(Conference Board of Canada)
The Conference Board of Canada has released a report for the Government of Canada identifying the key issues facing the manufacturing sector in Canada and their impacts on labour market and skills requirements.
Accompanying this report are case studies that examine the impact of four innovative Sector Council programs aimed at overcoming specific labour market challenges in Canada’s apparel, wood manufacturing, plastics, and textiles industries.
More information, and a link to download the report, is available here.
Showing posts with label Canadian Economy. Show all posts
Showing posts with label Canadian Economy. Show all posts
Wednesday, July 9, 2008
Monday, June 30, 2008
Canada’s Economy Rebounds
(Virginia Galt — Globe and Mail)
After the unexpected contraction of Canada’s real gross domestic product in the first quarter of this 2008, it now appears that the economy will post “relatively slow economic growth, but positive economic growth” overall for the year, Federal Finance Minister Jim Flaherty said Monday.
“We’re on track to accomplish that this year …although obviously, the economy has slowed down,” Mr. Flaherty said in an interview after Statistics Canada reported that the GDP rebounded 0.4 per cent in April after declines in February and March.
“One month doesn’t make a trend, of course, but it’s more in line with what the forecasters, including ourselves, were anticipating.”
Mr. Flaherty said the first quarter’s 0.3 per cent drop in the GDP “was a concern – but it was explainable, on analysis, by the factors affecting the auto industry, particularly a strike at a parts plant in the United States.”
Mr. Flaherty said the Statscan report, which showed that manufacturing production rose by 1.9 per cent in April and that the retail sector was up by 0.6 per cent, “reflects strong economic fundamentals in Canada …I am particularly encouraged by continuing consumer confidence in Canada.”
Mr. Flaherty declined to say whether he believes the Canadian economy now has enough momentum to avoid a technical recession – which economists define as two consecutive quarters of negative growth.
“I don’t do that, other than what private sector forecasters say.”
However, several economists said Monday that it appears that the Canadian economy will eke out modest growth in the second quarter and for the balance of this year.
Statscan on Monday cited increases in manufacturing, and wholesale and retail trade in April, offsetting declines in construction, oil and gas extraction and exploration. Read more.
After the unexpected contraction of Canada’s real gross domestic product in the first quarter of this 2008, it now appears that the economy will post “relatively slow economic growth, but positive economic growth” overall for the year, Federal Finance Minister Jim Flaherty said Monday.
“We’re on track to accomplish that this year …although obviously, the economy has slowed down,” Mr. Flaherty said in an interview after Statistics Canada reported that the GDP rebounded 0.4 per cent in April after declines in February and March.
“One month doesn’t make a trend, of course, but it’s more in line with what the forecasters, including ourselves, were anticipating.”
Mr. Flaherty said the first quarter’s 0.3 per cent drop in the GDP “was a concern – but it was explainable, on analysis, by the factors affecting the auto industry, particularly a strike at a parts plant in the United States.”
Mr. Flaherty said the Statscan report, which showed that manufacturing production rose by 1.9 per cent in April and that the retail sector was up by 0.6 per cent, “reflects strong economic fundamentals in Canada …I am particularly encouraged by continuing consumer confidence in Canada.”
Mr. Flaherty declined to say whether he believes the Canadian economy now has enough momentum to avoid a technical recession – which economists define as two consecutive quarters of negative growth.
“I don’t do that, other than what private sector forecasters say.”
However, several economists said Monday that it appears that the Canadian economy will eke out modest growth in the second quarter and for the balance of this year.
Statscan on Monday cited increases in manufacturing, and wholesale and retail trade in April, offsetting declines in construction, oil and gas extraction and exploration. Read more.
Friday, June 27, 2008
Industrial Product and Raw Materials Price Indexes, May 2008
(Statistics Canada)
Petroleum prices increased substantially for a third consecutive month in May, driving up the indexes for manufactured goods and raw materials prices. However, if energy products were excluded, the price movement for both those indexes would have been negative.
From April to May, prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), rose 0.6%, down from the 1.6% increase in April. May’s increase was almost entirely attributable to petroleum and coal products, which continued their upward climb with an increase of 8.2%, similar to the rate recorded in the previous two months.
Prices for other IPPI products, with the exception of energy, declined 0.5%, their first decrease after five straight monthly increases. Among non-energy products, 13 major groups out of a total of 20 posted declines, led by primary metal products as well as motor vehicles and other transport equipment. Summary statistics and a link to the data file can be found here.
Petroleum prices increased substantially for a third consecutive month in May, driving up the indexes for manufactured goods and raw materials prices. However, if energy products were excluded, the price movement for both those indexes would have been negative.
From April to May, prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), rose 0.6%, down from the 1.6% increase in April. May’s increase was almost entirely attributable to petroleum and coal products, which continued their upward climb with an increase of 8.2%, similar to the rate recorded in the previous two months.
Prices for other IPPI products, with the exception of energy, declined 0.5%, their first decrease after five straight monthly increases. Among non-energy products, 13 major groups out of a total of 20 posted declines, led by primary metal products as well as motor vehicles and other transport equipment. Summary statistics and a link to the data file can be found here.
Thursday, June 19, 2008
Canada Amongst Top Five “Global Trade Friendly” Countries: WEF Study
(Agence France-Presse)
Hong Kong and Singapore are the two economies most conducive to global trade, according to a ranking by the World Economic Forum released on Wednesday.
The World Economic Forum’s new Global Enabling Trade Index survey of 118 economies looked at ten factors impacting trade, such as tariffs, customs administration efficiency and availability of transport and communications infrastructure.The forum ranked Hong Kong number one thanks to its “very open market” as well as a “secure and open business environment.”
Singapore’s open business environment was also complemented by a “highly efficient and transparent border administration” and a well-developed transport and communications infrastructure.
Third and fourth places were taken by Sweden and Norway respectively, while Canada was ranked fifth.
The world’s largest economy United States, however, did not figure in the top ten, coming in at number 14, dragged down by its border administration, judged to be “lacking some efficiency.”
“Customs procedures (in the United States) are seen as comparatively burdensome (ranked 42nd) and there is a relatively high cost to import (ranked 65th),” said the WEF.
Export giant China fared even worse, ranked just 48th, reflecting “underlying weaknesses in its economy and its trading regime.”
“Above all, China is a fairly closed country. Although its economic success relies heavily on exports, imports are still severely inhibited by tariff and non-tariff barriers, despite the country’s accession to the WTO,” it said.
Fellow Asian giant India ranked even further down the list, at 71st place, due to its market access, which is rated as “severely restricted.”
Brazil was not far behind India, at 80th place, as its markets remain “fairly closed, with tariffs... inhibiting goods imports.”
Hong Kong and Singapore are the two economies most conducive to global trade, according to a ranking by the World Economic Forum released on Wednesday.
The World Economic Forum’s new Global Enabling Trade Index survey of 118 economies looked at ten factors impacting trade, such as tariffs, customs administration efficiency and availability of transport and communications infrastructure.The forum ranked Hong Kong number one thanks to its “very open market” as well as a “secure and open business environment.”
Singapore’s open business environment was also complemented by a “highly efficient and transparent border administration” and a well-developed transport and communications infrastructure.
Third and fourth places were taken by Sweden and Norway respectively, while Canada was ranked fifth.
The world’s largest economy United States, however, did not figure in the top ten, coming in at number 14, dragged down by its border administration, judged to be “lacking some efficiency.”
“Customs procedures (in the United States) are seen as comparatively burdensome (ranked 42nd) and there is a relatively high cost to import (ranked 65th),” said the WEF.
Export giant China fared even worse, ranked just 48th, reflecting “underlying weaknesses in its economy and its trading regime.”
“Above all, China is a fairly closed country. Although its economic success relies heavily on exports, imports are still severely inhibited by tariff and non-tariff barriers, despite the country’s accession to the WTO,” it said.
Fellow Asian giant India ranked even further down the list, at 71st place, due to its market access, which is rated as “severely restricted.”
Brazil was not far behind India, at 80th place, as its markets remain “fairly closed, with tariffs... inhibiting goods imports.”
