Compared with Canada, U.S. Economy Looks OK 25 comments
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The US dollar was initially stronger versus the Euro, Swiss franc, British pound and Japanese yen Friday, but its gains gradually faded into the US session. The Euro gave way a little during the European session upon the release of German retail sales data which turned out to be quite horrid at -1.7% m/m and -1% compared to a year ago.
Focus was then shifted to the recessionary-like conditions in the US as weak US economic data came in one after another. US consumer spending slowed in April as income gains weakened: Personal income rose by 0.2% in April, in line with expectations, following a revised 0.4% rise in March (was 0.3%). Personal spending rose by 0.2%, also as expected, following a 0.4% gain in March.
The Chicago PMI business index rose to 49.1 in May, better than forecast, from 48.3 in April. Although this marks the fourth straight month of contraction in US business activity, the business slowdown isn’t much a surprise. Meanwhile, core PCE deflator, an inflation index closely followed by the Fed, excluding food and fuel, rose 0.1% in April after a 0.2% gain the previous month. It was up 2.1% from a year ago.
Basically, the news today wasn’t earth-shattering and as we head into the weekend, we expect currency movements to be tame and long dollar profit-taking action to dominate.
Canadian Economy In Trouble
While the whole world is worried about the slowdown in the US, Canada has to deal with a shocker in its backyard today. For the first time in almost 5 years, Canada’s economy contracted in the first quarter. Its GDP shrank an annualized 0.3% (0.4% gain expected) in January through March following an 0.8% growth in the fourth quarter. On a quarterly basis, GDP fell 0.1% after growing 0.2% previously.
This data is unexpected, and compared with the 0.9% gain in the US economy in 1Q, it seems even more unreal. Vehicles and parts production were the hardest hit, accounting for 40% of the fall in manufacturing. The Canadian dollar immediately fell against the US dollar after the news release. We think that the Bank of Canada may be forced to cut interest rates again next month.
Forex Trading
USD/CHF reached the initial target around 1.0530, and then heavy shorting pressure pushed the currency pair down to below 1.0500. EUR/USD touched an intraday low around 1.5460 but then bounced back up above 1.5500 when Swissy met resistance at 1.0530.
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This article has 25 comments:
Unlike the corrupt US gov't and our FED, who get complete joy out of raping, and lying to our citizens each and every day, at least Canada is telling it like it is.
Bravo for them. Compared to Canada, the US looks like the biggest welfare, entitlement state, in the free world. In the US we manipulate the data, so the elitists can suck more money from the system, claiming they are helping "everyone" LOL.
Please. What a joke.
That aside, the Canadian economic situation is very regional. Ontario's manufacturing base is being hit severely by the strength of the CDN dollar. The car industry is in bad shape.
But out west with both oil (Alberta) and fertilizer (Saskatchewan) things are much rosier. Indeed right across the Western states things are much better (and there is oil coming on line on the Atlantic coast too).
Now as far as fiddling economic numbers - be assured that Canada has its own foibles. Stats Canada pushes things the other way, however, to show how poor everyone is, how many kids are starving and how the poor are getting poorer (not the case in fact) so that the conservative government is pushed in social hand outs.
Maybe that fiddle the data in the US - rest assured though the Canada (and I suspect Europe) also alters data. It is just that the objectives are different. Socialist do it differently.
Real salary has not gone up in Canada for more than 15 years, public services are getting more similar to the third wold countries. Come to Toronto to see.
Not a rosy picture.
I wish it was like Europe in any aspect
I also wonder if Grace has been to a gas-station, grocery store , a dress-store, or even to dinner at a middle-class family restaurant in the last year. She would have a much better appreciation of our rate of inflation, core or otherwise. I guess she must frequent only those places in NY where the Gucci-bag toting, chablis guzzling and brie smelling crowd entertain themselves after a hard NY investment day. Trust no famed economists to tell you what life is in middle-class trenches!
Bye! jegan ;-)
I've charted Real PCE indicating a consumer-recession.
