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Fewer Canadians have emergency savings on hand, driving down economic sentiment: poll – Financial Post

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Household outlook index sinks back to record low

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Canadians’ outlook for the economy deteriorated in February, as a greater number of households showed signs of worry about the state of their savings, according to that latest version of an ongoing tracking poll.

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The Maru Household Outlook Index dropped to 85 last month, matching the lowest reading since global research firm Maru Group started keeping track in 2021. The index was 87 in January and 88 in December. The index pretty much has been on a downward slide since July 2021, when it printed its most optimistic result of 107.

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The baseline for the index is 100. A score below 100 indicates negative sentiment, while a score above 100 is considered positive. Maru comes up with its household index by asking a panel of about 1,500 people a series of questions about the economy’s prospects over the next 60 days.

“The key thing is that people are concerned about the amount of savings they have. That’s what’s underlying all the main pieces here,” said John Wright, executive vice-president of Maru Public Opinion. “It doesn’t look like they have a lot on hand.”

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Wright conducted the survey from Feb. 24 to 27. Some 62 per cent of respondents said they thought they had enough money on hand to cover an unexpected expense over the next two months, down from 65 per cent in January. The February result matched that of October 2022, the last time the index was this low. Regionally, the lowest levels of available savings were recorded in Alberta and Manitoba/Saskatchewan where 48 per cent and 46 per cent, respectively, estimated they had enough to cover a surprise expense. By age, 47 per cent of Canadians 18-34 and 45 per cent of middle-aged participants had enough savings, meanwhile, among women, it was 38 per cent.

The key thing is that people are concerned about the amount of savings they have

John Wright, executive vice-president, Maru Public Opinion

Fewer households indicated that they felt their investments and savings would be enough to sustain them in the future; 55 per cent of respondents answered affirmatively, down from 59 per cent in January. February’s result was the second-lowest reading after March 2022’s 54 per cent.

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Negative sentiment far outstripped any positive feelings survey participants could muster regarding the economy and their personal financial situation.

A growing number of Canadians — 66 per cent compared with 64 per cent in January — said they believed the economy was on the “wrong track.” The only other time Canadians held a more pessimistic view of the economy was in October 2022 when 70 per cent said the economy was headed in the wrong direction.

The last time a majority of Canadians believed the economy was moving in the right direction was in November 2022.

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Also, a declining number of Canadians — 31 per cent compared with 35 per cent January — said they thought now was a good time to invest in the stock market with the former result matching similar views held in October 2022.

On the positive side, fewer Canadians said they were worried about losing their jobs. Eleven per cent indicated they feared that outcome over the next 60 days, compared with 15 per cent in January. Those indicating losing their job was very likely fell to three per cent from five per cent. The last time results were similar was in September 2022.

• Email: gmvsuhanic@postmedia.com | Twitter:

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Economy

U.S. economic growth for last quarter revised up slightly to healthy 3.4% annual rate

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The U.S. economy grew at a solid 3.4 per cent annual pace from October through December, the government said Thursday in an upgrade from its previous estimate. The government had previously estimated that the economy expanded at a 3.2 per cent rate last quarter.

The Commerce Department’s revised measure of the nation’s gross domestic product – the total output of goods and services – confirmed that the economy decelerated from its sizzling 4.9 per cent rate of expansion in the July-September quarter.

But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports and business investment in buildings and software. It marked the sixth straight quarter in which the economy has grown at an annual rate above 2 per cent.

For all of 2023, the U.S. economy – the world’s biggest – grew 2.5 per cent, up from 1.9 per cent in 2022. In the current January-March quarter, the economy is believed to be growing at a slower but still decent 2.1 per cent annual rate, according to a forecasting model issued by the Federal Reserve Bank of Atlanta.

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Thursday’s GDP report also suggested that inflation pressures were continuing to ease. The Federal Reserve’s favoured measure of prices – called the personal consumption expenditures price index – rose at a 1.8 per cent annual rate in the fourth quarter. That was down from 2.6 per cent in the third quarter, and it was the smallest rise since 2020, when COVID-19 triggered a recession and sent prices falling.

