-half-full chart:

Here’s one that’s half empty:

Here’s the empty version:

And here’s one that’s just plain interesting:

Investors anxious

Global markets are on edge this morning after yesterday’s stock rout.

Tokyo’s Nikkei tumbled 2.4 per cent, Hong Kong’s Hang Seng 1.8 per cent, and the Shanghai composite 3.2 per cent.

In Europe, London’s FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 0.5 per cent and 0.8 per cent by about 6 a.m. ET.

“The big question now is where do we go to next,” said CMC Markets chief analyst Michael Hewson.

“That looks highly likely to depend on oil prices, and a late rebound off the lows yesterday did see U.S. markets recoup a large portion of their losses.”

Pengrowth suspends dividend

The bloodletting continues in Canada’s oil patch today, with Pengrowth Energy Corp. the latest to tinker with its dividend.

Tinker is an understatement: Pengrowth suspended its quarterly payout, saying it would review it going forward.

“Pengrowth is taking this necessary step during this period of low prices to emerge with a better financial position when prices recover,” it said.

As The Globe and Mail’s Jeff Lewis reports, Whitecap Resources cut its dividend, and Husky Energy suspended its payout this week alone.

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