November 9, 2009
October 6, 2009
The results of a new poll released this week by the Canadian Payroll Association revealed some surprising statistics and facts about the average Canadian household. A one week delay in receiving a paycheque would render nearly 60 percent of Canadians unable to pay their regular bills. Moreover, the same majority group has little or no ability to set aside money for retirement funds.
These surprising results have shed new light on the financial condition of many Canadian homes during these rough economic times. Despite common financial advice that people should have an emergency cash reserve for three months of expenses, the majority of households surveyed admitted that they are happy if they can make it to the next paycheque, let alone save for retirement or emergencies.
The younger workforce is in greater distress. 45 percent of workers aged 18 to 34 are feeling the crunch and feel that they are having trouble making ends meet. A delay in being paid would spell disaster. 72 percent of single parents responded in a similar fashion.
Regardless of age, the survey revealed that half of all Canadian workers are unable to save more than five percent of their net income for retirement. Financial planners recommend that ten percent is an advisable amount. However, the recent fluctuations in the stock markets have made saving for retirement far more challenging. Nearly one third of Canadians are trying to save more money but they can’t. 42 percent admit that they aren’t trying at all to save more.
Despite the variety and wide array of financial products being offered to Canadians by financial institutions nationwide, many Canadians seem pleased if they can pay their bills after payday.
October 2, 2009
A person needs oxygen to survive. A business needs credit. Even in the most difficult of times, the flow of oxygen remains uninterrupted. Not so, however, with credit.
Many a business has seen its line of credit be reduced or cancelled over the course of the last year. Financial institutions, seeking to reduce risks on unsecured or unstable credit lines, have made obtaining funds ever more difficult. This move has dealt a crippling or death blow to many small businesses in Canada.
Under Canada’s recent Economic Action Plan, designed to stimulate and strengthen the Canadian economy, the Federal government is sponsoring a program that will work with financial institutions in the private sector. The Business Credit Availability Program (BCAP) will provide loans and other forms of credit support to creditworthy businesses. At least $5 billion has been allocated in loans and other forms of credit support for business enterprises with viable business models but, for various reasons, have limited or no accessibility to financing.
The BCAP is a joint venture between two financial Crown corporations and private Canadian financial institutions. The steering committee is comprised of senior representatives of all sponsoring parties whose experience and commitment have establishes a program with initial promising results. Similar to credit issues, discussions are also being conducted to examine ways of providing accounts receivable insurance.
Business owners and entrepreneurs seeking assistance through this program to support their established operations and preserve jobs should contact their financial institutions to discuss their needs and eligibility. Your financial representative can advise you which program is best suited for your particular situation.
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October 1, 2009
Statistics are like a cat. Rub its fur one way and it purrs; rub the other way and the results are somewhat less positive.
So it is with employment figures released by Statistics Canada for the month of August 2009. Stephen Harper’s Conservative government is giving a positive spin to the 27,100 net jobs gain for the month. The announcement triggered an eight-tenth of a cent rise in the Canadian dollar, although higher crude oil prices may also have influenced the dollar’s rise. Some leading economists have announced that this is an indication of the end of the recession. All this sounds rather encouraging.
Critics, though, are quick to note that many Canadians are not feeling quite as positive. Most of the new jobs were part-time only. The number of unemployed rose in August by 21,900, bringing the total number of unemployed Canadians to 486,000 since the global financial crunch of October 2008. The decline in the manufacturing sector has continued, although construction has begun to stabilize. Most of the new part-time jobs were in the lower paying service sector. Higher paying, high productivity work fell by 17,300 positions. Full-time work continues to be in a decline.
Certainly, there is cause to be optimistic. As one economist stated, half a job is better than no job. Economic indicators seem to point in a positive direction. But, one month of net growth may be far too early to establish a positive trend. Canada may well be on its way to economic recovery. Nearly half a million unemployed Canadians certainly hope so.
September 14, 2009
Government officials and economic analysts are in common agreement that Canada is headed out of the recession. While there are disagreements as to the exact timeframe, there is a fact that is common to all parties – the price tag.
