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Canadians’ outlook on their finances, economy went from dark to darker last month, poll shows

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‘Bleakest and most biting outlook that I have seen since we started this’

Canadians grew more pessimistic about the economy last month, according to a new sentiment gauge that tracks households’ feelings about where the economy is headed and the state of finances.

Maru Public Opinion’s Canadian household outlook index — shared exclusively with the Financial Post — fell to 87 in October from 93 in September, a six-point drop indicating that Canadians’ mood around economic matters has soured considerably after perking up slightly as summer turned to fall.

“What I am seeing is the bleakest and most biting outlook that I have seen since we started this and for many years previous,” said John Wright, Maru’s Toronto-based executive vice-president.

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Wright found that 70 per cent of respondents believed the economy was “on the wrong track,” a significant jump from 65 per cent in September. The result suggests higher interest rates and increased talk of a recession are weighing on the public mood. The last time any of the survey participants had anything good to say about the Canadian economy was back in November 2021, when 54 per cent said they approved of its trajectory.

Maru Public Opinion, a subsidiary of global research firm Maru Group, comes up with its household index by asking a representative panel of about 1,500 people a series of questions designed to probe how they feel about the economy’s prospects over the next 60 days. The most recent poll was conducted Oct. 31 and Nov. 1. Maru started tracking Canadian households’ outlook in February 2021. The baseline for the index is 100. A score below 100 indicates negative sentiment, while a score above 100 is considered positive.

There has been little good economic news of late. In its fiscal update released last week, the federal government downgraded its outlook for economic growth this year to 3.2 per cent from a previous estimate of 3.9 per cent. It also drastically cut its projection for 2023, and now expects the economy to grow only 0.7 per cent from an earlier forecast of 3.1 per cent.

Under a downside scenario, Ottawa said GDP could contract by 0.9 per cent next year.

Inflation is a major reason for the downbeat outlook. The consumer price index for September, the most recent reading available, came in at 6.9 per cent, well above the Bank of Canada’s target of two per cent. Given inflation’s tenacity, the Bank of Canada deployed another outsized interest-rate increase in October in a bid to cool demand that policymakers say exceeds suppliers’ ability to keep up. The benchmark rate is now 3.75 per cent after starting the year near zero.

Slower growth, elevated inflation and rising interest rates are making households feel vulnerable.

For the first time since Maru started asking about personal finances in July 2020, a small majority (53 per cent) of Canadians said that in the next 60 days it was likely that they would worry about their personal and family daily finances. In September, 47 per cent said they had such concerns.

Younger Canadians aged 18-34 were most worried (67 per cent), compared with older age groups 35-54 and 55-plus at 55 per cent and 39 per cent, respectively. Almost 60 per cent of households making less than $50,000 said they were anxious about the next two months.

“Now we are getting personal financial anxiety. Now this is starting to come into your home, into your life,” Wright said. “Now, it’s crossing over into anxiety in 18-34 (year olds) with kids and variable-rate mortgages,” he said.

The bad news didn’t stop there.

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China Wants Everyone to Trade In Their Old Cars, Fridges to Help Save Its Economy

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China’s world-beating electric vehicle industry, at the heart of growing trade tensions with the US and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That’s one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It’s widely expected to be one of this year’s main stimulus programs, though question-marks remain — including how much the government will spend.

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German Business Outlook Hits One-Year High as Economy Heals

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German business sentiment improved to its highest level in a year — reinforcing recent signs that Europe’s largest economy is exiting two years of struggles.

An expectations gauge by the Ifo institute rose to 89.9. in April from a revised 87.7 the previous month. That exceeds the 88.9 median forecast in a Bloomberg survey. A measure of current conditions also advanced.

“Sentiment has improved at companies in Germany,” Ifo President Clemens Fuest said. “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

A stronger global economy and the prospect of looser monetary policy in the euro zone are helping drag Germany out of the malaise that set in following Russia’s attack on Ukraine. European Central Bank President Christine Lagarde said last week that the country may have “turned the corner,” while Chancellor Olaf Scholz has also expressed optimism, citing record employment and retreating inflation.

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There’s been a particular shift in the data in recent weeks, with the Bundesbank now estimating that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic.

Even so, the start of the year “didn’t go great,” according to Fuest.

“What we’re seeing at the moment confirms the forecasts, which are saying that growth will be weak in Germany, but at least it won’t be negative,” he told Bloomberg Television. “So this is the stabilization we expected. It’s not a complete recovery. But at least it’s a start.”

Monthly purchasing managers’ surveys for April brought more cheer this week as Germany returned to expansion for the first time since June 2023. Weak spots remain, however — notably in industry, which is still mired in a slump that’s being offset by a surge in services activity.

“We see an improving worldwide economy,” Fuest said. “But this doesn’t seem to reach German manufacturing, which is puzzling in a way.”

Germany, which was the only Group of Seven economy to shrink last year and has been weighing on the wider region, helped private-sector output in the 20-nation euro area strengthen this month, S&P Global said.

–With assistance from Joel Rinneby, Kristian Siedenburg and Francine Lacqua.

(Updates with more comments from Fuest starting in sixth paragraph.)

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Parallel economy: How Russia is defying the West’s boycott

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When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

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Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment’s delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.

“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.

But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

 

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