Canada's economy stalls, signalling hiring spree might not be enough to ward off recession - Financial Post

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Kevin Carmichael: A rare time when the Bank of Canada welcomes news that the economy has hit a rough patch

GDP numbers showing flat growth in the fourth quarter belies some of the strongest hiring on record. Photo by Getty Images

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Canada might be headed for a recession after all.

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Statistics Canada reported Feb. 28 that economic growth stalled in the fourth quarter, ending more than a year of strong post-pandemic increases in gross domestic product.

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“Canada’s economy ended 2022 with a thud,” James Orlando, an economist at Toronto-Dominion Bank, said in a note.

The agency’s latest tally of economic output belies some of the strongest hiring on record, highlighted by an unemployment rate of five per cent in January and hourly wage growth in excess of four per cent. Those numbers caused some on Bay Street to second-guess predications that high inflation and a spike in interest rates would inevitably cause a downturn — and perhaps even a serious one.

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But there is more to GDP than consumption. Household spending increased 0.5 per cent from the third quarter, so all those new jobs were indeed creating demand, but not enough demand to offset reduced business spending on inventories, machinery and equipment and housing. Statistics Canada put the annual rate of growth over the final three months of 2022 at 0.0 per cent, compared with a rate of 2.3 per cent in the third quarter.

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It will be a rare time that the Bank of Canada welcomes news that the economy has entered a rough patch. Governor Tiff Macklem’s unprecedented series of interest rate increases last year were calibrated to quickly take the heat out of inflation without causing a sharp spike in unemployment. The central bank predicted higher interest rates would cause growth to come to a standstill for a period of time — a reasonable tradeoff, Macklem said, if that’s what’s required to get inflation back to two per cent.

The Bank of Canada predicted in January that GDP would grow at an annual rate of 0.5 per cent in the fourth quarter, so the economy appears to be unfolding as policymakers thought it would at the start of the year. That guarantees that Macklem will make good on his conditional promise to pause rate increases next week when he makes his next decision on where to set interest rates.

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“Today’s mostly soft report won’t be a disappointment to policymakers, as the Bank of Canada is openly attempting to take some steam out of the economy,” Douglas Porter, chief economist at Bank of Montreal, said in a note to his clients. “And zero-point-zero growth is about as little steam as one could ask for, without pushing things into an outright downturn.”

GDP — the combination of consumption, investment, government spending and the net contribution from international trade — grew 3.4 per cent from 2021, pushing the size of Canada’s economy to $2.2 trillion.

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A separate Statistics Canada report that measures monthly GDP by recording the value of goods and services produced by industry showed output dropped 0.1 per cent in December, while early information indicates that GDP increased 0.3 per cent in January, suggesting the economy was resisting toppling into a recession, although it’s too soon to make the conclusion. Higher debt-servicing costs represent a headwind for consumption, as will a slower pace of wage increases.

“Weaker demand is yet to come,” Claire Fan, an economist at Royal Bank, said in a note.

• Email: kcarmichael@postmedia.com | Twitter: carmichaelkevin

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Canada's economy stalls, signalling hiring spree might not be enough to ward off recession - Financial Post
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A geoeconomic tsunami – Economy and ecology - IPS Journal

When tectonic plates shift, the earth shakes. Tsunamis race around the globe in the form of shock waves. The global economy has experienced three such earthquakes in recent years. The Covid-19 pandemic has made us aware of the vulnerability of a globally integrated economy. When important components are stuck in quarantine in China, production lines in Germany come to a halt. Thus, in the organisation of global supply chains – which for decades have been trimmed down for efficiency (‘just in time’) – resilience (‘just in case’) will play a more important role in the future.