For a country that proudly presented a balanced budget for twelve consecutive years, Canada had to revise its budget projections for the thirteenth year and for several years to come. Canadian Finance Minister Jim Flaherty recently announced his department’s projection of a $50.2 billion deficit for the current fiscal year. He was quick to add, though, that this figure is “consistent” with meeting the deficit target. The government projects that it will present deficit budgets for the next four years, adding nearly $100 billion to the national debt. The current deficit is due primarily to several factors: falling tax revenues, both personal and corporate; a massive 47% increase in unemployment insurance premium payouts; and huge bailouts to the auto industry as well as other business subsidies.
While Mr. Flaherty is holding to his optimistic prediction of returning to a balanced budget in 2013-14, Prime Minister Stephen Harper, and several leading economists are somewhat more realistic in their forecasts. However, both the Prime Minister and the Finance Minister are in agreement that tax increases and major spending cuts are not being considered in order to expedite a balanced budget.
Some analysts have suggested that drastic changes to the budget are not advisable. Rather, once the stimulus programs spending has been depleted, the government should adopt a program to control spending growth. This will enable the government to eliminate the deficit over a period of several years.
September 13, 2009
Let’s be honest; most of us have done it. Embarrassing as it might be, most people have removed an item from their shopping cart while waiting in line at the checkout. It used to be merely changing your mind, or realizing you took the wrong item off the shelf. Today, it is a totally different phenomenon. In today’s rocky recession climate, people are tightening their belts. Some are doing it out of necessity while others are adopting a more cautious attitude. Whatever the reason, more people these days are careful of what they purchase. They come to the store with a list of needs, not wants, accompanied by a specific budget. If the tally should move above their available funds, something comes out of the cart.
As yet, there are no hard statistics for this latest trend. However, more and more stores are reporting a growing number of un-purchased items at the cash register, either removed by shoppers as they wait in line or removed by the cashier at the shopper’s request upon seeing their balance.
Shoppers have also begun arranging their purchases. Health care and other basic necessities are the first to go through. If there is enough money in the wallet, the frivolous items go through last.
It’s not just a question of cash. Credit card purchases have also been affected. Credit card companies used to allow customers to exceed their credit limits by up to 10 percent. No longer! Purchases that exceed the credit limit even slightly are being denied. Consumers wishing to avoid that embarrassment simply remove some items to keep their balance lower.
Internet shopping has become victim to the same trend. Research estimates indicate that as much as 59 percent of online purchases are being dumped before checkout. Much of this is attributed to the costs that are tacked on as one proceeds through various steps, including taxes, handling fees, and shipping charges. Some internet companies are reducing the number of steps in a purchase, as well as posting the costs up front, in order to retain customers.
Hopefully, the days of changing one’s mind will soon return.
September 1, 2009
Speculation has been growing in some economic circles that a “double-dip” recession – a second wave – is a distinct possibility. Some investors and economists fear that the government stimulus programs in various countries have managed to stabilize economies but have failed to jump start any long term growth.
Countries like Japan, Germany, and France have recently posted positive growth figures for the second quarter. However, world stock markets have remained fairly volatile.
The growing fear is that growth generated by the trillion of government stimulus dollars is only temporary and will cease as soon as the governments cease funding the various programs, most probably within the coming year. Thus, the term “double-dip” has come into use.
In order to truly declare an end to the recession, countries should be experiencing substantial sustained growth in consecutive quarters. This has failed to materialize yet in any significant fashion. Certainly, there is reason to be optimistic but consumers have yet to display a return to a strong buying mentality. Many are still in a savings mode, particularly in the United States. Even though interest rates are at an historic low in the U.S., many consumers fear taking on any more debt. Canadians are faring better than their neighbours in the U.S., but they, too, are still leery about the economy, as unemployment is still rampant in the nation, especially in the manufacturing sectors.
Economists hope that governments will not make the mistake of ending the stimulus packages too early. A good beginning can lead to a stable financial future if the elements of recovery are managed properly and timely.
