Canada Loses Haven Status as Loonie Drop Fails to Spark Exports


mentalfloss
No Party Affiliation
#1
Canada Loses Haven Status as Loonie Drop Fails to Spark Exports

Canada was the envy of developed economies following the global recession, boasting the world’s soundest banks and a robust housing market that helped push its currency above parity with the U.S. Those days are gone.

The dollar plunged to a four-year low yesterday and returns on Canada’s benchmark stock index were less than half of U.S. equities last year, underscoring an economy beset by the slowest rebound in exports since World War II. Consumers are tapped out with record household debt and governments are more focused on erasing budget deficits than providing stimulus.

With the outlook for other major economies improving and “the lack of job growth and economic growth here in Canada, comparatively I think we’re going to be sub-par for a little while at least,” said Brad Bardua, chief financial officer of Avigilon Corp. (AVO), the Vancouver-based maker of digital surveillance systems.

The recovery is so sluggish that Bank of Canada Governor Stephen Poloz may move as early as today to signal easier monetary policy while the Federal Reserve takes steps to taper stimulus, according to Gluskin Sheff & Associates Chief Economist David Rosenberg in Toronto and Sebastien Galy, senior forex strategist at Societe Generale SA in New York.

The International Monetary Fund yesterday forecast Canada’s economy would expand 2.2 percent this year, trailing both the U.S. and U.K. among Group of Seven countries. In 2009, Canada was the leader of the G-7 pack.

Missing Improvement
“The improvement in Canada hasn’t really been there since we started from a higher level,” said Malcolm J. Jones, a portfolio manager at Adroit Investment Management Ltd. in Edmonton, Alberta, who oversees about C$500 million ($456 million) of fixed-income securities.

The world’s 11th-largest economy, which relies on exports for about 30 percent of output, is struggling to build momentum for shipments abroad even as the dollar falls and the U.S. economy gathers steam. While the U.S. takes in about 75 percent of Canada’s exports, energy shipments have declined since 2011 as U.S. supplies have grown. Exports of metals have also fallen while auto and parts shipments are little changed over the past year.

“Fundamentally, Canada is a trees and rocks economy,” said David Garofalo, chief executive officer of Toronto-based HudBay Minerals Inc. by phone. “The weakness in the Canadian dollar reflects a softening of the commodities space.”

The Canadian dollar dropped beyond C$1.10 per U.S. dollar yesterday for the first time since 2009. At that time, the country was emerging from recession, buoyed by banks that remained solvent through the credit crisis and consumer that were ready to spend. The currency remains stronger than it was at any point from 1976 to 2006 -- as it averaged 1.2870 per U.S. dollar during that period.

Stagnant Exports
Exports have been stagnant for more than two years, with shipments 19 percent below where they would be if the recovery followed the average of the last four economic cycles, according to Statistics Canada data compiled by Bloomberg.

“The big gap between our exports and the U.S. economy is the result of lost market share,” said Krishen Rangasamy, senior economist at National Bank Financial in Montreal. “That is the legacy of 10 years of the loonie appreciating,” he said, using the nickname for the Canadian dollar.

Canada’s benchmark Standard & Poor’s/TSX Composite Index has risen 9.1 percent over the past year, trailing the 24 percent gain for the Standard & Poor’s 500 Index, the third straight year of underperformance. Canadian government bonds due in five years or less yield more than U.S. Treasuries, with longer-dated U.S. debt carrying higher yields.

Canada’s manufacturing base has shrunk, meaning a weaker currency will provide less of a spark that it would have in the past.

Job Losses
Bombardier Inc. (BBD/B) said yesterday it was cutting 1,700 jobs in its aerospace division, or about 6 percent of the work force. The Montreal-based company is working to produce its new CSeries regional jet, a plane whose debut has been pushed back four times.

In December, Battle Creek, Michigan-based Kellogg Co. (K) closed a plant in London, Ontario, firing 500 workers who had produced Corn Flakes and All-Bran cereal. Weeks earlier, HJ Heinz Co., the ketchup-maker owned by Warren Buffett’s Berkshire Hathaway Inc. and 3G Capital, closed its plant in Leamington, Ontario, cutting 740 jobs.

“The tomatoes are going to go to the plants that have the low production costs,” Buffett said in November at an event in Detroit. “It’s really a question of having an unprofitable plant and concentrating production in a more profitable plant.” Heinz is based in Pittsburgh.

BlackBerry Cuts
Waterloo, Ontario-based BlackBerry Ltd. (BBRY) cut 4,500 jobs and wrote down $960 million of inventory in September. The smartphone maker, whose devices were once known as CrackBerrys for their addictive nature, now holds less than 3 percent of the global smartphone market.

Canada added a net 102,000 jobs last year, a 0.6 percent increase that was the slowest since 2009, Statistics Canada reported this month.