After the end of the unipolar moment, larger and smaller powers are vying for the best positions in the new world order. In the hegemonic conflict between China and the United States, the government under Joe Biden has verbally disarmed, but its export controls in the high-tech sector have all the more bite. This politicises the framework conditions for investment decisions. Market access, infrastructure projects, trade agreements, energy supplies and technology transfers are more and more being evaluated from a geopolitical point of view. Companies are increasingly faced with the decision of choosing one IT infrastructure, one market and one currency system over the other. The major economies may not decouple from each other across the board, but diversification (‘not all eggs in one basket’) is gaining momentum, especially in the high-tech sector. As this develops, we cannot rule out the possibility that economic blocs will form.

The experience with the ‘human uncertainty factor’ in the pandemic is also resulting in the acceleration of digital automation. Robots and algorithms make it easier to protect against geopolitical risks. In order to bring these vulnerabilities under control, the old industrialised countries are reorganising their supply chains. It remains to be seen whether this is purely for economic or logistical reasons (re-shoring or near-shoring), or whether geopolitical motives also play a role (friend-shoring).

Bloc formations

China must respond to these challenges. The fate of the People’s Republic will depend on whether it succeeds in charging to the head of the pack in worldwide technology, even without foreign technology and know-how. Anyone who believes that Beijing has no countermeasures up its sleeve will soon be proven wrong. In order to compensate for the closure of the developed export markets, the Silk Road Initiative has been opening up new sales markets and raw material suppliers for years. At the last party congress, the Chinese Communist Party officially approved a reversal of its development strategy. From now on, the gigantic home market will be the engine of the ‘dual circular economy’. Export earnings are still desired, but strategically they are being relegated to a supportive role.

One impetus behind China’s massive build-up of gold reserves serves is the goal of having its own (digital) currency take the place of the US dollar as the world’s reserve currency. Because China benefits more than anyone else from open world markets, it is continuing to rely on a globally networked world economy for the time being. Alternatively, Beijing could also be tempted to create its own economic bloc. The foundations for this have already been put into place, with the Regional Comprehensive Economic Partnership (RCEP), the BRICS Development Bank (NDB), the Asian Infrastructure Investment Bank (AIIB), the Silk Road Initiative (BRI) and bilateral cooperation in Africa, Latin America and the Middle East. The difficulties that Western companies face in the Chinese market should provide just a sample of what is looming if China makes market entry into such a bloc contingent on good political will.

But it is not just China. Generally, for all of Asia as the new centre of the world economy, these geoeconomic disruptions are tantamount to a tsunami. And the disruptions could hit developing countries particularly hard. Whether they are being cut from global supply chains for the sake of resilience or due to geopolitical factors, this brings equally devastating results. Of course, some economies are hoping to benefit from the diversification strategies of developed countries (i.e. the ‘China plus one’ strategy).

As with Europe, most Asian states depend on China’s dynamism for their economic development – and on the guarantees of the US for their security.

But digital automation neutralises what is often their only comparative advantage – cheap labour costs. Why should a European medium-sized company have to deal with corruption and power cuts, quality problems and sea routes lasting weeks, when the robots at home produce better and cheaper? Algorithms and artificial intelligence are also likely to replace millions of service providers in outsourced back offices and call centres. How are developing countries supposed to feed their (sometimes explosively) growing populations if, in the future, simple jobs are to be performed by machines in industrialised countries? And what do these geoeconomic disruptions mean for the social and political stability of these countries?

As with Europe, most Asian states depend on China’s dynamism for their economic development – and on the guarantees of the US for their security. Therefore, to varying degrees, they resist pressure to choose sides. Whether it will be possible to escape the pull of geoeconomic bipolarisation over the long term, however, is still an open question. If the splitting of IT infrastructures continues, it could be too costly to play in both technological worlds. American regulations prevent products with certain Chinese components from entering the market; but those who want to play on the Chinese market will not be able to avoid a steadily increasing share of Chinese components.

Reducing economic vulnerabilities through diversification

This type of global economy would also pose an existential challenge to export nations such as Germany. Even the short-term cutting off of Russian energy is a Herculean task. Decoupling from China at the same time seems difficult to imagine. But burying one’s head in the sand will not be enough. Neither nations nor businesses will be able to escape the pressure from Washington and Beijing. In the future, important economic, technological, and infrastructural decisions will increasingly be subject to geopolitical considerations. Therefore, reducing one-sided vulnerabilities through diversification is the right thing to do.

