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U.S. core capital goods orders point to worsening business investment downturn – The Journal Pioneer

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By Lucia Mutikani

WASHINGTON (Reuters) – New orders for key U.S.-made capital goods fell sharply in February as demand for machinery and other products slumped, suggesting a deepening contraction in business investment that analysts said signaled the economy was already in recession.

The coronavirus pandemic has further darkened the outlook for business investment as measures to contain the highly contagious virus have brought the country to a sudden stop. The Federal Reserve has taken extraordinary steps to soften the hit on the economy. U.S. senators were set to vote on Wednesday on a record $2 trillion fiscal stimulus package.

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“Business investment is the key swing factor in every recession, and right now the pendulum is swinging the wrong way with declining orders likely to drag the economy over the cliff and down into recession in March,” said Chris Rupkey, chief economist at MUFG in New York.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.8% in February after rising by a slightly downwardly revised 1.0% in January, the Commerce Department said on Wednesday.

These so-called core capital goods orders were previously reported to have increased 1.1% in January.

Economists polled by Reuters had forecast core capital goods orders would drop 0.4% in February. There were decreases in orders for machinery, primary metals and computers and electronics products last month. But demand for electrical equipment, appliances and components increased 1.3% last month.

Shipments of core capital goods fell 0.7% last month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. They increased 1.1% in January.

Business investment has contracted for three straight quarters, the longest such stretch since 2009. Economists have blamed the business investment rot on the Trump administration’s 20-month-old trade war with China. The weakness in business investment comes at a time when corporate profits are weakening.

“Given that profits are likely now declining, financial market conditions have tightened and the economy is contracting, business investment will take it on the chin,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Business investment in equipment will drop sharply in the second quarter.”

Stocks on Wall Street were trading mostly higher, with investors comforted by the huge stimulus package. The dollar .DXY> fell against a basket of currencies. U.S. Treasury prices were mostly trading higher.

ABRUPT HALT

The coronavirus, which causes a respiratory illness called COVID-19, has brought the economy to a abrupt halt, with governors in at least 18 states, accounting for nearly half the country’s population, ordering residents to stay mostly indoors.

“Non-essential” businesses have also been ordered closed, leading to massive unemployment and a rush to apply for jobless benefits. A survey by data firm IHS Markit on Tuesday showed its gauge of U.S. business activity dropped to a record low in March. Some analysts say the economy slipped into recession in March.

Recessions in the United States are called by the National Bureau of Economic Research. The NBER’s business cycle dating committee does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries.

Instead, it looks for a drop in economic activity, spread across the economy and lasting more than a few months. Measures taken by the U.S. central bank to stem the slide include slashing interest rates to zero, promising bottomless dollar funding and implementing an array of programs to help keep companies afloat.

Business investment is taking a hit from a collapse in crude prices, thanks to the coronavirus and an oil price war between Russia and Saudi Arabia. A survey from the Dallas Fed on Wednesday showed a significant decline in activity in the oil and gas sector in the first quarter.

The survey’s measure of capital expenditures among exploration and production firms dropped to a reading of -49.0 in the first quarter from 9.1 in the October-December period. Its measure of the expected level of capital expenditures next year plummeted to -61.9 from 0.9 in the fourth quarter, as firms also cut expectations for capital spending in 2021.

“Prior to the global COVID-19 outbreak, the combination of muted global growth, persistent trade policy uncertainty and tariffs, the strong dollar and weak corporate profitability made for a very challenging backdrop for U.S. businesses,” said Lydia Boussour, a senior U.S. economist at Oxford Economics in New York. “We now believe the additional headwind posed by the coronavirus will lead to one of the largest pullbacks in capital spending in history.”

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, accelerated 1.2% last month after gaining 0.1% in January. They were boosted by a 4.6% rebound in orders for transportation equipment, which followed a 0.9% decline in January.

Orders for civilian aircraft slipped 0.3% last month after soaring 356.7% in January. Motor vehicles and parts orders accelerated 1.8% in February after falling 0.5%.

But orders for transportation equipment are set to weaken. Boeing has temporarily closed some its plants in Washington state, one of the states hardest hit by the coronavirus, and auto makers have shuttered factories to protect their workers from COVID-19.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)

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World's Largest Pension Fund Seeks Information on Bitcoin Under the Portfolio Diversification Plan – CoinDesk

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For the time being, GPIF invests in domestic bonds, domestic stocks, foreign bonds, foreign stocks, private equity, real estate and infrastructure. While the pension fund is seeking information about bitcoin, there’s no guarantee it will choose to invest in the world’s largest cryptocurrency once the evaluation is completed.

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Kelowna investment portfolio tops $950 million – Kelowna News – Castanet.net

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The City of Kelowna’s investment portfolio continues to benefit from high interest rates set out by the Bank of Canada.

Interest rates, which have soared from almost nil during COVID to five per cent in the summer have been a boon to the city’s investments.

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The city’s portfolio, which includes short and long-term investments as well as cash on hand has inched closer to the $1 billion threshold.

At the end of 2023, investments sat at $950.5 million, up by nearly $160 million just a year previous.

“The Bank of Canada started raising interest rates in 2022 and the city has garnered favourable interest rates as a result of the increases in 2022 and 2023,” financial planning manager Melanie Antunes told council Monday.

“The city still expects to be able to cycle low interest investment vehicles into higher rate investment vehicles as investments mature throughout 2024 and beyond.

With the prospect of interest rates beginning to recede later this year Altunes says the city’s return on investment will continue its upward direction, but at a more moderate pace that the past year.

The city presently has $295.5 million in short term investments which mature in less than a year, $493.5 million is long-term investments maturing in one to 10 years and another $159.4 million in the city’s endowment fund created through the sale of its electric utility.

While the city appears to be flush with cash, much of it is already earmarked for specific purposes.

Finance director Joe Sass says investments are made up of a “number of different reserve funds,” including development cost charges, grant funds from senior levels of government and various other funds not at the discretion of staff or council.

The City of Kelowna’s investment portfolio reached a little more than $950 million at the end of 2023.

That’s nearly $160 million more than the city had in investments and cash a year earlier.

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Businesses want outstanding ‘green’ investment tax credits fast-tracked

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TORONTO — A survey by KPMG in Canada says business leaders want Ottawa to fast-track all outstanding “green” or “clean” economy business investment tax credits.

The online survey of 534 small- and medium-sized businesses done in February says 90 per cent of those questioned supported speeding up the delivery of the promised incentives.

KPMG’s Lucy Iacovelli says meeting the climate challenges and retooling the economy requires significant business investment to decarbonize and build the net-zero industries and technologies.

To deliver, Iacovelli says Ottawa needs to make it fast and easy for companies to access the clean energy investment tax credits or they risk falling further behind U.S. and other major economies.

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The survey found 83 per cent of the businesses say they require more assistance and incentives to decarbonize.

Eighty per cent of those surveyed also supported federal green-related investments or incentives to attract foreign companies to locate in Canada.

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