August 25, 2009
While the global recession is still a major economic factor in many countries, the Canadian economy is rebounding very well. A stable banking sector combined with lower employment, have contributed to Canada’s recent rise in global economic standings.
According to annual rankings by the Conference Board of Canada, the Canadian economy ranked 11th of 17 developed countries in 2008. However, based on current forecasts by the Organization for Economic Cooperation and Development (OECD), the country’s ranking is expected to catapult to 5th place in 2010. The OECD’s forecast for growth, unemployment, and various other economic factors revealed that Canada is expected to rebound from the global recession at a rate that far exceeds many other developed countries.
Both the United States and Belgium are also expected to rise in global economic rankings. However, Switzerland, Britain, and the Netherlands are expected to fall. Norway was ranked in first place in 2008 and is predicted to remain in first place through 2010. This high ranking is attributed to the country’s large petroleum sector as well as its resilient economy. At the bottom end of the scale is Ireland whose 17th place economic ranking is expected to continue into 2010.
Although Bank of Canada Governor Mark Carney recently announced that the recession is over, many unemployed Canadians would disagree. On the other hand, consumer confidence has displayed an upward trend since the beginning of 2009. As well, investment portfolios have begun to recover, housing prices have risen, and the key lending rate in Canada is at an historic low.
August 20, 2009
The global recession has literally divided Canada into two halves – stable economic sectors and slumping sectors.
Canada’s service industry has been extremely resilient and has weathered the economic storm surprisingly well. Service industries including finance, insurance, health care, real estate and construction dropped approximately 1 per cent last winter but have since rebounded rather well. Employment in the services sector has been fairly stable as well. Although construction output and jobs had fallen at a somewhat greater rate than other services, these, too, have stabilized and are showing improvement. Sales of existing homes are showing record levels. The service sector’s strength is attributed to its self reliance, rather than dependence on external global factors.
On the other hand, Canadian manufacturing is in desperate shape. Its dependence on foreign, rather than domestic, concerns may not portend well for Canadian manufacturers in the hear future. Key production concerns in Canada include base metal mining, aluminum production, and auto and aerospace manufacturing. As foreign buyers continue to reject Canadian made products including cars, planes, metals and other industrial products, shipments and sales have continued to slide to the lowest levels in the last decade. The lion’s share of this decline has been felt in Canada’s industrial heartland – Ontario and Quebec. Indeed, Canada’s manufacturing numbers were far worse than figures released for U.S. industrial production. About 11 per cent of Canada’s industrial workers – some 220,000 employees have lost their jobs due to the economic slump.
Despite early signs of global recovery, the strength of the Canadian dollar has made Canadian made products more expensive relative to foreign-produced products. Thus, foreign purchases are being directed to lower priced products.
The current trend in the manufacturing sector is not expected to show signs of improvement until well into 2010.
July 27, 2009
While it is not predicting the end of the economic recession – the worst since the Second World War, the Canadian government is presenting a bright outlook for the immediate future. The government now thinks that the current year’s downturn will be less severe than earlier predictions and growth for 2010 will be stronger. As expected, the Bank of Canada is keeping its key policy rate at 0.25-per-cent – an historic low and has pledged to keep that rate until the spring of 2010.
In a move that has surprised some economists, the central bank has reduced the amount of money available to chartered banks in order to support borrowing and lending. Bank Governor Mark Carney has noted that some banks were not drawing down as much money as the Bank of Canada was making available, Mr. Carney cautiously sees this trend as a strong indicator of improving financial markets.
“Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand,” according to a recent statement released by the central bank.
Mr. Carney has improved his financial forecast for the Canadian economy. An earlier April forecast of three percent annual contraction has been reduced to 2.3 percent. Similarly, he has increased his 2010 growth projection by half-a-point to 3.5 percent.
While agreeing that the future is looking brighter, leading analysts at several of the nation’s leading banks view Mr. Carney’s outlook as overly optimistic. Most forecasts in the private sector are limiting growth in 2010 to 2.0 percent.
In any event, Mr. Carney has not changed his opinion that complete economic recovery will not be realized before mid-2011.