Econowatch: February 2012

A monthly scorecard on the state of the economy in North America and beyond

by Colin Campbell

Econowatch

Don Denton/CP

Over the last month the police in Italy have been setting up roadblocks in the hunt for thousands of criminals. Specifically, tax cheats. They’re easy to spot, it turns out. They tend to be the ones driving luxury cars, like Ferraris and Range Rovers. After performing roadside checks on nearly 3,000 drivers, officials have recovered $90 million, according to one local report. In the fight to balance budgets, it seems, there is still lots of low-hanging fruit.

In North America, the battle for economic stability is no less critical. The economy appears to be on the uptick in the U.S., where employment and job openings are up sharply. But as Federal Reserve chairman Ben Bernanke said last week, real stability will only come when fiscal policy is “placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time.” The Congressional Budget Office reports, however, that the U.S. deficit is not expected to shrink in the next decade, but will instead hit levels not seen since just after the Second World War.

In Canada, there is no longer the luxury of a rosy jobs picture and growth is slowing. But there is a recognition that out-of-control budgets are a major threat. Ontario Premier Dalton McGuinty warned this week of labour troubles ahead as he tries to tackle Canada’s ugliest provincial deficit. The federal government has also signalled that it’s serious about getting its books in order, however unpleasant it might seem in the short run. There are hints of an upcoming austerity budget with cuts worth as much as $8 billion a year.

Officials in most of the Western world are at least on the right track to a healthier long-term economy. Or in the case of Italy, the right road.

The good news

Canada’s trade surplus hit $2.7 billion in December, the highest level since the Great Recession. Exports were up 4.5 per cent. The recovery continues.

The median income in the U.S. is on the rise, reaching $51,400 at the end of 2011, up from $49,400 in August. Reports of the death of the middle class are premature.

New home prices in Canada were up in December, but only modestly at 0.1 per cent, compared to 0.3 per cent in November. When will the good times end?

Canadian Tire’s sales jumped 21 per cent in its latest quarter to $3.1 billion. The rise of the dad consumer.

The economies of the developed world, led by the U.S. and Japan, are on the rise, according to the most recent OECD economic survey.

U.S. jobless claims fell to 358,000—12,000 less than expected. Meanwhile, job openings were at their highest level since September 2008. Is this the turnaround America’s been waiting for?

The bad news

A Royal Bank survey found that just 32 per cent of Canadians feel positive about the economic outlook for the next year, down from 43 per cent a year ago, and 56 per cent two years ago.

Credit card debt levels rose by $19.3 billion in December to $2.5 trillion in the U.S. Those rosy holiday shopping figures come at a price.

Gas prices in the U.S. are at their highest level since last September and are expected to soar this summer in North America. Take that road trip while you still can.

The Texas-based energy giant Halliburton says it will stop giving employees BlackBerry smartphones, and use Apple iPhones instead. Another blow for RIM and its vaunted security claims.

PepsiCo plans to cut three per cent of its workforce, or 8,700 jobs, including 100 in Canada, as it struggles with rising food costs. The taste of a laid-off generation.

Inspections were ordered for Airbus’s A380s due to small cracks in wing components. Minor defects were also found in Boeing’s new 787. Big planes, bigger headaches.

By the numbers

$15 Share price for Las Vegas-based casino operator Caesars Entertainment after its IPO last week. Shares opened the day at just $9.

2020 The year Finance Minister Jim Flaherty said Ottawa’s planned changes to Old Age Security will likely kick in.

4,000 Jobs cut at Nokia, the world’s biggest but struggling cellphone maker.

$125,000 Reported cap on cash bonuses at Morgan Stanley this year.

$1.5 billion The lawsuit facing Apple over the use of the iPad name in China, where it was registered by another firm.

$90 billion Value of the proposed merger between mining giant Xstrata and Glencore.

‘No measure of justice is enough to make it right for a family who’s had their piece of the American dream wrongly taken from them. But this settlement is a start.’—President Barack Obama on the $26-billion housing settlement reached between federal and state governments and five major mortgage servicers. The majority of the money will go to reduce mortgage debts and refinance loans at lower rates, while $1.5 billion will go to the 750,000 Americans who lost their homes in foreclosures between 2008 and 2011.

Signs of the Times: Towering investments

The U.S. rush to cash in on Canada’s hot retail sector continues as American consumers keep their wallets shut tight. Wal-Mart has decided to spend $750 million to expand and remodel some of its 333 Canadian stores, while also building new ones. The move comes as rival Target prepares to enter Canada next year.

The public will have a chance to own a piece of New York’s 102-storey Empire State Building. Owners of the iconic tower, opened in 1931, are planning an initial public offering that’s expected to raise as much as $1 billion.

In the age of email and Twitter, Canada Post has removed more than 1,000 red letter boxes from street corners across the country. With mail volume down nearly 20 per cent in the past five years, postal workers were finding some of the street boxes completely empty.

It’s not a pretty picture at Eastman Kodak, now in bankruptcy protection. After dumping its film business, the company now plans to stop selling digital cameras (which it invented), pocket video cameras and digital picture frames to save money.




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Econowatch: February 2012

  1. If the united states of america does not get its fiscal house in order very very soon it will be finished as a world power and it will be relegated to third world nation status .Many of the fifty states finances are in even worse financial shape than the federal governments fiscal situation..

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