Friday, June 13, 2008
U.S. Airline Industry Heading for “Catastrophe” Warns New Study
(Transport Intelligence/CTV News)
Canadian airlines still in “reasonably good shape” however
At current oil prices, several U.S. airlines will default on their obligations to creditors, beginning at the end of 2008 and early 2009, according to a study issued today (June 13) by AirlineForecasts LLC and the Business Travel Coalition (BTC).
According to that report, $130/barrel oil prices would increase yearly airline costs by $30bn, while carriers would be able to generate only $4bn in fare increases and incremental fees. “The implication of this alarming trend is that several large and small airlines will ultimately end up in bankruptcy – and of those, some will be forced to liquidate,” it suggested.
“If oil prices stay anywhere near $130/barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009. U.S. commercial aviation is in full blown crisis and heading toward a catastrophe.
“Airlines are the primary source of inter-city transportation, critical to national and local economic development, the flow of human capital, movement of just-in-time parts for manufacturing, perishable food and other goods critical to our economy. With airlines gravely threatened, so is our economic well-being.”
Specific findings of the AirlineForecasts/BTC study include:
• The top 10 U.S. airlines will spend almost $25bn in higher fuel costs this year over last year when jet fuel averaged $2.11 per gallon. Fuel hedge benefits could offset $5 to $6bn of the increased fuel costs.
• Earnings for the group (of U.S. airlines), when one-time reorganisation charges are removed, were less than $4bn in 2007, the only year of profitability this decade. “The group could lose as much as $9bn over the next 12 months if the current range of oil prices holds.”
• Airlines have the ability to raise some cash, and moreover, suppliers such as aircraft manufacturers, leasing companies and travel management companies will have an incentive to support large airlines that provide a stream of value. “Nevertheless, without a swift reduction in the price of fuel, the industry is headed toward a massive failure that will result in more bankruptcies, including liquidations.”
While there is little doubt the industry is hurting both in Canada and the U.S., Joe D’Cruz, a management professor at the University of Toronto, said Canadian airlines are in “reasonably good shape.”
“In Canada, the industry is insulated by a couple of things,” D’Cruz told CTV.ca, noting that the overall Canadian economy is in better shape than its American counterpart.
“We (also) don’t have the intense (airline) competition. There is competition, but the airlines refrain from destructive competition. (And they) seem to pass on increases in high oil prices to travelers. They are hurting, but they are not in a disastrous shape.” Read more here.
Canadian airlines still in “reasonably good shape” however
At current oil prices, several U.S. airlines will default on their obligations to creditors, beginning at the end of 2008 and early 2009, according to a study issued today (June 13) by AirlineForecasts LLC and the Business Travel Coalition (BTC).
According to that report, $130/barrel oil prices would increase yearly airline costs by $30bn, while carriers would be able to generate only $4bn in fare increases and incremental fees. “The implication of this alarming trend is that several large and small airlines will ultimately end up in bankruptcy – and of those, some will be forced to liquidate,” it suggested.
“If oil prices stay anywhere near $130/barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009. U.S. commercial aviation is in full blown crisis and heading toward a catastrophe.
“Airlines are the primary source of inter-city transportation, critical to national and local economic development, the flow of human capital, movement of just-in-time parts for manufacturing, perishable food and other goods critical to our economy. With airlines gravely threatened, so is our economic well-being.”
Specific findings of the AirlineForecasts/BTC study include:
• The top 10 U.S. airlines will spend almost $25bn in higher fuel costs this year over last year when jet fuel averaged $2.11 per gallon. Fuel hedge benefits could offset $5 to $6bn of the increased fuel costs.
• Earnings for the group (of U.S. airlines), when one-time reorganisation charges are removed, were less than $4bn in 2007, the only year of profitability this decade. “The group could lose as much as $9bn over the next 12 months if the current range of oil prices holds.”
• Airlines have the ability to raise some cash, and moreover, suppliers such as aircraft manufacturers, leasing companies and travel management companies will have an incentive to support large airlines that provide a stream of value. “Nevertheless, without a swift reduction in the price of fuel, the industry is headed toward a massive failure that will result in more bankruptcies, including liquidations.”
While there is little doubt the industry is hurting both in Canada and the U.S., Joe D’Cruz, a management professor at the University of Toronto, said Canadian airlines are in “reasonably good shape.”
“In Canada, the industry is insulated by a couple of things,” D’Cruz told CTV.ca, noting that the overall Canadian economy is in better shape than its American counterpart.
“We (also) don’t have the intense (airline) competition. There is competition, but the airlines refrain from destructive competition. (And they) seem to pass on increases in high oil prices to travelers. They are hurting, but they are not in a disastrous shape.” Read more here.
Thursday, June 5, 2008
Dollar Parity Possible – But Then What?
(Stephen Poloz — EDC)
Many have begun to contemplate the possibility that the Canadian dollar might reach parity with the U.S. dollar. Since the vast majority of export sales are conducted in U.S. dollars, a 10 per cent rise in the Canadian dollar would clip C$3-4 billion per month from export revenues – a serious matter.
Dollar parity is obviously possible. After all, we had it 30 years ago. Plus, the dollar has risen by nearly 30 cents since 2003, so another 8-10 cents is not out of the question. But the deeper question would be, first, what would cause it? And second, what would happen next?
One route to parity would be a speculative bubble. Canada looks attractive in the context of high commodity prices, low inflation, a strong fiscal situation and a trade surplus. Economic history is littered with periods of exchange rate volatility that cannot be explained by economic models.
The story would not end there, though. A rise in the dollar to parity in the absence of an accompanying strengthening of Canada’s economic fundamentals would slow the Canadian economy significantly. Monetary policy would ease and the speculative bubble would pop.
Another route to dollar parity would be a further big ramp-up in prices for commodities, particularly oil. According to EDC’s model for the Canadian dollar, a rise in the price of oil of $10 translates into a currency appreciation of 3 cents. Given current conditions, a rise in the price of oil to the $100-110 range would take the Canadian dollar to parity. This is clearly possible.
Again, though, the story would not end there. The global economy would slow significantly, prices of other commodities would retreat, oil prices would probably retreat as well, monetary policy would ease and the Canadian dollar would reverse some of its gains.
The third route to parity is through productivity gains here in Canada. The reason why models of the Canada/U.S. exchange rate point to a natural value somewhere between 75-80 cents is that Canadian business productivity levels are on the order of 80 per cent of U.S. productivity levels. This reflects a steady erosion in Canada’s relative productivity performance during the past 20-25 years. That means that a level of the dollar in the 75-80 cent range levels the playing field for manufacturing in the two countries, making costs of production about equal.
Narrowing that productivity gap would lead naturally to a higher Canadian dollar over time. This began in 2005, when manufacturing productivity rose 5.4 per cent in Canada and 5 per cent in the U.S. We expect Canada’s outperformance to continue, but it will take many years to close a 20 per cent gap and move the natural level of the Canadian dollar up to parity. The good news is that such a gradual move would be sustainable, because improved fundamentals would be driving the dollar’s rise.
The bottom line? The Canadian dollar can clearly reach parity, but under current conditions it would prove short-lived. Rising productivity is the surest route to a stronger currency. And even if the strong currency comes first, higher productivity is the best cure for the accompanying stress.
Many have begun to contemplate the possibility that the Canadian dollar might reach parity with the U.S. dollar. Since the vast majority of export sales are conducted in U.S. dollars, a 10 per cent rise in the Canadian dollar would clip C$3-4 billion per month from export revenues – a serious matter.
Dollar parity is obviously possible. After all, we had it 30 years ago. Plus, the dollar has risen by nearly 30 cents since 2003, so another 8-10 cents is not out of the question. But the deeper question would be, first, what would cause it? And second, what would happen next?
One route to parity would be a speculative bubble. Canada looks attractive in the context of high commodity prices, low inflation, a strong fiscal situation and a trade surplus. Economic history is littered with periods of exchange rate volatility that cannot be explained by economic models.
The story would not end there, though. A rise in the dollar to parity in the absence of an accompanying strengthening of Canada’s economic fundamentals would slow the Canadian economy significantly. Monetary policy would ease and the speculative bubble would pop.
Another route to dollar parity would be a further big ramp-up in prices for commodities, particularly oil. According to EDC’s model for the Canadian dollar, a rise in the price of oil of $10 translates into a currency appreciation of 3 cents. Given current conditions, a rise in the price of oil to the $100-110 range would take the Canadian dollar to parity. This is clearly possible.