Stripping out volatile food and energy prices, so-called core inflation amounted to 2 per cent from October through December, unchanged from the third quarter.

The economy’s resilience over the past two years has repeatedly defied predictions that the ever-higher borrowing rates the Fed engineered to fight inflation would lead to waves of layoffs and probably a recession. Beginning in March 2022, the Fed jacked up its benchmark rate 11 times, to a 23-year high, making borrowing much more expensive for businesses and households.

Yet the economy has kept growing, and employers have kept hiring – at a robust average of 251,000 added jobs a month last year and 265,000 a month from December through February.

At the same time, inflation has steadily cooled: After peaking at 9.1 per cent in June 2022, it has dropped to 3.2 per cent, though it remains above the Fed’s 2 per cent target. The combination of sturdy growth and easing inflation has raised hopes that the Fed can manage to achieve a “soft landing” by fully conquering inflation without triggering a recession.

Thursday’s report was the Commerce Department’s third and final estimate of fourth-quarter GDP growth. It will release its first estimate of January-March growth on April 25.

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Economy

Canadian economy starts the year on a rebound with 0.6 per cent growth in January – CBC.ca

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The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada said Thursday.

The rate was higher than forecasted by economists, who were expecting GDP growth of 0.4 per cent in the month. December GDP was revised to a 0.1 per cent contraction from zero growth initially reported.

January’s rise, the fastest since the 0.7 per cent growth in January 2023, was helped by a rebound in educational services as public sector strikes ended in Quebec, Statistics Canada said.

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WATCH | The Canadian economy grew more than expected in January: 

Canada’s GDP increased 0.6% in January

41 minutes ago

Duration 2:20

The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada says.

“The more surprising news today was the advance estimate for February,” which suggested that underlying momentum in the economy accelerated further that month, wrote CIBC senior economist Andrew Grantham in a note.

Thursday’s data shows the Canadian economy started 2024 on a strong note after growth stalled in the second half of last year. GDP was flat or negative on a monthly basis in four of the last six months of 2023.

More time for BoC to assess

The strong rebound could allow the Bank of Canada more time to assess whether inflation is slowing sufficiently without risking a severe downturn, though the central bank has said it does not want to stay on hold longer than needed.

Because recent inflation figures have come in below the central bank’s expectations, “it appears that much of the growth we are seeing is coming from an easing of supply constraints rather than necessarily a pick-up in underlying demand,” wrote Grantham.

“As a result, we still see scope for a gradual reduction in interest rates starting in June.”

WATCH | Bank of Canada left interest rate unchanged earlier this month: 

Bank of Canada leaves interest rate unchanged, says it’s too soon to cut

22 days ago

Duration 1:56

The Bank of Canada held its key interest rate at 5 per cent on Wednesday, with governor Tiff Macklem saying it was too soon for cuts. CBC News speaks with an economist and a couple who might be forced to sell their home if interest rates don’t come down.

The central bank has maintained its key policy rate at a 22-year high of five per cent since July, but BoC governors in March agreed that conditions for rate cuts should materialize this year if the economy evolves in line with its projections.

The bank in January forecast a growth rate of 0.5 per cent in the first quarter, and Thursday’s data keeps the economy on a path of small growth in the first three months of 2024. The BoC will release new projections along with its rate announcement on April 10.

Growth in 18 out of 20 sectors

Growth in January was broad-based, with 18 of 20 sectors increasing in the month, StatsCan said. The agency said that real estate and the rental and leasing sectors grew for the third consecutive month, as activity at the offices of real estate agents and brokers drove the gain in January.

Overall, services-producing industries grew 0.7 per cent, while the goods-producing sector expanded 0.2 per cent.

In a preliminary estimate for February, StatsCan said GDP was likely up 0.4 per cent, helped by mining, quarrying, oil and gas extraction, manufacturing and the finance and insurance industries.

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Economy

Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg

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US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.

“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”

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