Econowatch

THE BAD NEWS

Falling behind
Remember all that reassuring talk about how Canadians are better at managing our money than Americans? It’s getting harder to say that with a straight face. As of the end of May, the number of Canadians late in making their credit payments had shot up 19 per cent, to 450,000, according to Equifax. Things are especially bad in B.C. and Alberta, where delinquency rates rose 26 and 27 per cent respectively over the year before.

Gloomy again
Using words like “surprised” and “unexpected,” economists received word that U.S. consumer confidence slid in June after rising in recent months. The Conference Board’s consumer index fell to 49.3 in June from 54.8 in May.

Less bad still isn’t good
In April, Canada’s economy shrank by 0.1 per cent, marking the ninth straight monthly decline. While some took heart that the decline wasn’t worse, most signs point to at least another two months of contraction. Economists now expect the GDP in the second quarter to fall at a rate of three to 3.7 per cent.

Not so driven
Americans are sticking with their old wheels. U.S. vehicle sales in June plunged 28 per cent to 860,000 from the year before. Annualized, that’s about 9.5 million cars, far less than the decade average of 16 million a year. Washington’s new cash-for-clunkers program might get people buying, but it won’t come for another few months.

SIGNS OF THE TIMES

• Can you hold it? The state of Virginia is planning to close nearly half of its roadside rest stops, and many other states are following suit. Cash-strapped governments argue the pit stops are increasingly irrelevant given the number of large gas stations dotting interstate highways. Unfortunately for the weak-bladdered traveller, the lowly rest stop has become an easy target for budget cuts.
• Crabtree & Evelyn Ltd., the Connecticut-based company that sells expensive soaps, candles and fragrances, filed for bankruptcy protection in the U.S. Over the last 10 months, sales at its 126 U.S. outlets have been on the decline as consumers have avoided buying the kinds of pricey gifts the store is known for. It seems that in a recession, aromatherapy is one of those things that consumers can grudgingly do without.
• Call it the Fourth of July fizzle. In cities across the United States, skies were dark after costly fireworks celebrations were cancelled by municipal governments desperate to save money. At least there was a small silver lining in Montebello, Calif., which decided to take it’s $40,000 fireworks budget and donate it to local food banks.
• The gargantuan suburban home known as the McMansion has finally fallen out of favour. A survey of U.S. architects found fewer and fewer Americans are interested in more square footage and builders report more small homes under construction. With the recession, and given concerns about rising energy costs and an aging population with no children at home, smaller is better.

LATEST INTELLIGENCE

Many economists had expected American job losses in June to moderate at around 350,000, offering a further sign of recovery. Instead, last month another 467,000 jobs were lost, scorching any talk of a rebound. Some diehards still sought good news in the numbers. But as the U.S. moves perilously closer to national double-digit unemployment, the end of the recession seems as far off as it ever has.

“This was a very ugly labour market report, and there is no amount of lipstick that can improve its image. With conditions in the U.S. economy continuing to be very weak, there is little to suggest that a turnaround in U.S. labour market conditions is on the horizon.” —Millan Mulraine, TD Securities

“At no time in the 1990 or 2001 recessions did we ever come close to seeing such a detonating jobs figure, not even at the depths of those downturns, and yet we have a whole industry of ‘green shoot’ advocates today telling us that the recovery has already arrived. As always, the devil was in the details.”—David Rosenberg, chief economist and strategist, Gluskin Sheff & Associates

“People can’t spend when they don’t have the money.” —Dean Baker, director, Center for Economic and Policy Research

“We were on the road of things getting less bad in the jobs market, and that has been temporarily waylaid. But this doesn’t change my view that the recession will end later this year. We’re probably two months away.”—Ken Mayland, president, ClearView Economics

“The only areas that showed any growth . . . were the already bloated sectors of education and health care. Our current economic problems will not be solved by hiring more teachers and medical technicians.”—Peter Schiff, Euro Pacific Capital

THE WEEK AHEAD

Friday, July 10: The U.S. trade deficit will be reported by the Census Bureau. Imports to the U.S. have been declining for the past nine months, a pattern analysts expect to continue.

Monday, July 13: The U.S. Department of Treasury will release its June budget, which will highlight an ever-growing federal deficit.

Wednesday, July 15: Statistics Canada will report manufacturing sales for May. Sales are down in recent months, but improving.