Again, though, the story would not end there. The global economy would slow significantly, prices of other commodities would retreat, oil prices would probably retreat as well, monetary policy would ease and the Canadian dollar would reverse some of its gains.
The third route to parity is through productivity gains here in Canada. The reason why models of the Canada/U.S. exchange rate point to a natural value somewhere between 75-80 cents is that Canadian business productivity levels are on the order of 80 per cent of U.S. productivity levels. This reflects a steady erosion in Canada’s relative productivity performance during the past 20-25 years. That means that a level of the dollar in the 75-80 cent range levels the playing field for manufacturing in the two countries, making costs of production about equal.
Narrowing that productivity gap would lead naturally to a higher Canadian dollar over time. This began in 2005, when manufacturing productivity rose 5.4 per cent in Canada and 5 per cent in the U.S. We expect Canada’s outperformance to continue, but it will take many years to close a 20 per cent gap and move the natural level of the Canadian dollar up to parity. The good news is that such a gradual move would be sustainable, because improved fundamentals would be driving the dollar’s rise.
The bottom line? The Canadian dollar can clearly reach parity, but under current conditions it would prove short-lived. Rising productivity is the surest route to a stronger currency. And even if the strong currency comes first, higher productivity is the best cure for the accompanying stress.
Thursday, May 29, 2008
Get Ready To Pay More for Everyday Items, Especially Imported Ones: Report
(PRNewswire-FirstCall/ - CIBC)
Exploding transport costs are driving up prices and could force some manufacturing to move closer to home, says CIBC World Markets
The soaring price of oil has dramatically increased the cost of moving goods around the globe, posing a major threat to price stability and overseas manufacturing, finds a new report from CIBC World Markets.
“Exploding transport costs may soon remove the single most important brake on inflation over the last decade – wage arbitrage with China,” says Jeff Rubin, chief economist and chief strategist at CIBC World Markets. “Not that Chinese manufacturing wages won’t still warrant arbitrage. But in today’s world of triple-digit oil prices, distance costs money.”
The report finds that the cost of shipping a standard 40-ft. container from East Asia to the North American east coast has already tripled since 2000 and will double again as oil prices head towards US$200 per barrel. These soaring energy costs are threatening to offset decades of trade liberalization and force some overseas manufacturing to return closer to home.
“Unless that container is chock full of diamonds, its shipping costs have suddenly inflated the cost of whatever is inside,” adds Rubin. “And those inflated costs get passed onto the Consumer Price Index when you buy that good at your local retailer. As oil prices keep rising, pretty soon those transport costs start cancelling out the East Asian wage advantage.”
Rubin says that these forces may reverse the impact of globalization.
“Higher energy prices are impacting transport costs at an unprecedented rate. So much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today.”
The report notes that it currently costs US$8,000 to ship a standard 40-ft. container from Shanghai to the North American east coast, including in-land transportation. That’s up from just US$3,000 in 2000 when oil was US$20 per barrel. At US$200 per barrel of oil, the cost to ship the same container is likely to reach US $15,000.
The impacts of these rising costs are already being seen in capital intensive manufacturing that carry a high ratio of freight costs to the final sale price, such as steel production. Soaring transport costs, first on importing coal and iron to China and then exporting finished steel overseas, have more than eroded the wage advantage and suddenly rendered Chinese-made steel uncompetitive in the U.S. market. Underscoring this is the fact that China’s steel exports to the U.S. are falling by more than 20% year over year, while US domestic steel production has risen by almost 10%.
“That’s great news if you are the United Steelworkers of America,” Rubin says. “Long lost jobs will soon be coming home. And the more that oil and transport costs rise for Chinese steel exporters, the more that North American steel wage rates can grow. But if you’re a steel buyer, your costs are going up regardless of whether you’re sourcing from China or Pittsburgh.”
Converting transport costs into tariff equivalents shows how disruptive soaring energy prices can be. Rubin notes that oil at US$150 per barrel equates to an 11% tariff rate – a level last seen in the 1970s. At $200 per barrel of oil, “We are back at tariff rates even prior to the Kennedy Round GATT negotiations of the mid-1960s,” he says. “Even at US$100 per barrel of oil, transport costs outweigh the impact of tariffs for all of America’s trading partners, including Canada and Mexico.”
Rubin points to history to show how higher energy and transport costs serve to dampen trade and force markets to seek shorter, and cheaper supply lines. Global exports have soared in all periods over the last 50 years when trade barriers were reduced and oil prices were low, his analysis shows. But he says exports “went absolutely nowhere” during the oil and energy crises of the 1970s, and for several years after despite reductions in global tariffs and healthy recoveries from recessionary periods.
“It’s relatively easy to see why North American importers shifted to regional trading during that time,” Rubin says. “Trans-oceanic transport costs literally exploded during the two oil price shocks. The cost of shipping a standard cargo load overseas almost tripled, just as it (has) over the past few years. Ultimately, soaring transport costs were borne by consumers and markets responded accordingly, substituting goods that could be sourced from closer locations than half way around the world carrying hugely inflated freight costs.” Read the complete article.
Related: CIBC World Markets report (PDF format).
Exploding transport costs are driving up prices and could force some manufacturing to move closer to home, says CIBC World Markets
The soaring price of oil has dramatically increased the cost of moving goods around the globe, posing a major threat to price stability and overseas manufacturing, finds a new report from CIBC World Markets.
“Exploding transport costs may soon remove the single most important brake on inflation over the last decade – wage arbitrage with China,” says Jeff Rubin, chief economist and chief strategist at CIBC World Markets. “Not that Chinese manufacturing wages won’t still warrant arbitrage. But in today’s world of triple-digit oil prices, distance costs money.”
The report finds that the cost of shipping a standard 40-ft. container from East Asia to the North American east coast has already tripled since 2000 and will double again as oil prices head towards US$200 per barrel. These soaring energy costs are threatening to offset decades of trade liberalization and force some overseas manufacturing to return closer to home.
“Unless that container is chock full of diamonds, its shipping costs have suddenly inflated the cost of whatever is inside,” adds Rubin. “And those inflated costs get passed onto the Consumer Price Index when you buy that good at your local retailer. As oil prices keep rising, pretty soon those transport costs start cancelling out the East Asian wage advantage.”
Rubin says that these forces may reverse the impact of globalization.
“Higher energy prices are impacting transport costs at an unprecedented rate. So much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today.”
The report notes that it currently costs US$8,000 to ship a standard 40-ft. container from Shanghai to the North American east coast, including in-land transportation. That’s up from just US$3,000 in 2000 when oil was US$20 per barrel. At US$200 per barrel of oil, the cost to ship the same container is likely to reach US $15,000.
The impacts of these rising costs are already being seen in capital intensive manufacturing that carry a high ratio of freight costs to the final sale price, such as steel production. Soaring transport costs, first on importing coal and iron to China and then exporting finished steel overseas, have more than eroded the wage advantage and suddenly rendered Chinese-made steel uncompetitive in the U.S. market. Underscoring this is the fact that China’s steel exports to the U.S. are falling by more than 20% year over year, while US domestic steel production has risen by almost 10%.
“That’s great news if you are the United Steelworkers of America,” Rubin says. “Long lost jobs will soon be coming home. And the more that oil and transport costs rise for Chinese steel exporters, the more that North American steel wage rates can grow. But if you’re a steel buyer, your costs are going up regardless of whether you’re sourcing from China or Pittsburgh.”
Converting transport costs into tariff equivalents shows how disruptive soaring energy prices can be. Rubin notes that oil at US$150 per barrel equates to an 11% tariff rate – a level last seen in the 1970s. At $200 per barrel of oil, “We are back at tariff rates even prior to the Kennedy Round GATT negotiations of the mid-1960s,” he says. “Even at US$100 per barrel of oil, transport costs outweigh the impact of tariffs for all of America’s trading partners, including Canada and Mexico.”
Rubin points to history to show how higher energy and transport costs serve to dampen trade and force markets to seek shorter, and cheaper supply lines. Global exports have soared in all periods over the last 50 years when trade barriers were reduced and oil prices were low, his analysis shows. But he says exports “went absolutely nowhere” during the oil and energy crises of the 1970s, and for several years after despite reductions in global tariffs and healthy recoveries from recessionary periods.
