March was undeniably a hectic month, with diverging trends around the globe: as the ECB finally launched their quantitative easing program and the U.S. continued to be the world’s economic bright spot, the euro and the dollar inched suddenly close to parity. So far, the QE program seems to have given the eurozone a bit of an upward push, even as volatility in oil prices – tossed around by international events from Yemen to Iran – wreacked havoc in economies from Nigeria to Venezuela to yes, Canada. It was also a month of watching Janet Yellen and the Fed for signs of an interest rate hike, as markets rode out every word change, and a steady rate (and a defence) from Stephen Poloz and the Bank of Canada.
Elsewhere in the world, China’s growth continued to slow down, as high-drama negotiations (and desperate cash collecting) from Greece rumbled on, while Ukraine and Venezuela slipped further into economic crisis and Brazil’s streets erupted over austerity measures and a corruption scandal at the state oil company. Amidst big questions about where the global economy will go next, markets nonetheless saw plenty of highs: as the Wall Street Journal point out, 17 indexes hit all-time records, including the Dow Jones and the S&P 500, and 29 more hit records for the year.
An undramatic month, March was not.
This morning, the key numbers are in manufacturing. Canada will see RBC’s manufacturing PMI, there will be Markit numbers for the U.S. (along with construction spending and total vehicle sales). Manufacturing data is also out for most of Europe and Asia, most of which has already been released, including China, Japan and the eurozone countries, and while we’re seeing a slowdown in the two big Asian countries, the eurozone is actually looking a bit perky.
The first look at 2015 real GDP. Were the results “atrocious,” as Stephen Poloz’s latest interview suggested? No – but we do have two more months of data to go in this quarter. At a 0.1 per cent contraction, the results for January’s real GDP were actually better than the 0.2 per cent decline most analysts expected, but that’s still a quick drop from the 0.3 per cent gain in December. Services output was down 0.3 per cent that month, while goods output was up by 0.2 per cent – pushed by utilities, forestry, and even oil and gas extraction. The Bank of Canada has warned they expect the impact of the oil rout (as well as a harsh winter, which may have dampened spending) to be “front-loaded,” coming early and harsh, with exports picking up the slack for the latter half of the year. All of this leads to a thorny question, which Maclean’s columnist Jason Kirby tackled yesterday: are we going to face a recession? Analysts are saying Canada will be just fine, but Kirby’s not so sure: if oil continues to drop (and that’s not an unlikely possibility, see: U.S. surplus continually hitting records), and exports don’t pick up, we’re in for a rough ride: “If not a recession, Canada is certainly headed for a near-cession,” he writes.
The fate of the world’s factories. Many of the major economies release their manufacturing data today, and as always, the most closely watched sign of all is likely China. There, the widely-used HSBC Markit survey put PMI at 49.6 in March, slightly above expectations. Nonetheless, the industry contracted slightly last month, down from 50.7 in February. The official numbers, which include more state-owned companies, were more optimistic, and in fact went the other direction: tipping just above growth to 50.1, from 49.9 in February. What do we get from these conflicting directions? Regardless of whether factories are growing slightly or contracting slightly, it confirms that the outlook for the world’s manufacturing powerhouse remains sluggish. Japan is just clinging to growth with a reading of 50.3, down from 51.6 the previous month. In the eurozone, earlier forecasts for PMI were revised up to 52.2 for March, with German manufacturing staying steady at 52.8 – and Italy offering a surprisingly good reading, at 53.3, and Spain coming in even higher at 54.3. In Russia, the industry is feeling the bite from sanctions after the fourth-consecutive month of contraction, with March’s reading at 48.1.
Who pays for New Brunswick’s budget? The province is facing a budget deficit of more than $470 million, the government says, and total debt will be about $12.6 billion: so cuts are coming down the pipe. The headliners are cuts to schools and teachers – though no specific numbers for school closures were laid out – as well as tax increases for those who make more, and cuts to seniors benefits. CBC did a rundown of where the cuts or increases will hit New Brunswickers, including progressive pay rates for seniors homes, ending the rebate for students who study and then stay in the province, a hike on gas prices, and two new upper tax limits.
Insert April Fool’s joke here. No, I’m not going to try and fool you with some hilarious joke about Ben Bernanke’s blog, or Snapchat suddenly getting a valuation that makes it worth more than the entire GDP of Mauritius. Let’s be honest, in a world where Internet hoaxes and “viral” marketing are just a click away – every single day – virtually all April 1 advertising campaigns flop. At the Globe, Susan Krashinsky runs through some of the all-stars of Aprils past, from a perfume that smells like Cheetohs, to spray-on yoga pants (thanks, Lululemon), while the Financial Times smirks at the morning’s PR pitches. These included everything from a zero-gravity ride on the London Eye (now renamed the Coca-Cola London Eye, but that’s not a joke), to a rehab clinic for seagulls addicted to potato chips. There were even some marketing tips to be had: these hoaxes only work if they’re funny, as one Toronto ad exec reminded the Globe: “Brands forget that they’re held to a much higher standard than your crazy uncle at the dinner table who’s trying to sound hip.”
Need to know:
TSX: 14,902.44 (-5.95), Tuesday
Loonie: 78.95 (+0.17), Tuesday
Oil (WTI): $47.28, Wednesday (5 a.m.)