The 6-month % change has dropped to levels only seen during recessions.The report on Business Investment is more benign, but I believethat the consumer sector will lead the business sector down.
it's good to hear from our neighbor to the north. everytime someone complains about living in america, saying that canadians have free medical care, i just laugh and tell them to move there. most of the doctors i've met in the last few years came from canada, looking for a way to make a living.
people who vote for free things, free rent, free food, free whatever, fail to understand or care that real, hard working people have to pay taxes to pay for those things. when the tax payers move away and their tax base moves with them, they just raise taxes, as if everyone is going to stay there and work for them. that's how cities end up abandoned and full of rubble.
they say that water seeks its own level. well, tax payers seek the least tax burden. if you tax them, they will leave. if you lower your taxes, they will stay, provide jobs and consumers, create industry and commerce and your area will flourish.
our michigan auto industry was crushed because they had the heaviest tax burdens and union demanded social services. that's why our steel industry disappeared too. they could not compete with countries that wanted jobs. that's why ford is going to mexico, that's why japan and korea have auto factories here in alabama. don't blame free trade for our problems. free trade provides lots of goods and services which we could not otherwise afford.
rant all you want against the corporation or the man, but they provide jobs and income. there are, however, ways of protecting workers everywhere that are more effective. ways of ensuring that human rights, minimal wages, reasonable hours, safe conditions can be delivered on a level playing field. we need to keep the size of corporations and businesses under a certain limit. that would ensure a larger number of independent businesses all competing for labor. a large number of businesses in any area would remove the leverage huge multinational corporations, like walmart, have in markets. it should be the first priority of any league of nations to have unilateral agreements not to do business with any corporations over a certain size, dictated either by gross sales, number of employees or whatever.
that's just my opinion. maybe you have a better one.
But I, as a Canadian economics writer, will be a bit more severe!. If Grace Cheng is basing her article on a bunch of Canadian government issued numbers compared to a bunch of American government issued numbers then there are two things that you can conclude right away. 1.) she knows nothing about economics and 2.) she knows nothing about Canada.
Me thinks she is just trying to get her article piublished by using an outlandish title! Personally, I take offence.
Obviously the title was sarcastic as she has outlined the problems with the US economy in many of her other posts.
This sarcasm was lost when seekingalpha edited the title here.
1) better monetary policy
2) energy resources
3) gold and mining industries
are superior to the US's. Long term, I suspect Canada's currency to outperform the US dollar. They are not sending $650 billion out of the country every year to purchase oil, and they don't have insane tax and spend policies piling up fiscal deficits. Sure the US is a major trading partner, so, from that aspect their economy can suffer some. That said, China and the Middle East have discovered the riches of Canada and over time Canada will be another Austrailia, if it isn't already.
If we (USA) are so bad then why in the hell does everyone want to come here ?
The only people I see leaving are fleeing felons, draft dodgers, etc.
They sure as hell aren't leaving here for a "better" life elsewhere.
Anyone have the net immigation/emigration figures for USA vs the rest of the world ??
Don't bother about Mexico - I think I know the answer to that one !
And stop bagging on Grace! You have the right to disagree with her but you don't have to be a dick about it.
So I have to wonder how much this begins to look like the eurozone, with some complaining that monetary policy is far too tight and others demanding rate hikes. Surely Alberta could use a break from its price-wage spiral, and I doubt very much that the US automakers are going to make a comeback any time soon anyway. But I suppose the political realities in and around Toronto make that mercy killing impossible.
So be it, then. Jobs for the westerners, but inflation for all! Meanwhile, the needed reallocation of resources from manufacturing auto parts in Windsor to pumping oil and smelting copper in the west will just have to wait. I guess your antipodean cousins will end up making all the money in Asia. Thanks for the post.
After all these years I still do not understand why the Americans think that (small) contractions equal to death.
Contractions are just as natural as your sleep.
And don't forget: If you adjust the US GDP growth for all that extra debt, the USA is contracting for a lot of years already. Right now the US economy has over 50 trillion of debt standing over herself and it routinely grows about 8% a year (that's about 2 to 3 times the long term GDP YoY growth by the way).
No no Grace: Your looks are charming but your brains are not...
we always thought we'd have to bring the cars back in when the price of gasoline finally went up, but we made a much wiser decision. we built much bigger houses with much bigger garages. unfortunatley, it is still possible to walk into some of our garages. so, we are not yet satisfied!!!!!! we must consume or be consumed!!!!!