“It’s relatively easy to see why North American importers shifted to regional trading during that time,” Rubin says. “Trans-oceanic transport costs literally exploded during the two oil price shocks. The cost of shipping a standard cargo load overseas almost tripled, just as it (has) over the past few years. Ultimately, soaring transport costs were borne by consumers and markets responded accordingly, substituting goods that could be sourced from closer locations than half way around the world carrying hugely inflated freight costs.” Read the complete article.
Related: CIBC World Markets report (PDF format).
Study: The Year in Review for Wholesale Trade, 2007
(Statistics Canada)
The wholesale trade sector expanded for a fourth consecutive year in 2007.Wholesale sales amounted to $517.8 billion in 2007, up 5.5% from 2006, a slightly faster pace than the growth the year before. It was the fourth year in a row that the rate of growth surpassed 5.0%, according to a year-end review published today in the Analysis in Brief series.
Provincially, the rate of growth accelerated in Saskatchewan, Newfoundland and Labrador, and Manitoba. Sales in Saskatchewan rose 19.6%, the fastest rate of growth since the start of this statistical series in 1993 and the best performance among the provinces.
Alberta wholesalers had a growth rate below the national average for the first time since 2002.
While slightly higher than 2006 levels, the rate of growth for wholesalers in Ontario was below the national average for the fifth consecutive year. As a result, Ontario’s share of national sales continued to slide, although it still represented just over half of the total.
Quebec wholesalers experienced a slight recovery in 2007, with the pharmaceuticals trade group still the main source of growth.
Nationally, this performance in 2007 was due, among other factors, to the “other products” sector, which posted the strongest growth in wholesale trade and had its best performance since 2003. Sales in this sector grew partly because of increased sales of agricultural chemicals and other farm supplies, as well as sales of animal feed.
This study reviews the performance of the wholesale trade sector nationally and regionally, along with some of the key factors affecting last year’s performance. The report is available on Statistics Canada website.
The wholesale trade sector expanded for a fourth consecutive year in 2007.Wholesale sales amounted to $517.8 billion in 2007, up 5.5% from 2006, a slightly faster pace than the growth the year before. It was the fourth year in a row that the rate of growth surpassed 5.0%, according to a year-end review published today in the Analysis in Brief series.
Provincially, the rate of growth accelerated in Saskatchewan, Newfoundland and Labrador, and Manitoba. Sales in Saskatchewan rose 19.6%, the fastest rate of growth since the start of this statistical series in 1993 and the best performance among the provinces.
Alberta wholesalers had a growth rate below the national average for the first time since 2002.
While slightly higher than 2006 levels, the rate of growth for wholesalers in Ontario was below the national average for the fifth consecutive year. As a result, Ontario’s share of national sales continued to slide, although it still represented just over half of the total.
Quebec wholesalers experienced a slight recovery in 2007, with the pharmaceuticals trade group still the main source of growth.
Nationally, this performance in 2007 was due, among other factors, to the “other products” sector, which posted the strongest growth in wholesale trade and had its best performance since 2003. Sales in this sector grew partly because of increased sales of agricultural chemicals and other farm supplies, as well as sales of animal feed.
This study reviews the performance of the wholesale trade sector nationally and regionally, along with some of the key factors affecting last year’s performance. The report is available on Statistics Canada website.
Wednesday, May 21, 2008
Economy Showing Signs That Worst Is Already Past: Economists
(The Canadian Press)
The loonie once again worth about the same as the U.S. greenback, employment, exports and consumer spending continuing strong – what is happening to Canada’s year of economic discontent?
Just as the Canadian and U.S. economies were expected to be at their gloomiest – falling into negative numbers or close to it in the second quarter – some economists are entertaining the notion that the worst may already be in the past.
“What’s with the doom and gloom in Canada lately?” asked BMO deputy chief economist Doug Porter this week in a list of 10 reasons to feel good about the economy.
Among the categories – strong income growth and employment, no real credit crunch, rising equity prices, a surprising trade surplus and a healthy housing market.
“We know that bad news sells, but this is ridiculous,” Porter said of the hand-wringing in face of the positives.
Even in the U.S. – which is the real threat to the Canadian economy in terms of falling exports – the news has not been as uniformly bad as most economists had been forecasting for months, and the talk that the U.S. had already dipped into recession has not been supported by the numbers.
Growth in the U.S. has been tepid at best at 0.6% the past two quarters, but it has remained above the line. And while many had pointed to the second quarter as the time the American economy would cross the line, the early numbers are at best mixed.
This week saw another “surprise” when the U.S. Commerce Department reported retail sales had actually risen 0.2% in April, or 0.5% if auto sales are excluded. Read the complete article.
The loonie once again worth about the same as the U.S. greenback, employment, exports and consumer spending continuing strong – what is happening to Canada’s year of economic discontent?
Just as the Canadian and U.S. economies were expected to be at their gloomiest – falling into negative numbers or close to it in the second quarter – some economists are entertaining the notion that the worst may already be in the past.
“What’s with the doom and gloom in Canada lately?” asked BMO deputy chief economist Doug Porter this week in a list of 10 reasons to feel good about the economy.
Among the categories – strong income growth and employment, no real credit crunch, rising equity prices, a surprising trade surplus and a healthy housing market.
“We know that bad news sells, but this is ridiculous,” Porter said of the hand-wringing in face of the positives.
Even in the U.S. – which is the real threat to the Canadian economy in terms of falling exports – the news has not been as uniformly bad as most economists had been forecasting for months, and the talk that the U.S. had already dipped into recession has not been supported by the numbers.
Growth in the U.S. has been tepid at best at 0.6% the past two quarters, but it has remained above the line. And while many had pointed to the second quarter as the time the American economy would cross the line, the early numbers are at best mixed.
This week saw another “surprise” when the U.S. Commerce Department reported retail sales had actually risen 0.2% in April, or 0.5% if auto sales are excluded. Read the complete article.
Friday, May 16, 2008
Trade surplus expands for the third straight month in March
Canada’s merchandise trade surplus with the world expanded for the third straight month in March as exports grew and imports declined.
The trade surplus jumped to $5.5 billion, its highest level since May 2007.
Exports to the United States climbed for the third straight month while U.S. imports decreased as the trade surplus with the United States rose to $8.6 billion, its highest level since April 2006.
The trade deficit with countries other than the United States fell to $3.1 billion, contracting for the third straight month, largely due to increased exports to Mexico and Norway.
Canada’s exports rose for the third straight month, increasing 1.6 per cent to $40.1 billion in March, largely on the strength of energy products.
The trade surplus jumped to $5.5 billion, its highest level since May 2007.
Exports to the United States climbed for the third straight month while U.S. imports decreased as the trade surplus with the United States rose to $8.6 billion, its highest level since April 2006.
The trade deficit with countries other than the United States fell to $3.1 billion, contracting for the third straight month, largely due to increased exports to Mexico and Norway.
Canada’s exports rose for the third straight month, increasing 1.6 per cent to $40.1 billion in March, largely on the strength of energy products.
Sunday, April 27, 2008
Ontario Exports to Decline in 2008 and Remain Flat in 2009, Says EDC Forecast
(Export Development Canada)
Ontario’s exports are expected to decline 7% in 2008 and rise a lukewarm 1% in 2009, according to the Global Export Forecast released today by Export Development Canada (EDC).
“Ontario’s exports will be battered this year by the high Canadian dollar and eroding U.S. sales,” said Peter Hall, Vice-President of Economics and Deputy Chief Economist. “Ontario is exposed to weakness in the auto sector and sliding demand for industrial goods. Both sectors are also impacted by the soaring currency.”
The auto sector accounts for 37.2% of Ontario’s international exports. Light vehicle sales in the U.S. are anticipated to reach no more than 15.0 million units in 2008, following average sales of 16.7 million units over the 2003 to 2006 period. The bleak outlook for auto sales has already led to production cutbacks in Ontario, with total vehicle output down 24% in January relative to only a 2.2% decline in U.S. production and an increase of 21% in Mexican production. As a result, EDC expects motor vehicle exports to decline 9% in 2008 before posting mild growth of 3% in 2009.