A geoeconomic tsunami will roll around the globe, crushing old structures in its path.

On the other hand, some of the lessons drawn from the over-reliance on Russian energy before the war seem short-sighted. For decades, the German economy has integrated itself more deeply into the world economy than many other countries, with the goal of avoiding violent conflicts through interdependence. It cannot break out of these interdependencies from one day to the next. Reducing economic vulnerabilities through diversification is therefore the right move, while decoupling for ideological reasons is the wrong one. Germany should therefore beware of sacrificing its economic future to an overly ambitious value-based foreign policy. This is because losses of prosperity translate into fears of the future and social decline at home – a fertile breeding ground for right-wing populists and conspiracy theorists.

The geopolitical race, digital automation and the reorganisation of supply chains according to resilience criteria are mutually reinforcing processes. It is not only companies that have to rethink their business models – entire national economies need to adapt their development models in order to be able to survive in a rapidly changing global economy. The particular difficulty lies in having to make investment decisions today without being able to foresee exactly what the world of tomorrow will look like. Looking into the crystal ball, some think they can see an age of de-globalisation. And in fact, in the wake of the 2008 financial crisis, the peak of globalisation, as measured by the volume of world trade and capital exports has already passed. However, de-globalisation is not synonymous with a relapse into autarkic national economies. A stronger regionalisation of the more networked global economy is more likely. In view of the political, social and cultural upheavals of turbo-globalisation, this need not be the worst of possible outcomes.

In order to prevent the regionalisation of the world economy from turning into the formation of competing blocs with high prosperity losses for everyone, there is a need for new partnerships on an equal footing.

One thing is certain: A geoeconomic tsunami will roll around the globe, crushing old structures in its path. The hope is that out of the ‘creative destruction’ that Joseph Schumpeter spoke of, there will emerge a more resilient, sustainable and diversified global economy. However, without political shaping of the new world economic order, the opposite could also occur. Politically, this means adapting the rule-based world order so that it remains a stable framework for an open world economy because even the organisation of a regionalised world economy needs global rules of the game that everyone adheres to. Therefore, with few exceptions, nearly all nations have a great interest in the functioning of rules-based multilateralism. However, in the Global South, there is already a great deal of distrust towards the existing world order. In reality, according to some, this amounts to the creation of the old and new colonial powers, whose supposedly universal norms do not apply to everyone but are instead violated at will by the permanent members of the UN Security Council.

In order to break through current blockages, such as those of the World Trade Organization (WTO), the emerging powers must be granted representation and a voice in the multilateral institutions that would be commensurate with their newfound importance. Europe will have to accept a relative loss of influence because, as a rule-based supranational entity, its survival and prosperity depend on an open, rule-based world (economic) order.

Instead of morally elevating itself above others, Europe must concentrate all its energies on maintaining the conditions for the success of its economic and social model. In order to prevent the regionalisation of the world economy from turning into the formation of competing blocs with high prosperity losses for everyone, there is a need for new partnerships on an equal footing beyond the currently popular comparisons of democracies and autocracies. In order for new trust to develop, the global challenges (climate change, pandemics, hunger, migration) that particularly affect the Global South must finally be tackled with determination.

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A geoeconomic tsunami – Economy and ecology - IPS Journal
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JPMorgan Sees Argentina Economy Facing Prospect of Hard Landing - BNN Bloomberg

(Bloomberg) -- Argentina’s economy is facing the prospect of a “hard landing” scenario this year as a crop drought deepens expectations of a larger downturn, according to a note published Monday by analysts at JPMorgan Chase & Co. 

South America’s second-largest economy is forecast to contract 1.7% this year versus the bank’s previous forecast of a 0.5% decline. That’s one of the most bearish outlooks for Argentina. Economists surveyed by the central bank in January saw 0.5% growth this year while the government penciled 2% growth into its annual budget. 

