THE BAD NEWS
Fear factory
Manufacturing took another hit in May. Canadian factory sales plunged six per cent to $38.4 billion, far worse than economists had expected. The sector was hit hard by automotive plant closures and trouble in the aerospace industry. Though companies are chipping away at their backlog of inventories, new orders aren’t coming fast enough to warrant more production.
Foreclosed
Even as some economists see signs of stability in U.S. real estate, the foreclosure rate continues to worsen. More than 1.5 million properties were in the foreclosure process during the first half of the year, according to RealtyTrac, up by 15 per cent from the same time last year.
Double-digit misery
Fifteen states, as well as the District of Columbia, now suffer from unemployment in the double-digits, according to a report from the U.S. Federal Reserve. Michigan is faring the worst with unemployment above 15 per cent, the first state to reach that level since 1984. The Fed expects the national unemployment rate, now at 9.5 per cent, will hit 10 per cent this year and stay there through 2010.
Whole lot of nuthin’
Canada’s wholesale trade fell to its lowest level since 2005. Sales in May slipped 0.3 per cent to $40.1 billion in May, the eighth-straight monthly decline. The drop was led by the equipment, food, and metal sectors.
SIGNS OF THE TIMES
- Scores of modern-day hobos are overrunning trendy New York neighbourhoods, camping in half-built luxury condo projects that have been shuttered by the downturn. The squatters, who call themselves “gutter punks,” haven’t endeared themselves to the locals as they’ve transformed some areas into heroin hot spots.
- The roar of a Harley-Davidson motorcycle doesn’t seem to have the appeal it used to. The Milwaukee-based company says it’s cutting 1,000 jobs, following a plunge in U.S. sales last quarter by 35 per cent. Even before the recession, Harley was struggling to expand its market beyond male baby boomers. But in this economic climate, even that demographic is putting off buying pricey new bikes.
- High-end Las Vegas restaurants are struggling, and that’s meant uncertain times for celebrity chefs. In an already crowded market of five-star eateries, as many as 30 new restaurants—such as France’s Pierre Gagnaire and San Francisco’s Michael Mina—are set to open in December as part of the US$8.5-billion CityCenter project. Yet with the big spenders vanishing, wait staff who once took home $150,000 in tips have already seen their incomes cut in half.
- Remember all that talk about how little kids who devoured Harry Potter books wouldn’t have time for the movies now that they’re teens? So much for that: the boy wizard recently conjured up US$159.7 million at North American box offices in just five days. Despite the recession (and flops like Brüno), Hollywood has managed to boost overall ticket sales by 12 per cent over last year.
LATEST INTELLIGENCE
For some, the astounding US$3.4-billion quarterly profit recently announced by Goldman Sachs is cause for hope. For others, it’s cause for unmitigated rage. Many are furious about the quick return to huge bonuses being paid out to bankers, especially since Goldman benefited from taxpayer dollars in big way. As Wall Street improves while Main Street continues to suffer, there’s a lot more anger to come.
“There is no financial institution that would be reporting the kind of positive results we have seen in the last quarter, but for the extraordinary public support provided by the government.”—Lawrence Summers, director, White House National Economic Council
“My main concern is that it seems to be a return to some of the flawed short-term compensation structures that played an important role in the run-up to the financial crisis.” —Lucian Bebchuk, professor of law, Harvard University
“It’s what’s known in business as the invisible government-funded scaffolding of the free market. And it worked, just enough for Goldman Sachs to pay its employees a total of $11.36 billion so far this year. So fret not America, your work has not gone in vain.”—Jon Stewart, host, The Daily Show
“There will be outrage.” —Senator Jon Tester, Montana
“[Goldman’s] results understandably generate claims of ‘unfair’ proprietary trading gains. The reality, however, is that capital markets are very profitable for those with means and desire.” —Roger Freeman, banking analyst, Barclays Capital
“I wouldn’t be surprised if there’s some sort of a backlash, but if you’re Goldman, you’re in good shape here. There’s not a whole lot they can do to enforce any sort of compensation restrictions.”—William Fitzpatrick, analyst, Optique Capital
THE WEEK AHEAD
Thursday, July 23: The Bank of Canada will issue its latest Monetary Policy Report. It’s expected that the second quarter output forecast will be up a bit, as the first quarter wasn’t as bad as expected.
Friday, July 24: The U.S. survey of consumer confidence results for July will be released. Preliminary figures show a big decline.
Tuesday, July 28: The S&P/Case-Shiller Home Price Index for May comes out. Recently prices have been declining, but at a slower rate.
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