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Japan cuts economy view on weaker factory output – Financial Post

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TOKYO — Japan’s government has trimmed its overall view on the economy for the fourth time this year due to a downgrade in its assessment of manufacturing output in spite of a U.S.-China trade truce.

It described the economy as recovering at a moderate pace, in its December report, but said weakness centered on manufacturers increased a notch amid continued softness in exports, which was a slightly bleaker view than last month.

The assessment suggests domestic demand remains strong enough to offset risks to Japan’s export-reliant economy from slowing global growth and pressures on exports from the 17-month-long Sino-U.S. trade war.

But the downbeat estimation could add pressure on the government to devise new steps to support growth and for the central bank to maintain its ultra-loose monetary policy.

On Thursday, the Bank of Japan kept its short- and long-term rate targets steady though it warned that risks to the recovery remained high.

The last time the government marked down its view on the economy four times in a single year was in 2012.

The downgrade was mainly the result of a cut in the view on industrial production because of the widening impact from declining car exports, including on steel, chemical and electronic component manufacturers.

“Some weakness that appeared in other industries related to car production was the trigger for this further downgrade,” an official from the Cabinet Office, which helps coordinate government policy, said at a briefing.

The government left untouched its view on most of the other individual components of the report, offering a generally positive view of domestic demand.

It also downgraded its overall assessment of the economy in October, May and March this year.

Japan’s economy, the world’s third-largest, grew in the third quarter at the slowest pace seen so far this year, though it still expanded an annualized 1.8%, mostly driven by robust capital spending and domestic demand. (Reporting by Daniel Leussink; Editing by Jacqueline Wong)

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Canadian retail sales slide in April, May as COVID-19 shutdown bites

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december retail sales

Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

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Canadian dollar notches a 6-day high

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Canadian dollar

The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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Economy

Toronto Stock Exchange higher at open as energy stocks gain

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Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

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