One day after federal Finance Minister Joe Oliver deflected concerns over Canada’s poor economic showing to start 2015, the OECD announced that it now projects Canadian growth this year at about 1.5 percent, down sharply from 2.2 percent during its previous temperature reading in March and a full percentage point below its forecast last November. Oliver on Tuesday told a Parliamentary Committee that he does not anticipate a recession.
The Bank of Canada’s Spring 2015 Business Outlook Survey (link to complete report below) released this week, gives more reason for serious concern regarding the economic prospects for all Canada, and the widening impact of Canada’s “natural resource curse”: it’s fossil fuel based economy. The report points to a significant increase in business pessimism about the economy as a whole, well beyond the oil economy, which is causing business to significantly reduce plans for capital spending and hiring. As I pointed out previously, the impact of the oil economy collapse is likely to reverberate throughout the Okanagan. The BofC report suggests that the impacts will be even deeper and more diverse.
Regrettably, this week’s events in the oil market, provide further evidence of the dire consequences ahead for the Canadian oil economy. Oil industry bulls who have been betting on a quick rebound in oil prices are likely to get severely burned, and the prospects for the local tourism based economy are only worsening.
The good news today is Cisco’s new focus on the Internet of Things, which I have been reporting as the new Mega Global Market War. But frankly, the damage to U.S. companies like Cisco Systems by the NSA spying scandal has been catastrophic. Not only Cisco, but Google’s strategy to become a global Internet Service Provider, Yahoo, and Facebook are all affected.
In a somewhat surprising article this weekend, Wall Street Journal investigative reporters Rebecca Smith and Cameron McWhirter have reported on the sorry saga of efforts to create allegedly “clean coal” in Mississippi. This is one of those topics that one would expect the Wall Street Journal to crow about, as it is part of the Murdoch Fox News Empire. What better than another great story about how American technology is once again conquering a challenge by make coal clean and affordable, like in the television ads….? But when the evidence does not add up, the Murdoch minions can reinvent the story as an indictment of government policy and waste. This story has obvious implications for the continued reliance on coal in China and the United States, and the associated problems with carbon emissions from the tar sands in Alberta.
JEREMY GRANTHAM’S GOT A TRACK RECORD that’s impossible to ignore—he called the Internet bubble, then the housing bubble. While moves like those have earned the famed forecaster the nickname “perma-bear,” in early 2009 he also told clients at GMO, his $100 billion, Boston-based money-management firm, to jump back into the market. It was the same week that stocks hit their post-Lehman low. Now, however, the outspoken Yorkshireman, who is chief investment strategist at GMO, is making headlines with a new prediction: Dire, Malthusian warnings about environmental catastrophe. To hear him tell it, the world is running out of food. Resources will only keep getting more expensive. And climate change looms over it all. Indeed, at times he sounds like someone Greenpeace would send door-to-door with a clipboard. (He’s not above likening the coal-industry spin to the handiwork of Goebbels.) If it were anyone else, Wall Street would probably laugh him off. But because it’s Jeremy Grantham, they just might listen.
The Canadian media (CBC, Globe & Mail, Canadian Business) have been buzzing with analyses of Alberta Premier Alison Redford’s pronouncement last month that the “Bitumen Bubble,” is now crashing down on the Alberta economy, and potentially the entire Canadian economy. The Alberta budget released last Thursday, March 7, acknowledged a $6.2 Billion deficit from this year, and “even larger declines in the next several years,” due to forecasts for significant price decreases for “Western Canada Select” (WCS), the market term for Alberta oil sands oil. Canadian Finance Minister Jim Flaherty echoed the impact of reduced oil sands revenue on the federal budget, by warning of significant cutbacks in federal spending as well. The impact of this sudden change in the prospects for the Canadian petroleum industry and for government oil tax revenues, will likely also have serious implications for the BC economy, jobs growth, business investment, consumer spending: essentially the Canadian economy as a whole will suffer.