READ MORE: Argentina Soy Crop to Be Lowest Since 2009 as Drought Takes Toll

JPMorgan economists Diego Pereira and Lucila Barbeito see “stagflation entering a new phase with inflation and growth trends diverging: inflation higher and real growth trending lower,” according to the note. 

On top of annual inflation nearing 100%, a historic crop drought is worsening the outlook for key commodity exports that boost activity, tax revenue and central bank reserves. Pereira and Barbeito estimate the top three crop exports — soy, corn and wheat — may fall this year to $36.6 billion of shipments down from $51.6 billion in 2022. 

High inflation and worsening harvest expectations are fueling what the economists call a “recessionary environment.” 

©2023 Bloomberg L.P.

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U.S. stocks trim gains as data point to robust economy - BNN Bloomberg

U.S. stocks trimmed earlier gains after a slew of data pointed to a resilient economy, adding to evidence that the Federal Reserve will remain restrictive for longer than previously expected. 

The S&P 500 and the Nasdaq 100 still remained firmly in the green on Monday after a dismal week. But those gains were slightly dented after Fed Governor Philip Jefferson firmly stood by the central bank’s 2 per cent inflation goal. The U.S. 10-year Treasury yield hovered around 3.93 per cent. A dollar index dropped. 

The fresh U.S. economic data that investors are parsing on Monday point to an economy that remains robust despite the Fed’s persistent rate hikes. U.S. pending home sales rose last month by the most since June 2020, which could keep pressure on the Fed to stay hawkish.  

Meanwhile, orders for durable goods fell, in their steepest decline since April 2020, underscoring a pullback in bookings for commercial aircraft. But excluding transportation equipment, durable goods orders rose more than expected. Orders placed with U.S. factories for business equipment also rose in January as companies continued to make longer-term capital investments despite uncertainty about where the economy is headed. 

“We have had a bit of a repricing in markets in February where there is more concern that central banks will have more work to do,” Sam Lynton-Brown, global head of macro strategy at BNP Paribas, said on Bloomberg Television. “The view we have is that there’s still some further room to run on that repricing. So either equities are at risk to come lower or rates are at risk to head higher.”

In the near-term, both scenarios could play out if the markets price in a more hawkish policy outlook for the Fed, he said.

For now, a more optimistic outlook for earnings estimates is helping ease fears that inflation will remain entrenched even as growth slows, drawing investors back to stocks. Those treading into this market risk are falling into a “bull trap” according to Michael Wilson, chief U.S. equity strategist at Morgan Stanley. That view was echoed by Torsten Slok, chief economist at Apollo Global Management.

“A generation of investors has since 2008 been taught that they should buy on dips, but today is different because of high inflation, and credit markets and equity markets are underestimating the Fed’s commitment to getting inflation down to 2 per cent,” Slok wrote in a note.

The sanguine mood took a knock last week as the Fed’s preferred inflation gauge accelerated and dashed hopes for a policy pivot. Traders are now pricing U.S. rates to peak at 5.4 per cent this year, compared with about 5 per cent just a month ago. 

Key events this week:

• U.S. wholesale inventories, Conf. Board consumer confidence, Tuesday
• China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI, Wednesday
• Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
• U.S. construction spending, ISM Manufacturing, light vehicle sales, Wednesday
• Eurozone CPI, unemployment, Thursday
• U.S. initial jobless claims, Thursday
• Eurozone S&P Global Eurozone Services PMI, PPI, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5 per cent as of 11:30 a.m. New York time
• The Nasdaq 100 rose 0.9 per cent
• The Dow Jones Industrial Average rose 0.3 per cent
• The Stoxx Europe 600 rose 1.1 per cent
• The MSCI World index fell 1.2 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.2 per cent
• The euro rose 0.4 per cent to US$1.0588
• The British pound rose 0.7 per cent to US$1.2024
• The Japanese yen rose 0.2 per cent to 136.27 per dollar

