adplus-dvertising
Connect with us

Economy

Loonie forecasts turn less bullish as economy stumbles – Financial Post

Published

 on


A combination of more oil supply and weakening residential investment could weigh on the Canadian dollar next year, one economist says

Article content

TORONTO — There is less upside for Canada’s dollar over the coming year, according to analysts who are weighing the effect of a surprise contraction in the economy and signs of a cooler housing market on the Bank of Canada’s policy outlook, a Reuters poll showed.

Article content

With about 68 per cent of its population fully vaccinated against COVID-19, Canada’s economy could be positioned better than some others to cope with a fourth wave of the virus.

Still, the economy surprisingly shrank in the second quarter, when lockdowns were in place, and likely had far less momentum than had been expected heading into the summer, data showed on Tuesday.

The Bank of Canada had expected second-quarter growth of 2 per cent, so the data could cause it to raise its estimate of the economy’s spare capacity.

That’s crucial because the BoC has pledged to keep interest rates on hold until slack is absorbed, which would occur in the second half of 2022 according to the central bank’s latest forecast.

The data “does create a bit of a question mark about just how quickly the Bank of Canada will raise interest rates going forward,” said Shaun Osborne, chief currency strategist at Scotiabank.

Article content

“It does raise the risk of maybe a slightly more dovish than we are currently expecting Bank of Canada, at least on the messaging front.”

The BoC is due to make an interest rate decision next Wednesday but an update of its economic projections is not expected until October.

Meanwhile, a snap Canadian election has been called for Sept. 20 but analysts see little difference between the major parties on fiscal and economic policy and doubt it will have much lasting impact on the currency.

The median forecast of 36 strategists, polled Aug. 30-Sept. 2, was for the Canadian dollar to strengthen around 1.6 per cent in three months to 1.2350 per U.S. dollar, or 80.97 U.S. cents, compared to 1.2250 in last month’s poll.

It was then expected to rise further to 1.22 in a year’s time. In August, the forecast was 1.21.

The currency has gained 1.4 per cent since the start of the year, the best performance among G10 currencies, helped by higher commodity prices. Canada is a major producer of commodities, including oil.

But oil has pulled back from a July peak, with the outlook for demand becoming more uncertain and OPEC raising output.

  1. None

    The loonie was at par with the U.S. dollar last time Canada’s trade surplus was so robust. What’s so different now?

  2. Statistics Canada said Tuesday that gross domestic product contracted at an annualized rate of 1.1 per cent in the second quarter, missing expectations for a 2.5 per cent expansion.

    Scotiabank economist rips Statistics Canada for dropping election GDP ‘bomb’

  3. A pedestrian wearing a mask walks past COVID signs on a store in downtown Toronto in May.  The third wave of the virus hit the economy harder than economists thought.

    ‘A longer road to recovery:’ Canada’s economy shrinks, catching economists by surprise

  4. Conservative Party of Canada Leader Erin O'Toole speaks during a news conference on August 31, 2021 in Ottawa.

    Erin O’Toole says Canada on ‘road to recession’ after GDP miss

A combination of more oil supply and weakening residential investment could weigh on the Canadian dollar next year, said Stephen Brown, senior Canada economist at Capital Economics.

Housing investment boomed during the pandemic but the market has cooled from its March peak, while a recent Reuters poll showed property market analysts expect prices to come off the boil next year.

The Bank of Canada “will not be as eager to raise rates” should the slow down in housing activity continue, Brown said.

© Thomson Reuters 2021

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Economy

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

Published

 on

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.

Adblock test (Why?)

728x90x4

Source link

300x250x1
Continue Reading

Economy

German Business Outlook Hits One-Year High as Economy Heals

Published

 on

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.

300x250x1

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.)

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Economy

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

Published

 on

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.

300x250x1

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.

 

728x90x4

Source link

Continue Reading

Trending