These are stories Report on Business is following Tuesday, March 31, 2015.
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'Fingers crossed'
Canadians get their first full look today at the kickoff to what Stephen Poloz warns is an "atrocious" first quarter for the economy.
A report from Statistics Canada at 8:30 a.m. ET is expected to show that the economy contracted in January by 0.1 per cent or 0.2 per cent, setting the stage for a lame showing for the first three months of the year. As The Globe and Mail's David Parkinson reports, the consensus among economists is for a 0.2-per-cent dip.
Much will depend, of course, on how February and March look, but economists believe Canada's economy has lagged in the quarter that ends today.
Some observers suggest the economy may have actually contracted in the first three months of the year, though modestly.
"January is set to start the year off with a whimper, a sign of things to come in what is likely to be a disappointing Canadian economy in 2015," said Nick Exarhos of CIBC World Markets.
He cited recent poor showings in the retail and manufacturing sectors, each down 1.7 per cent in January, which will play into this morning's report.
Don't get the wrong idea here: No one is suggesting that Canada is staring a recession in the face.
But the oil shock is forcing energy companies to slash their budgets and lay off workers, and governments to pull back. This will all play out, as well, in looming election campaigns, particularly as unemployment, now at 6.8 per cent, spikes, at least regionally.
Mr. Poloz, whose Bank of Canada had hoped for first-quarter economic growth of 1.5 per cent, is now looking at something far less.
Indeed, the central bank governor told The Financial Times that "the first quarter of 2015 will look atrocious, because the oil shock is a big deal for us."
In an interview with the news organization, he warned of the ripple effect from the stunning decline in crude prices, despite the savings at the gas pump.
"In theory lower oil prices mean [putting] more money in consumers' pockets, but … if an oil company cancels [an investment] project, laying off a worker, that guy will not have the money to buy a new pickup truck," Mr. Poloz said.
"That spreads pretty quickly."
So what's the outlook?
Where Mr. Poloz is concerned, he said recently that he has his "fingers crossed" for the rest of the year.
"We're seeing good momentum in several pockets of the manufacturing sector," he said in a recent speech.
"These sound like tame things, but they are pretty important categories that are connected to the investment story in the U.S."
But it's shaping up to a year of limping, rather than sprinting, particularly after what we've seen so far.
"Fiscal tightening, while not severe, will begin to take an additional dent out of activity in Alberta and Quebec," said CIBC chief economist Avery Shenfeld, referring to their budgets last week.
"Although crude prices have nosed up a bit, the pullback in capital spending in the first half of the year will see job losses that could weigh on consumption for a few quarters," he added in a recent report.
"Add it all up, and while we might escape a negative full quarter, growth could average less than 1 per cent for the first three quarters of the year. The Bank of Canada has already conceded that its Q1 projection of 1.5 per cent now looks too high, and our forecasts point to some further disappointments through the spring and summer."
The central bank has also said it believes the impact of the oil crash is "front-loaded," though others fear that may not necessarily be the case.
Emanuella Enenajor, the Canada and U.S. economist for Bank of America Merrill Lynch, is one of them, said such a scenario should mean "clear signs of damage" in certain leading indicators.
But, as an example, she cited the recent "slight uptick" in initial claims for jobless benefits in Alberta.
"We know more pain is on the way, with the province of Alberta receiving group layoff notices impacting a whopping 7,441 employees year-to-date," Ms. Enenajor said.
"That suggests protracted economic weakness as eventual job losses filter through to weaker spending," she added.
"Thus, even with recent data coming in weaker than expected, the risk is that the brunt of the energy shock still lies ahead and the drag could be more protracted than the BoC expects, raising the risk of additional policy easing."
In its latest forecast released last week, Toronto-Dominion Bank was on the happier side of things, projecting first-quarter growth of just 0.5 per cent, but then a pick-up going forward.
TD predicts the economy will expand by about 2 per cent in each of this year and next, though unemployment could hit 7 per cent by the end of 2015, easing slightly to 6.7 per cent by late 2016.
- Poloz warns of 'atrocious' first-quarter economic growth
- David Parkinson in ROB Insight (for subscribers): GDP report to show oil shock's impact on Canadian economy
- Luke Kawa: Oil slump weighs on Canadian economy
- Barrie McKenna: Poloz's 'fingers crossed' on outlook
- Canada's economy in a funk, could actually shrink in first quarter
Markets slip
Investors are decidedly unhappy so far this morning.
"With the quarter end upon us it is not surprising to see a general air of indecision envelop markets like a late-winter fog," said senior market analyst Chris Beauchamp of IG in London.
Tokyo's Nikkei lost 1.1 per cent, though Hong Kong bucked the trend with a gain of 0.2 per cent.
In Europe, the Paris CAC 40, Germany's DAX and London's FTSE 100 were down by between 0.3 per cent and 0.9 per cent by 6:50 a.m. ET.
New York futures were also down.
"In what has been a volatile first quarter, yesterday's sharp rebound following a week of declines was not out of character," said analyst Jasper Lawler of CMC Markets in London.
"The Dow and S&P 500 are just about up for 2015 but most of that gain was thanks to the moves yesterday and just a few days ago they were lower on the year."
Teck shares slide
Shares of Teck Resources Ltd. are sinking fast in the wake of the Canadian miner's denial of merger talks.
As The Globe and Mail's Rachelle Younglai and Brent Jang report, Teck has denied a news report that said it's in discussions with Antofagasta PLC to create giant copper producer.
Teck shares were down by more than 7 per cent with about two hours to go before the New York open.
Greece in spotlight. Still
One round of Greek talks with its lenders is over, but, as always, there's more to come.
The so-called technical discussions have ended on Greek reforms, but more talks are expected.
"On the bright side, although the round of 'technical talks' are over, both sides continue to discuss the round of reforms that Greece has proposed," said senior economist Jennifer Lee of BMO Nesbitt Burns.
"On the not-so-bright side, the talks are 'not there yet,' and the longer this drags on, the more markets worry that they will fail, particularly as key payment dates are coming up next week."
- Greece, lenders fail to reach deal to unlock aid
- Eric Reguly: Eldorado Gold faces accusations of tax avoidance in Greece
CPPIB takes ABP stake
For the investment arm of Canada's pension fund, it's not just any port in a storm.
The Canada Pension Plan Investment Board has joined with Hermes Infrastructure to buy at least 30 per cent of Associated British Ports for $2.9-billion.
A further 3.33 per cent is possible in ABP, which owns and operates more than 20 ports in the region and which the CPPIB said is the leading such group in the U.K.
"This investment is an important addition to our global infrastructure portfolio and fits well with CPPIB's long-term investment mandate."
Deflation fears ease
Deflation concerns are easing in Europe, but the labour market remains ugly.
Consumer prices are believed to have dropped 0.5 per cent in the euro zone this month, a better showing than February's 0.3 per cent, according to the Eurostat agency today.
The jobless rate, meanwhile dipped to 11.3 per cent in February, down from the 11.4 per cent of January.
More than 18 million people in the monetary union can't find work.
"The numbers are still gaudy but at least improving," economists at Bank of Nova Scotia said of the jobless data.
"Italy moved in the wrong direction at 12.7 per cent vs. 12.6 per cent in January, but there has been very strong improvement since November when unemployment stood at 13.2 per cent," they added.
"German unemployment in March ticked lower too to 6.4 per cent vs. 6.5 per cent in February."
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Michael Babad