THE BAD NEWS
Where are the tourists?
In June the number of Americans crossing into Canada on same-day trips plummeted by 26 per cent from May, to the lowest level since 1972. Tougher passport rules are partly to blame, but so is the strong loonie, which is making Canada expensive. Roughly two-thirds of Canada’s $75-billion tourism sector relies on American travellers.
A slick recovery
Soaring oil prices helped tip the world into a recession, so the dramatic rise in crude over the last week has many worried about a repeat. Oil hit US$75 a barrel, a high for 2009, on confidence that the U.S. economy is improving. The price of oil has jumped by 134 per cent since December.
Feds in the red
Canada posted a $5-billion deficit in June, as bailouts for the auto industry and Employment Insurance payments took their toll on the country’s finances. In the U.S., the Obama administration suddenly raised its deficit forecast for the next 10 years from US$7 trillion to US$9 trillion. On the positive side, the U.S. also shaved US$262 billion from its estimated 2009 federal budget deficit.
The EI rolls keep rising
More Canadians are turning to Employment Insurance in the wake of huge job losses. In June there were 816,600 people collecting EI, up 5.1 per cent from May, according to Statistics Canada. The largest percentage increases were in B.C. and Alberta.
SIGNS OF THE TIMES
- The rich have been getting richer for 30 years now, but their gold-plated ride may be over. New figures show that for the first time in decades, the share of total income earned by wealthy Americans may be in decline. According to CapGemini and Merrill Lynch Wealth Management, the number of Americans with a net worth of at least US$30 million crashed by 24 per cent last year. No word yet on whether that means there’s more money left over for the rest of us.
- When gas prices soared and the recession hit, Hummer sales took a dive, but Jim Lynch Hummer in Chesterfield, Ill., didn’t take the blow lying down. Lynch has decided to start stocking tactical rifles, handguns and shotguns, along with the tank-like vehicles at his dealership. So far, he says, his guns-and-Hummers mix has been a big hit.
- There’s been a lot of talk about “overcapacity” in the global economy as assembly lines go idle and warehouses sit empty. But the shipping industry has found a solution. It is literally destroying market overcapacity—by sending record numbers of container ships to the scrapyards. It’s projected that the number of ships sent to breakers this year will be double that of last year, setting a new high.
- Who wants to be a bureaucrat? The U.S. Bureau of Economic Analysis just released new figures showing that the pay advantage enjoyed by U.S. federal civilian workers over private sector workers is soaring. The average federal worker now receives compensation worth US$119,982 per year (including wages and benefits)—more than double the US$59,909 average for private sector workers.
LATEST INTELLIGENCE
When Washington launched its “cash for clunkers” program in July, offering up to US$4,500 to those willing to trade in gas guzzlers for new fuel-efficient vehicles, it hoped to inject new life into the troubled auto industry. US$2.6 billion and 700,000 cars later, the program wrapped up this week. But experts remain divided over its impact.
“You’ve got dealers, you’ve got mechanics, you’ve got the banks doing the loans—this isn’t just about the auto industry. We’re talking about tons of common ordinary people working today because of this program.” —U.S. Transportation Secretary Ray LaHood
“A billion dollars for cash for clunkers looks dramatically more efficient, dollar for dollar, than anything else the Congress has passed yet.”—Neal Soss, chief economist at Credit Suisse
“We needed a shot in the arm and this is it.” —Cody Lusk, president of the American International Automobile Dealers Association
“This was a sweet little spurt of sales, but it’s hard to imagine it will have any lasting impact.”—Rebecca Lindland, analyst at IHS Global Insight
“Any time we get one of these big surges in demand, it’s usually followed by a period when sales are not so strong.”—George Pipas, chief market analyst at the Ford Motor Company
“We’re going to have a hangover.”—Harm Bandholz, economist at Unicredit Markets
“Because this was hot and heavy for such a short period of time, we are going to have a payback.”—Jeff Schuster, analyst at J.D. Power and Associates
THE WEEK AHEAD
Friday, August 28: The U.S. Department of Commerce reports on personal income and spending for July. Income is expected to rise by 0.1 per cent over June, with spending up 0.2 per cent.
Monday, August 31: StatsCan releases balance of international payments for Q2. A $12.1-billion current account deficit is expected.
Wednesday, September 2: The U.S. Census Bureau issues Manufacturers’ Shipments, Inventories and Orders for July.
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