The industrial goods sector accounts for 30.5% of Ontario’s total exports. The U.S. economic downturn will also act to curb demand for this sector, with a projected decline of 9.5% in 2008 and 2.5% in 2009.
Although EDC expects 2008 to be a challenging year, the evolving global supply chain presents opportunities for Ontario exporters, particularly manufacturers of high value-added intermediary and final goods. Mexican light vehicle production has been rising steadily over the years and presents an opportunity for auto parts suppliers. Technical agricultural machinery and mining equipment are in strong demand in developing countries such as Russia and Ukraine, among other emerging markets. The ongoing infrastructure work and development of China’s industrial base also presents opportunity for exporters, not just resource exporters, but also producer-exporters of construction and industrial M&E.
Canadian exports are forecast to decline by 2% in 2008 before posting slight growth of 2% in 2009. Nationally, Canadian economic growth is forecast to decline to 1% in 2008 with a slight upturn to 2.3% in 2009. Internationally, EDC is forecasting a 3.8% growth rate in 2008 and 2009. EDC’s Global Export Forecast is available here.
Ontario’s exports are expected to decline 7% in 2008 and rise a lukewarm 1% in 2009, according to the Global Export Forecast released today by Export Development Canada (EDC).
“Ontario’s exports will be battered this year by the high Canadian dollar and eroding U.S. sales,” said Peter Hall, Vice-President of Economics and Deputy Chief Economist. “Ontario is exposed to weakness in the auto sector and sliding demand for industrial goods. Both sectors are also impacted by the soaring currency.”
The auto sector accounts for 37.2% of Ontario’s international exports. Light vehicle sales in the U.S. are anticipated to reach no more than 15.0 million units in 2008, following average sales of 16.7 million units over the 2003 to 2006 period. The bleak outlook for auto sales has already led to production cutbacks in Ontario, with total vehicle output down 24% in January relative to only a 2.2% decline in U.S. production and an increase of 21% in Mexican production. As a result, EDC expects motor vehicle exports to decline 9% in 2008 before posting mild growth of 3% in 2009.
The industrial goods sector accounts for 30.5% of Ontario’s total exports. The U.S. economic downturn will also act to curb demand for this sector, with a projected decline of 9.5% in 2008 and 2.5% in 2009.
Although EDC expects 2008 to be a challenging year, the evolving global supply chain presents opportunities for Ontario exporters, particularly manufacturers of high value-added intermediary and final goods. Mexican light vehicle production has been rising steadily over the years and presents an opportunity for auto parts suppliers. Technical agricultural machinery and mining equipment are in strong demand in developing countries such as Russia and Ukraine, among other emerging markets. The ongoing infrastructure work and development of China’s industrial base also presents opportunity for exporters, not just resource exporters, but also producer-exporters of construction and industrial M&E.
Canadian exports are forecast to decline by 2% in 2008 before posting slight growth of 2% in 2009. Nationally, Canadian economic growth is forecast to decline to 1% in 2008 with a slight upturn to 2.3% in 2009. Internationally, EDC is forecasting a 3.8% growth rate in 2008 and 2009. EDC’s Global Export Forecast is available here.
Friday, April 25, 2008
Canadian Economy Stalling as Exports Hit Hard: Bank of Canada
The Canadian economy has largely stalled as a result of the worsening credit crunch and the slumping U.S. economy that has robbed manufacturers of their traditional market, the Bank of Canada says.
The assessment in the central bank’s quarterly monetary report gives a clearer understanding of what the bank’s governing council was weighing Tuesday when it slashed its key interest rate by half a percentage point to three per cent.
After predicting in January that an upturn would begin this quarter, the bank now says Canada has entered an economic flat spot with growth in the current quarter barely above recessionary levels at a 0.3 per cent annualized rate, and won’t recover fully until 2010.
The bleaker outlook for the economy comes amid other potential bad news for Canadian consumers:
• CIBC World Markets predicted Thursday that national average gasoline prices, now about $1.23 a litre, will top $1.40 this summer and $2.25 by 2012 as crude oil prices continue to soar and reach US$225 a barrel in four years.
• The country’s largest bread maker, Canada Bread Co. (TSX:CBY), warned that consumers can expect to pay more for bread, bagels and other flour-based products after a 32 per cent drop in first-quarter profit amid “significant margin compression due to rising wheat prices.”
But Bank of Canada governor Mark Carney said Canada won’t fall into recession thanks to the relatively strong internal economy buttressed by oil and mineral exports and the record number of Canadians who have jobs.
“The decline in exports ... is counterbalanced and in our view more than counterbalanced by the strong domestic demand,” he said.
Still, Carney noted that the bank will likely have to put more stimulus into the economy over and above the 1.5 percentage points it has cut from the overnight rate since December.
Part of the reason is that tight credit conditions have increased the cost that the chartered banks pay for capital, causing them to pass on only a portion of the central bank’s stimulus to businesses and individuals in the form of lower borrowing costs.
The assessment in the central bank’s quarterly monetary report gives a clearer understanding of what the bank’s governing council was weighing Tuesday when it slashed its key interest rate by half a percentage point to three per cent.
After predicting in January that an upturn would begin this quarter, the bank now says Canada has entered an economic flat spot with growth in the current quarter barely above recessionary levels at a 0.3 per cent annualized rate, and won’t recover fully until 2010.
The bleaker outlook for the economy comes amid other potential bad news for Canadian consumers:
• CIBC World Markets predicted Thursday that national average gasoline prices, now about $1.23 a litre, will top $1.40 this summer and $2.25 by 2012 as crude oil prices continue to soar and reach US$225 a barrel in four years.
• The country’s largest bread maker, Canada Bread Co. (TSX:CBY), warned that consumers can expect to pay more for bread, bagels and other flour-based products after a 32 per cent drop in first-quarter profit amid “significant margin compression due to rising wheat prices.”
But Bank of Canada governor Mark Carney said Canada won’t fall into recession thanks to the relatively strong internal economy buttressed by oil and mineral exports and the record number of Canadians who have jobs.
“The decline in exports ... is counterbalanced and in our view more than counterbalanced by the strong domestic demand,” he said.
Still, Carney noted that the bank will likely have to put more stimulus into the economy over and above the 1.5 percentage points it has cut from the overnight rate since December.
Part of the reason is that tight credit conditions have increased the cost that the chartered banks pay for capital, causing them to pass on only a portion of the central bank’s stimulus to businesses and individuals in the form of lower borrowing costs.
Monday, March 17, 2008
Trade Surplus Expands in January
Canada's merchandise trade surplus with the world expanded by about $1 billion in January as exports increased at their fastest pace in more than a year.
Canadian companies exported $38 billion worth of merchandise, a 3.6% increase from December after a downward trend that persisted through most of 2007. Export prices rose 4.2% in constant dollars, while volumes edged down 0.6% in January.
At the same time, the value of merchandise imports rose one per cent to $34.7 billion, the third straight increase. Prices climbed 1.7%, while volumes slipped 0.7%.
As a result, the trade surplus with the world rebounded from a revised $2.3 billion in December, the lowest since November 1998, to $3.3 billion. Summary data, and a link to the report, are on the Statistics Canada website.
Economists welcomed a January improvement in Canada's merchandise trade surplus with the rest of the world, but cautioned that the report's strong results were skewed by rising energy prices. Click here for the complete article.
Canadian companies exported $38 billion worth of merchandise, a 3.6% increase from December after a downward trend that persisted through most of 2007. Export prices rose 4.2% in constant dollars, while volumes edged down 0.6% in January.
At the same time, the value of merchandise imports rose one per cent to $34.7 billion, the third straight increase. Prices climbed 1.7%, while volumes slipped 0.7%.
As a result, the trade surplus with the world rebounded from a revised $2.3 billion in December, the lowest since November 1998, to $3.3 billion. Summary data, and a link to the report, are on the Statistics Canada website.
Economists welcomed a January improvement in Canada's merchandise trade surplus with the rest of the world, but cautioned that the report's strong results were skewed by rising energy prices. Click here for the complete article.
Tuesday, February 19, 2008
Tracking Value-Added Trade: Examining Global Inputs to Exports
(Statistics Canada)
Canadian industries have sharply lowered their use of imported inputs to produce exports, according to a new study published today in Canadian Economic Observer.