Stimulus options are limited. Canadian consumers, who took advantage of low interest rates and led the recovery by buying houses and cars, now face record levels of debt as a share of income. By contrast, U.S. debt burdens have been declining since a peak in 2007.

Governments, both federal and provincial, are paring deficits. While opposition lawmakers called for stimulus after the latest employment report, Finance Minister Jim Flaherty, who may introduce a new fiscal plan as early as next month, has ruled out major spending initiatives as the government seeks to return to surplus by the year beginning April 2015.

Canada Loses Haven Status as Loonie Drop Fails to Spark Exports - Businessweek
 
petros
#2
Stimulus sits landlocked on the prairie and shield. Those who have invested are very pissed off and this is the backlash.
 
captain morgan
Bloc Québécois
#3
It's all part of the cycle.

The info in the OP is not any big surprise to anyone, especially the comparison to economies that have been on the skids in the past few years... When you're down, there is only one way to go
 
petros
#4
The reasons in the article are way off the mark. We should be filling orders but nothing is moving.
 
mentalfloss
No Party Affiliation
#5
Canadian dollar continues to slide

The Canadian dollar drifted lower Tuesday ahead of the U.S. Federal Reserve meeting Wednesday that could signal how much confidence the Fed has in the U.S. recovery.

The loonie was down 39 cents to 89.60 US at mid-afternoon after trading as low as 89.47 in the morning.

Markets have been severely buffetted over the last few sessions on concerns about emerging markets and plunging currencies in countries such as Turkey, Argentina and China.

But on Tuesday, stocks seemed to recover, buoyed by decisions in India and Argentina to raise interest rates.

The TSX/S&P index was up 85 points to 13,670 at mid-afternoon and New York’s Dow Jones index rose 86 points to 15,923. It was a reversal of steep drops on Friday and Monday.

Canadian dollar continues to slide
 
taxslave
No Party Affiliation
#6
No real surprise considering how difficult it is to get a permit to do anything in Canada.
 
Goober
Free Thinker
+1
#7
Quote: Originally Posted by mentalflossView Post

Canadian dollar continues to slide

The Canadian dollar drifted lower Tuesday ahead of the U.S. Federal Reserve meeting Wednesday that could signal how much confidence the Fed has in the U.S. recovery.

The loonie was down 39 cents to 89.60 US at mid-afternoon after trading as low as 89.47 in the morning.

Markets have been severely buffetted over the last few sessions on concerns about emerging markets and plunging currencies in countries such as Turkey, Argentina and China.

But on Tuesday, stocks seemed to recover, buoyed by decisions in India and Argentina to raise interest rates.

The TSX/S&P index was up 85 points to 13,670 at mid-afternoon and New York’s Dow Jones index rose 86 points to 15,923. It was a reversal of steep drops on Friday and Monday.

Canadian dollar continues to slide

Good for exporters bad for imports. But we are an exporting country.
 
taxslave
No Party Affiliation
#8
Quote: Originally Posted by GooberView Post

Good for exporters bad for imports. But we are an exporting country.

We were and could be again if the NIMBYs and NOPES were told to STFU or leave.
 
darkbeaver
Republican
#9
Quote: Originally Posted by petrosView Post

The reasons in the article are way off the mark. We should be filling orders but nothing is moving.

Baltic Index,,,,,,,bad very bad
 
Goober
Free Thinker
#10
Quote: Originally Posted by taxslaveView Post

We were and could be again if the NIMBYs and NOPES were told to STFU or leave.

Our biggest problem was productivity which was not a big issue when the dollar was in the low 60 cent range. Now it is reduced wages in the US. That and tax breaks offered.
Look at the free trade with Korea. The 1 large auto company was originally for it, then that changed. But we have a huge agricultural industry that dwarfs the auto industry, and the are for free trade.
 
darkbeaver
Republican
#11
Quote: Originally Posted by petrosView Post

The reasons in the article are way off the mark. We should be filling orders but nothing is moving.

Nonsense, elements of naval power are repositioning as we post. Troops are deploying munitions plants are working overtime to fill orders, gold and silver are being bunkered to prevent damage in the just about here global war. The real economy is working to capacity.
 
B00Mer
Libertarian
#12
I hope the Loonie drops to 70 cents on the dollar, it will stop the cross border shopping and force people to buy their "milk" at home...

Residents of Bellingham, WA cheer lower Loonie, no more Canadian invasion..

Now if the USA would only start building a border fence and start requiring a Visa to keep those Snow Burds in Canada... Then you'll see the bunch if ya start crying that you want to join the USA

Canadians act like it's somehow their right to come to the USA, got to pound it in to their thick skulls, it's a privilege

Leave them to freeze in their frozen wasteland
 
petros
#13
Cheering their income losses is the American way.
 
Goober
Free Thinker
#14
Quote: Originally Posted by petrosView Post

Cheering their income losses is the American way.