Cryptocurrencies

• Bitcoin fell 1 per cent to US$23,334.16
• Ether fell 0.4 per cent to US$1,636.6

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.93 per cent
• Germany’s 10-year yield advanced five basis points to 2.59 per cent
• Britain’s 10-year yield advanced 16 basis points to 3.82 per cent

Commodities

• West Texas Intermediate crude fell 0.5 per cent to US$75.92 a barrel
• Gold futures rose 0.2 per cent to US$1,820.80 an ounce

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Fed Says Interest Rate Hikes Are Tightening Economy; Wall Street Disagrees - Bloomberg

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Iran's currency hits record low as effects of anti-government protests roil economy - The Globe and Mail

A board shows currency exchange rates in Tehran, Iran Dec. 25, 2022.WANA NEWS AGENCY/Reuters

Iran’s currency fell to a new record low on Sunday, plunging to 600,000 to the dollar for the first time as the effects of nationwide anti-government protests and the breakdown of the 2015 nuclear deal continued to roil the economy.

Iranians have formed long lines in front of exchange offices in recent days, hoping to acquire increasingly scarce dollars. Many have seen their life savings evaporate as the local currency has deteriorated. Inflation reached 53.4 per cent in January, up from 41.4 per cent two years ago, according to Iran’s statistics centre.

The dire economic conditions have contributed to widespread anger at the government, but have also forced many Iranians to focus on putting food on the table rather than engaging in high-risk political activism amid a fierce crackdown on dissent.

Iran’s currency was trading at 32,000 rials to the dollar when it signed the 2015 nuclear accord with world powers. The agreement lifted international sanctions in return for strict limits on and surveillance of its nuclear activities.

The agreement unravelled when then-President Donald Trump unilaterally withdrew the U.S. from it and restored crippling sanctions. Iran responded by ramping up its enrichment of uranium, and now has enough for “several” atomic weapons if it chooses to develop them, according to the U.N.’s nuclear watchdog.

Iran insists its nuclear program is entirely peaceful, but experts say it had a nuclear weapons program until 2003 and is developing a breakout capacity that could allow it to quickly build an atomic weapon should it decide to do so.

The Biden administration supports a return to the 2015 agreement, but negotiations hit an impasse last year and appear to have ground to a halt. Iran has further angered Western countries by supplying armed drones to Russia that have been used in its invasion of Ukraine.

Meanwhile, Iran has seen waves of anti-government protests since the September death of a 22-year-old Kurdish-Iranian woman who was detained by the morality police for allegedly violating Iran’s strict Islamic dress code.

The protests rapidly escalated into calls for the overthrow of Iran’s ruling Shiite clerics, marking a major challenge to their four-decade rule. Iran’ has blamed the unrest on foreign powers, casting it as an extension of the sanctions, without providing evidence.

The Trump administration had hoped that maximum sanctions would force Iran to make major concessions on its nuclear activities, its ballistic missile program and its military involvement in countries across the Middle East, but it has yet to do so.

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Iran's currency hits record low as effects of anti-government protests roil economy - The Globe and Mail
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Warren Buffet stays upbeat, preaches patience amid economic uncertainty in annual letter - Global News

Billionaire investor Warren Buffett on Saturday signaled he has lost none of his enduring confidence in the U.S. economy and his company Berkshire Hathaway Inc BRKa.N.

In his annual letter to Berkshire shareholders, the 92-year-old Buffett urged investors to focus on the big picture over the long term, rather than higher inflation and other factors that in 2022 dampened stock prices, though not Berkshire’s.

He also urged Americans not to be convulsed by “self-criticism and self-doubt,” saying the country’s dynamism has benefited Berkshire in his 58 years running the company from Omaha, Nebraska, and will do so after he passes the reins.

Read more: Warren Buffett resigns from Bill and Melinda Gates Foundation

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“We count on the American Tailwind and, though it has been becalmed from time to time, its propelling force has always returned,” Buffett wrote.