The lower use of imported inputs sheds light on several widely discussed trends. It contradicts fears of a widespread offshoring of domestic production as firms adopt global supply chains.
It also suggests that firms in Canada have ample room to import more inputs as the soaring loonie increases competitive pressures, something they began to do in 2004.
Finally, removing the import content from exports reveals Canada's true exposure to export demand. This is an important piece of knowledge as analysts debate whether other countries can "decouple" from the current slowdown in the US economy. Since 2000, changes in exports have had less of an influence on the course of gross domestic product (GDP).
Comparing gross exports to GDP has always resulted in misleading analysis. Exports are the equivalent of gross sales, while GDP is measured on a value-added basis. Removing the import content of exports puts them on the same value-added basis, revealing the true exposure of GDP to external demand.
This paper shows that 27.9% of GDP came from value-added exports in 2004. This was down from its peak of 31.4% in 2000, and close to its recent low in 1997. It is well below the often-quoted but misleading share of gross exports in GDP, which peaked at 46% in 2000 before settling at about 38% in 2003 and 2004.
With exports to the United States currently accounting for 75% of all Canada's exports, this implies that just over 20% of Canada's output is exposed to the risk from the slowdown in US growth. The share of jobs exposed to exports would be even lower, as exports remain a sector with above-average output-per-worker. Complete press release and links here.
Canadian industries have sharply lowered their use of imported inputs to produce exports, according to a new study published today in Canadian Economic Observer.
The lower use of imported inputs sheds light on several widely discussed trends. It contradicts fears of a widespread offshoring of domestic production as firms adopt global supply chains.
It also suggests that firms in Canada have ample room to import more inputs as the soaring loonie increases competitive pressures, something they began to do in 2004.
Finally, removing the import content from exports reveals Canada's true exposure to export demand. This is an important piece of knowledge as analysts debate whether other countries can "decouple" from the current slowdown in the US economy. Since 2000, changes in exports have had less of an influence on the course of gross domestic product (GDP).
Comparing gross exports to GDP has always resulted in misleading analysis. Exports are the equivalent of gross sales, while GDP is measured on a value-added basis. Removing the import content of exports puts them on the same value-added basis, revealing the true exposure of GDP to external demand.
This paper shows that 27.9% of GDP came from value-added exports in 2004. This was down from its peak of 31.4% in 2000, and close to its recent low in 1997. It is well below the often-quoted but misleading share of gross exports in GDP, which peaked at 46% in 2000 before settling at about 38% in 2003 and 2004.
With exports to the United States currently accounting for 75% of all Canada's exports, this implies that just over 20% of Canada's output is exposed to the risk from the slowdown in US growth. The share of jobs exposed to exports would be even lower, as exports remain a sector with above-average output-per-worker. Complete press release and links here.
China Passes Canada, Becomes Top U.S. Import Source
(Bloomberg – Mark Drajem)
China passed Canada to become the largest source of products shipped into the U.S. last year, capping a six-year period when its exports to the U.S. more than tripled.
Led by items such as flat-panel televisions and computers, household appliances, toys and clothing, imports from China surged to $321.5 billion in 2007, according to a Commerce Department statement today. Chinese trade is accelerating faster than imports from Mexico after the North American Free Trade Agreement took effect in 1994.
China's ascension may lead to a backlash in Congress, where lawmakers accuse China of undervaluing its currency, producing unsafe products and providing its industries with subsidies that allow them to undercut American-made goods.
“This is a surprise, and it will be a bit of a ding-dong for the Congress,'' said Gary Hufbauer, an economist at the Peterson Institute for International Economics in Washington.
Lawmakers are considering a variety of measures to encourage higher duties on Chinese imports to compensate for what they say is an undervalued Chinese currency. The record trade deficit announced today bolsters their efforts, they said. “There is a more compelling case for our legislation than ever, given these new figures,'' said California Republican Representative Duncan Hunter, co-sponsor of a measure to allow companies to petition for duties on Chinese goods.
Yet, the burgeoning Chinese imports have benefited the U.S. by lowering prices and expanding choice, advocates say. “Consumers are getting lower prices for a wider variety of goods,” said former U.S. Trade Representative Rob Portman.
A stronger Chinese currency would mean higher prices for Chinese goods in U.S. markets and could impede consumer spending – which makes up more than two-thirds of the U.S. economy – just as the U.S. tries to avoid a recession. A more expensive yuan is “not a good thing for the U.S. – it is only going to escalate inflation there,'' said Chen Xingdong, chief China economist at BNP SA in Beijing.
It would be “silly” for Congress to legislate against China’s currency policies given the recent gyrations in financial markets, U.S. Treasury Secretary Henry Paulson told a Senate panel last week.
China has had the largest trade deficit with the U.S. since 2001, due largely to the relative low level of U.S. exports to the Asian trading giant. In 2007 it again hit a record, $256.3 billion.
China also passed Mexico last year to become the second- largest trading partner with the U.S. after Canada. As recently as 2002, Mexico sent more goods to the U.S. than China. Now, Chinese totals are 50% more than Mexican exports to the U.S. The rise of China doesn't mean trade with Canada is falling: imports from Canada increased 3% last year, despite the rise in the Canadian dollar. Imports from China jumped 12% compared with 2006. Chinese exports to the U.S. were rising steadily through the 1990s. They spiked after China entered the World Trade Organization in December 2001 and after global caps on apparel trade expired at the end of 2004.
Even the architect of China's WTO entry is surprised by the speed of its ascent as an economic powerhouse. “No one thought China's re-emergence would be as robust, rapid or consistent as it has been,'' former U.S. Trade Representative Charlene Barshefsky said in an interview. Barshefsky negotiated the U.S. side of China's WTO accession agreement during the Clinton administration. “You will see China continue to rise, despite issues of product safety'' and criticisms by lawmakers, she said.
When Portman took over as the Bush administration's top trade negotiator in April 2005, he announced a “top-to-bottom'' review of China's trade policies and vowed to take a tougher stand against China at the WTO. “China needs to play fairer, and we've had to beef up enforcement,'' he said.
Critics say that the Bush administration hasn't done enough to get China to eliminate subsidies to its exporters, to make sure its products are safe for children and to raise the value of its exports. That's why two Senate panels passed legislation last year aimed at pushing China to raise the value of its currency, which would make its exports more expensive.
Lawmakers say the pressure from industrial states, presidential election dynamics and the growing trade imbalance with China make it likely that Congress will approve legislation this year aimed at China. “This is a major issue in a lot of districts across the country,'' said Ohio Democratic Representative Tim Ryan, a primary co-sponsor of currency legislation. “The more we make the case, this will crank up the pressure on Congress to get something done.''
China passed Canada to become the largest source of products shipped into the U.S. last year, capping a six-year period when its exports to the U.S. more than tripled.
Led by items such as flat-panel televisions and computers, household appliances, toys and clothing, imports from China surged to $321.5 billion in 2007, according to a Commerce Department statement today. Chinese trade is accelerating faster than imports from Mexico after the North American Free Trade Agreement took effect in 1994.
China's ascension may lead to a backlash in Congress, where lawmakers accuse China of undervaluing its currency, producing unsafe products and providing its industries with subsidies that allow them to undercut American-made goods.
“This is a surprise, and it will be a bit of a ding-dong for the Congress,'' said Gary Hufbauer, an economist at the Peterson Institute for International Economics in Washington.
Lawmakers are considering a variety of measures to encourage higher duties on Chinese imports to compensate for what they say is an undervalued Chinese currency. The record trade deficit announced today bolsters their efforts, they said. “There is a more compelling case for our legislation than ever, given these new figures,'' said California Republican Representative Duncan Hunter, co-sponsor of a measure to allow companies to petition for duties on Chinese goods.
Yet, the burgeoning Chinese imports have benefited the U.S. by lowering prices and expanding choice, advocates say. “Consumers are getting lower prices for a wider variety of goods,” said former U.S. Trade Representative Rob Portman.
A stronger Chinese currency would mean higher prices for Chinese goods in U.S. markets and could impede consumer spending – which makes up more than two-thirds of the U.S. economy – just as the U.S. tries to avoid a recession. A more expensive yuan is “not a good thing for the U.S. – it is only going to escalate inflation there,'' said Chen Xingdong, chief China economist at BNP SA in Beijing.
