“At least it’s heading in the right direction.” That was all the enthusiasm Ian Shepherdson of High Frequency Economics could muster when asked about the trajectory for the U.S. economy in the third quarter, when GDP rose at a rate of 2.5 per cent. If his observation was light on technical analysis, it nonetheless reflected the dim view many share about America’s prospects. The world has become resigned to the idea that the American economy is a stagnant, unstable mess.
It’s not hard to see why. The crisis in Europe threatens to push America, which is grappling with its own fiscal woes, back into recession. Consumer confidence has plunged off a cliff into a sea of despair. Meanwhile, unemployment remains shockingly high and house prices are stuck in the basement.
But as bad as all that is, glimmers of hope have once again begun to emerge. Against all odds, the leaders of France and Germany convinced European bankers to accept a 50 per cent loss on their loans to Greece as part of a massive restructuring deal to stave of a Greek default. The Obama administration also overhauled a program that allows American homeowners who are underwater on their mortgages to refinance at lower rates, a move which some analysts said could put a floor under the housing market. And when the latest U.S. GDP figures, modest as they were, beat expectations and showed that consumers were still willing to open their wallets, investors sent markets soaring.
We’ve by no means seen the end of stock market volatility. And many more problems remain in both Europe and America. But at the same time, pessimism about America’s future appears to have been overdone. The solutions will be difficult, but they’re not impossible.
By The Numbers
1 % The interest rate the Bank of Canada will maintain in light of a weaker than expected forecast, said bank governor Mark Carney last week.
$80,000 The price of a Porsche Cayenne in Europe. There are more of the SUVs registered in Greece than there are people declaring income of $70,000 or more.
800,000 Subscribers who left Netflix in its latest quarter after it tried to separate its online and DVD rental services.
$150 million The amount of money the city of Toronto could raise by selling 10 per cent of Toronto Hydro to public investors.
$200 billion Amount Moammar Gadhafi may have secretly controlled through investments and Libya’s national bank.
The Good News
Canadian home prices rose 0.9 per cent in August from the previous month, hitting an all-time high in six of 11 markets surveyed. Enjoy it while it lasts.
Canadian retail sales were up 0.5 per cent in August, with auto sales driving the way with a 0.8 per cent boost.
Heavy machinery maker Caterpillar recorded record revenues in its latest quarter, with sales up 41 per cent. The recovery is still building.
Home prices in the U.S. rose in 10 out of 20 cities measured by Standard & Poor’s/Case-Shiller index in August. The foundation of a housing rebound?
Canadian workers can expect salaries to rise an average of 3.1 per cent in 2012, according to the Conference Board of Canada. No small change.
U.S. GDP grew at a rate of 2.5 per cent over the summer, picking up speed from earlier in the year, said the Commerce Department. Not great, but now’s not the time to be picky.
The Bad News
Over half of Canadians don’t have any money set aside for a rainy day, according to a survey by RBC. The storm clouds are gathering.
Consumer confidence in Canada slipped for the fifth time in six months, while in America confidence plunged even further. Everyone is losing faith.
Cash-strapped Washington said it would start charging Canadians $5.50 to enter the U.S. by sea and air. Somebody’s got to pay for all those full-body scanners.
The Canadian government cut its forecast for economic growth next year from 2.8 to 2.1 per cent. The Bank of Canada thinks growth will be even slower. Hopefully they’re both wrong.
Just nine per cent of Americans plan to spend more on holiday shopping this season than last year. The main item they plan to buy: clothing. Sorry kids.
RIM’s BBx operating system was meant to herald its turnaround. Oops. A New Mexico company already uses the name BBx and is now suing RIM. Hey, RIM, ever heard of Google?