Exactly- Low dollar, exports to the US increase, companies in the US cannot compete against the Canadian price, layoffs result. They come to visit Canada, we accept their money, and we are dammed polite about it.
 
B00Mer
Libertarian
#15
Quote: Originally Posted by GooberView Post

Exactly- Low dollar, exports to the US increase, companies in the US cannot compete against the Canadian price, layoffs result. They come to visit Canada, we accept their money, and we are dammed polite about it.


Yeah that's why the title of the thread states that's not happening ... LOL

Free Trade with Mexico offers cheaper goods and manufactured products ...

Canadians always ask me, what do Americans really think of Canada... Truth is we don't ..
 
L Gilbert
No Party Affiliation
#16
Quote: Originally Posted by mentalflossView Post

Canada Loses Haven Status as Loonie Drop Fails to Spark Exports
Canada was the envy of developed economies following the global recession, boasting the world’s soundest banks and a robust housing market that helped push its currency above parity with the U.S. Those days are gone.
The dollar plunged to a four-year low yesterday and returns on Canada’s benchmark stock index were less than half of U.S. equities last year, underscoring an economy beset by the slowest rebound in exports since World War II. Consumers are tapped out with record household debt and governments are more focused on erasing budget deficits than providing stimulus.
With the outlook for other major economies improving and “the lack of job growth and economic growth here in Canada, comparatively I think we’re going to be sub-par for a little while at least,” said Brad Bardua, chief financial officer of Avigilon Corp. (AVO), the Vancouver-based maker of digital surveillance systems.
The recovery is so sluggish that Bank of Canada Governor Stephen Poloz may move as early as today to signal easier monetary policy while the Federal Reserve takes steps to taper stimulus, according to Gluskin Sheff & Associates Chief Economist David Rosenberg in Toronto and Sebastien Galy, senior forex strategist at Societe Generale SA in New York.

Quote has been trimmed, See full post: View Post
Big deal. Fretting about economies will only net people a load of health problems.
 
tay
+1
#17
Quote: Originally Posted by mentalflossView Post

Canada Loses Haven Status as Loonie Drop Fails to Spark Exports
Canada was the envy of developed economies following the global recession, boasting the world’s soundest banks and a robust housing market that helped push its currency above parity with the U.S. Those days are gone.
The dollar plunged to a four-year low yesterday and returns on Canada’s benchmark stock index were less than half of U.S. equities last year, underscoring an economy beset by the slowest rebound in exports since World War II. Consumers are tapped out with record household debt and governments are more focused on erasing budget deficits than providing stimulus.
With the outlook for other major economies improving and “the lack of job growth and economic growth here in Canada, comparatively I think we’re going to be sub-par for a little while at least,” said Brad Bardua, chief financial officer of Avigilon Corp. (AVO), the Vancouver-based maker of digital surveillance systems.
The recovery is so sluggish that Bank of Canada Governor Stephen Poloz may move as early as today to signal easier monetary policy while the Federal Reserve takes steps to taper stimulus, according to Gluskin Sheff & Associates Chief Economist David Rosenberg in Toronto and Sebastien Galy, senior forex strategist at Societe Generale SA in New York.

Quote has been trimmed, See full post: View Post




This must have been a 'page filler' article.


The loonie has fallen in the last 2 weeks yet the author is wondering why exports haven't perked up.


The owners in China, India, Mexico, Vietnam, South Korea, Bangladesh or Right To Work For Less States in the USA aren't going to pack up their factories and move to Canada because the loonie has fallen...........
 
captain morgan
Bloc Québécois
+2
#18  Top Rated Post
Quote: Originally Posted by B00MerView Post

Free Trade with Mexico offers cheaper goods and manufactured products ...

Who are you kigging Boom.. The US buys more goods from China and Korea in a week then they do from Mexico in 2 years.... Unless you count meth and pot, then it's maybe 1 year

Quote: Originally Posted by B00MerView Post

Canadians always ask me, what do Americans really think of Canada... Truth is we don't ..

No offence here, but I suspect that sentiment also applies to Italy, England, Australia, Japan, Germany, etc
 
petros
#19
Once you've actually been to Disneyland, you walk away thinking to yourself WTF was that all about?
 
mentalfloss
No Party Affiliation
#20
Canadian dollar headed to 85 cents US, TD says
 
taxslave
No Party Affiliation
#21
Quote: Originally Posted by mentalflossView Post

Canadian dollar headed to 85 cents US, TD says

Meaning Ontario can quit complaining about Dutch Disease. What will they blame their poor performance on now?
 
petros
#22
Time to buy more Dollarama stocks. Their prices are going to go up and so will profits. WOOHOO
 

Similar Threads

51
Who has better exports Canada or China?
by americancitizen | Mar 10th, 2011
28
Canada exports death in asbestos
by mt_pockets1000 | Mar 8th, 2011
no new posts