It would be “silly” for Congress to legislate against China’s currency policies given the recent gyrations in financial markets, U.S. Treasury Secretary Henry Paulson told a Senate panel last week.
China has had the largest trade deficit with the U.S. since 2001, due largely to the relative low level of U.S. exports to the Asian trading giant. In 2007 it again hit a record, $256.3 billion.
China also passed Mexico last year to become the second- largest trading partner with the U.S. after Canada. As recently as 2002, Mexico sent more goods to the U.S. than China. Now, Chinese totals are 50% more than Mexican exports to the U.S. The rise of China doesn't mean trade with Canada is falling: imports from Canada increased 3% last year, despite the rise in the Canadian dollar. Imports from China jumped 12% compared with 2006. Chinese exports to the U.S. were rising steadily through the 1990s. They spiked after China entered the World Trade Organization in December 2001 and after global caps on apparel trade expired at the end of 2004.
Even the architect of China's WTO entry is surprised by the speed of its ascent as an economic powerhouse. “No one thought China's re-emergence would be as robust, rapid or consistent as it has been,'' former U.S. Trade Representative Charlene Barshefsky said in an interview. Barshefsky negotiated the U.S. side of China's WTO accession agreement during the Clinton administration. “You will see China continue to rise, despite issues of product safety'' and criticisms by lawmakers, she said.
When Portman took over as the Bush administration's top trade negotiator in April 2005, he announced a “top-to-bottom'' review of China's trade policies and vowed to take a tougher stand against China at the WTO. “China needs to play fairer, and we've had to beef up enforcement,'' he said.
Critics say that the Bush administration hasn't done enough to get China to eliminate subsidies to its exporters, to make sure its products are safe for children and to raise the value of its exports. That's why two Senate panels passed legislation last year aimed at pushing China to raise the value of its currency, which would make its exports more expensive.
Lawmakers say the pressure from industrial states, presidential election dynamics and the growing trade imbalance with China make it likely that Congress will approve legislation this year aimed at China. “This is a major issue in a lot of districts across the country,'' said Ohio Democratic Representative Tim Ryan, a primary co-sponsor of currency legislation. “The more we make the case, this will crank up the pressure on Congress to get something done.''
Wednesday, February 13, 2008
Confidence in the Economy Plummets
(Nanos Research)
The percentage of Canadians who think the economy will get stronger in 2008 has plummeted an astounding 24 points in 90 days (from 49% in November 2007 to 25% as of last week).
On the personal finance side - there has been a marginal decrease in the percentage of Canadians who think they are better off compared to a year ago (drop from 29% to 24%).
With a perceived downturn in the US economy and volatile markets in Canada, Canadians are basically waiting for the bad economic news even though it hasn’t hit them personally at this time.
Shifting perceptions related to economic confidence may explain the appetite the Conservative government currently has for a federal election.
Canadians were also asked [unprompted] what they would like to see the Government of Canada do to help make the Canadian economy stronger. One in three Canadians were either unsure or thought nothing should be done. The top unprompted response was lower taxes (14%) followed by create jobs/encourage job creation (8%) and invest in key industries (5%). The full list with questions has been posted on the Nanos website as part of the release.
For more detailed information on the methodology and the statistical results visit the Nanos website.
Methodology
Polling was conducted between February 2nd and February 4th, 2008 (Random Telephone Survey of 1,002 Canadians, 18 years of age and older). The aggregate survey results are accurate ±3.1%, 19 times out of 20. Readers should note that the data was weighted for age to match the latest Canadian census results. Results should be considered representative of the Canadian population. Results may not add up to 100% due to rounding.
Results
Question: Thinking of the upcoming year, do you think the Canadian economy will become stronger, weaker or will there be no change?
The numbers in parenthesis denote the change from the previous Nanos Research Survey completed in November, 2007.
Stronger 25% (-24) Weaker 33% (+13) No change 36% (+11) Unsure 6% (NC)
Question: Thinking of your personal finances, are you better off, worse off or has there been no change over the past year?
The numbers in parenthesis denote the change from the previous Nanos Research Survey completed in November, 2007.
Better off 24% (-5) Worse off 16% (NC) No change 58% (+6) Unsure 2% (-1)
The percentage of Canadians who think the economy will get stronger in 2008 has plummeted an astounding 24 points in 90 days (from 49% in November 2007 to 25% as of last week).
On the personal finance side - there has been a marginal decrease in the percentage of Canadians who think they are better off compared to a year ago (drop from 29% to 24%).
With a perceived downturn in the US economy and volatile markets in Canada, Canadians are basically waiting for the bad economic news even though it hasn’t hit them personally at this time.
Shifting perceptions related to economic confidence may explain the appetite the Conservative government currently has for a federal election.
Canadians were also asked [unprompted] what they would like to see the Government of Canada do to help make the Canadian economy stronger. One in three Canadians were either unsure or thought nothing should be done. The top unprompted response was lower taxes (14%) followed by create jobs/encourage job creation (8%) and invest in key industries (5%). The full list with questions has been posted on the Nanos website as part of the release.
For more detailed information on the methodology and the statistical results visit the Nanos website.
Methodology
Polling was conducted between February 2nd and February 4th, 2008 (Random Telephone Survey of 1,002 Canadians, 18 years of age and older). The aggregate survey results are accurate ±3.1%, 19 times out of 20. Readers should note that the data was weighted for age to match the latest Canadian census results. Results should be considered representative of the Canadian population. Results may not add up to 100% due to rounding.
Results
Question: Thinking of the upcoming year, do you think the Canadian economy will become stronger, weaker or will there be no change?
The numbers in parenthesis denote the change from the previous Nanos Research Survey completed in November, 2007.
Stronger 25% (-24) Weaker 33% (+13) No change 36% (+11) Unsure 6% (NC)
Question: Thinking of your personal finances, are you better off, worse off or has there been no change over the past year?
The numbers in parenthesis denote the change from the previous Nanos Research Survey completed in November, 2007.
Better off 24% (-5) Worse off 16% (NC) No change 58% (+6) Unsure 2% (-1)
Saturday, December 22, 2007
Surprise of the Year: Deflation Dissipation
(Stephen Poloz — Export Development Canada)
Each year, just before the holidays, we take a look back and recall the surprises that took place in the previous 12 months. 2007 was loaded with candidates.
Start with the world economy. We began the year with the world in decent shape, but concerned that the U.S. housing sector could surprise on the downside. Downside surprise indeed! Despite repeated reassurances from policymakers, the U.S. housing sector went into a meltdown and there is no evidence to suggest that it is over. The erosion of consumer confidence is affecting the rest of the economy, and economists are now open to the possibility of a U.S. recession.
As the year unfolded, many predicted that the rest of the world would decouple from the U.S. economy. Surprise again! The decline in the U.S. dollar over the year boosted U.S. exports and reduced U.S. imports, thereby directly spreading the U.S. slowdown to the rest of the world. Plus, the credit crunch that emerged in August – spawned by the U.S. housing meltdown, but surprising in its severity – immediately went international, and its effects are still growing today.
Slower economic growth generally leads to lower inflation. Besides, in recent years the world has been cushioned from inflation pressures by deflation in goods exported from China. Surprise again! Inflation is back on the policy radar screen. Oil is above $90 per barrel, wheat at $10 per bushel. The quality of some of China’s exports has come into question, leading many consumers to begin a switch to higher-priced alternatives. Plus, the growing awareness of global warming, supported by Al Gore’s receipt of the Nobel Peace Prize, will gradually embed environmental costs into consumer prices – thereby potentially creating a modest uptrend in global inflation.
It is tempting to blame political risk for high oil prices, which boosted the demand for bio-fuels, thereby pushing up food prices. Yet, factor in the surprising U.S. intelligence flip-flop Iran’s nuclear program, plus the apparent political shift in Venezuela, and the prices of commodities really do look surprisingly high. Although higher prices like these do not constitute inflation per se, consumers can’t tell the difference. Nor do they care whether the Canadian dollar shot above the U.S. dollar because of high commodity prices or pure speculation – the only unsurprising part of the dollar story was the brevity of its surge. In the end, it averaged about 93 cents in 2007.
And then, attentive readers will recall our surprise of the year in 2005 – the $39 DVD player – which then fell to $28 in 2006, prompting us to boldly forecast that DVD players could be free by Christmas 2009. Even this story, however, supports the deflation dissipation theme – a visit to our local rock-bottom retailer this Christmas found, surprisingly, the same $28 price point as last year.
The bottom line? These surprises underscore the massive contrasting tensions – between slowing economic growth and awakening inflation potential – being balanced by global financial markets today. 2007 was financially volatile, but don’t be surprised if 2008 is even more so.
Each year, just before the holidays, we take a look back and recall the surprises that took place in the previous 12 months. 2007 was loaded with candidates.
Start with the world economy. We began the year with the world in decent shape, but concerned that the U.S. housing sector could surprise on the downside. Downside surprise indeed! Despite repeated reassurances from policymakers, the U.S. housing sector went into a meltdown and there is no evidence to suggest that it is over. The erosion of consumer confidence is affecting the rest of the economy, and economists are now open to the possibility of a U.S. recession.
As the year unfolded, many predicted that the rest of the world would decouple from the U.S. economy. Surprise again! The decline in the U.S. dollar over the year boosted U.S. exports and reduced U.S. imports, thereby directly spreading the U.S. slowdown to the rest of the world. Plus, the credit crunch that emerged in August – spawned by the U.S. housing meltdown, but surprising in its severity – immediately went international, and its effects are still growing today.
Slower economic growth generally leads to lower inflation. Besides, in recent years the world has been cushioned from inflation pressures by deflation in goods exported from China. Surprise again! Inflation is back on the policy radar screen. Oil is above $90 per barrel, wheat at $10 per bushel. The quality of some of China’s exports has come into question, leading many consumers to begin a switch to higher-priced alternatives. Plus, the growing awareness of global warming, supported by Al Gore’s receipt of the Nobel Peace Prize, will gradually embed environmental costs into consumer prices – thereby potentially creating a modest uptrend in global inflation.
It is tempting to blame political risk for high oil prices, which boosted the demand for bio-fuels, thereby pushing up food prices. Yet, factor in the surprising U.S. intelligence flip-flop Iran’s nuclear program, plus the apparent political shift in Venezuela, and the prices of commodities really do look surprisingly high. Although higher prices like these do not constitute inflation per se, consumers can’t tell the difference. Nor do they care whether the Canadian dollar shot above the U.S. dollar because of high commodity prices or pure speculation – the only unsurprising part of the dollar story was the brevity of its surge. In the end, it averaged about 93 cents in 2007.
And then, attentive readers will recall our surprise of the year in 2005 – the $39 DVD player – which then fell to $28 in 2006, prompting us to boldly forecast that DVD players could be free by Christmas 2009. Even this story, however, supports the deflation dissipation theme – a visit to our local rock-bottom retailer this Christmas found, surprisingly, the same $28 price point as last year.
The bottom line? These surprises underscore the massive contrasting tensions – between slowing economic growth and awakening inflation potential – being balanced by global financial markets today. 2007 was financially volatile, but don’t be surprised if 2008 is even more so.
Friday, December 14, 2007
Back to the 70s: That Was Then, This Is Now
(Stephen Poloz, Export Development Canada)
Those of us with grey hair have noticed that there are a lot of parallels between our current economic situation and that of the 1970s. But there are differences, too, and these are important enough to suggest that things will be different this time.
The similarities with the 1970s are obvious. High prices for oil, gold, base metals, food and fertilizer. A weak U.S. dollar. War, then in Viet Nam, now in Iraq and Afghanistan. Concerns about inflation, combined with worries about recession - the stagflation recipe. Not to mention a fast-growing economy changing the global landscape - then it was Japan, now it is China.
And some of the differences? Start with oil. In the early 1970s, the world used 1.3 barrels of oil per $1,000 of GDP, whereas today it uses 0.8, 40% less. The U.S. has more than halved its oil intensity, from 1.5 barrels to 0.7. And China, forecast by many to exhaust the world’s supply of oil, has seen intensity fall from 4 barrels to 1.3. China is very likely to reduce its oil intensity at least to global levels during the next 10 years, and may go further, as Japan has done. Accordingly, it is folly to extrapolate China’s demand growth as if nothing else is going on, just as it was wrong to extrapolate Japan’s oil demand in 1980.
Same thing for copper. Copper sold for U.S. $6800 per tonne in 1974, and the book “The Limits to Growth” published by the Club of Rome predicted that the world would run out of copper by 1999. Instead, the price had fallen to under $2,000 by 1999, as new supplies and substitutes emerged. Prices are back at 1970s levels again today, and another decline in prices is in store.
The world economy has changed in other important ways, too. Populations of the major economies are a lot older, so they react differently to shocks today, behaving more as investors than as consumers. Economies are more integrated internationally, as trade now represents 60% of global GDP, as opposed to 30-35% in the early 1970s. Economic and financial synchronization is the new paradigm, not decoupling. Even economic theory has changed. Economists’ understanding of inflation and central banking have been advanced dramatically, due in no small part to the experience of the 1970s. Indeed, the 1970s were arguably just as important to economic thinking as the 1930s.
And then there are the usual concerns about war, fiscal deficits and the consequent forecast demise of the U.S. dollar. U.S. defense spending was running at 8% of GDP in the early 1970s, and it was to fall to a low of 3% in 2000. It has risen since then, but only to 4%. But one parallel that is likely to hold up is that today’s calls for the U.S. dollar’s demise are just as premature as those of the 1970s proved to be. The dollar cycles inversely to global business and commodity cycles, and always will.
The bottom line? It’s true, there are a lot of similarities with the 1970s. But that was then, this is now. The 1970s ended in tears, and there is much less reason for this decade to do likewise.
Those of us with grey hair have noticed that there are a lot of parallels between our current economic situation and that of the 1970s. But there are differences, too, and these are important enough to suggest that things will be different this time.
The similarities with the 1970s are obvious. High prices for oil, gold, base metals, food and fertilizer. A weak U.S. dollar. War, then in Viet Nam, now in Iraq and Afghanistan. Concerns about inflation, combined with worries about recession - the stagflation recipe. Not to mention a fast-growing economy changing the global landscape - then it was Japan, now it is China.
And some of the differences? Start with oil. In the early 1970s, the world used 1.3 barrels of oil per $1,000 of GDP, whereas today it uses 0.8, 40% less. The U.S. has more than halved its oil intensity, from 1.5 barrels to 0.7. And China, forecast by many to exhaust the world’s supply of oil, has seen intensity fall from 4 barrels to 1.3. China is very likely to reduce its oil intensity at least to global levels during the next 10 years, and may go further, as Japan has done. Accordingly, it is folly to extrapolate China’s demand growth as if nothing else is going on, just as it was wrong to extrapolate Japan’s oil demand in 1980.
Same thing for copper. Copper sold for U.S. $6800 per tonne in 1974, and the book “The Limits to Growth” published by the Club of Rome predicted that the world would run out of copper by 1999. Instead, the price had fallen to under $2,000 by 1999, as new supplies and substitutes emerged. Prices are back at 1970s levels again today, and another decline in prices is in store.
The world economy has changed in other important ways, too. Populations of the major economies are a lot older, so they react differently to shocks today, behaving more as investors than as consumers. Economies are more integrated internationally, as trade now represents 60% of global GDP, as opposed to 30-35% in the early 1970s. Economic and financial synchronization is the new paradigm, not decoupling. Even economic theory has changed. Economists’ understanding of inflation and central banking have been advanced dramatically, due in no small part to the experience of the 1970s. Indeed, the 1970s were arguably just as important to economic thinking as the 1930s.
And then there are the usual concerns about war, fiscal deficits and the consequent forecast demise of the U.S. dollar. U.S. defense spending was running at 8% of GDP in the early 1970s, and it was to fall to a low of 3% in 2000. It has risen since then, but only to 4%. But one parallel that is likely to hold up is that today’s calls for the U.S. dollar’s demise are just as premature as those of the 1970s proved to be. The dollar cycles inversely to global business and commodity cycles, and always will.
The bottom line? It’s true, there are a lot of similarities with the 1970s. But that was then, this is now. The 1970s ended in tears, and there is much less reason for this decade to do likewise.
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