“I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.”

Berkshire also repurchased $7.9 billion of its own stock in 2022, signaling confidence it was undervalued. Buffett defended buybacks, a target of politicians in Washington.

The letter was accompanied by Berkshire’s year-end results, including a record $30.8 billion operating profit.

Buffett called 2022 a “good year” for Berkshire, with many of its strongest businesses withstanding pressures from elevated inflation, rising interest rates and supply chain disruptions.

2:03 Canada’s job surge: How hot economy could affect employers, interest rates

Berkshire also posted a $22.8 billion annual net loss, compared with an $89.8 billion gain in 2021, as the prices of Apple Inc AAPL.O and many other stocks in its vast investment portfolio declined.

Buffett downplays net results because they are volatile and affected by accounting rules.

Berkshire owns dozens of operating businesses including the Geico car insurer, BNSF railroad, and well-known consumer brands such as Dairy Queen, Duracell and Fruit of the Loom. It employs more than 382,000 people.

'Very humble'

Multiple observers said Buffett appeared cautious, almost apologetic, about his struggles in navigating markets, though he is arguably the most famous living American investor. His $106 billion net worth ranks fifth worldwide, Forbes magazine said.

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“Buffett is very humble in assessing his own investment prowess, and unnecessarily so,” said Thomas Russo, a partner at Gardner Russo & Quinn and longtime Berkshire investor. “Investors have profited from him over decades.”

Anyone who stuck with Berkshire from 1965 to 2022 saw their shares gain 3,787,464% in value. The Standard & Poor’s 500 .SPX rose 24,708% including dividends over that period.

Buffett said most of his capital allocation decisions have been merely “so-so,” and Berkshire’s “satisfactory” results over time resulted from only about one dozen “truly good” decisions.

READ MORE: Amazon, Warren Buffett, JPMorgan team up to tackle ‘hungry tapeworm’ of U.S. health care costs

“‘Efficient’ markets exist only in textbooks,” Buffett said. “In truth, marketable stocks and bonds are baffling, their behavior usually understandable only in retrospect.”

Buffett also said “trust and rules are essential” in running large businesses, even amid the inevitable disappointments, and urged investors not to dwell on near-term market conditions.

Cathy Seifert, an analyst at CFRA Research, said Buffett took a “subtle swipe” at critics who wished he would disclose more than a few paragraphs about Berkshire’s largest businesses, and invest more aggressively.

“The current market climate has been, for a lack of a better word, very schizophrenic,” Seifert said. “Buffett is expressing that frustration.”

Munger 'makes me laugh'

Despite paying $11.5 billion in October for the insurance company Alleghany Corp, Berkshire ended 2022 with $128.6 billion of cash, as it became a big seller of stocks including Taiwanese semiconductor maker TSMC 2330.TW late in the year.

Buffett, a Democrat, appeared in his letter to indirectly criticize President Joe Biden who this month urged a quadrupling of a 1% tax on corporate stock buybacks that became law in his Inflation Reduction Act last August.

While Biden hasn’t demanded an end to buybacks, Buffett said those who claim all repurchases “are harmful to shareholders or to the country, or particularly beneficial to CEOs” are “either an economic illiterate or a silver-tongued demagogue.”

Bill Smead, a longtime Berkshire investor at Smead Capital Management, said: “He’s poking fun at people who try to add money without adding value.”

4:10 Money Mentors

Buffett also reminded investors how much Berkshire gives back to the U.S. Treasury, paying $32 billion of federal income taxes over a decade.

“At Berkshire we hope and expect to pay much more in taxes during the next decade,” Buffett wrote. “We owe the country no less.”

While Berkshire has tapped Vice Chairman Greg Abel, 60, as Buffett’s eventual successor as chief executive, Buffett used his letter to renew his affection for his friend and business partner Charlie Munger, the 99-year-old Berkshire vice chairman.

He said both will in early May attend Berkshire’s annual shareholder weekend, which is known as “Woodstock for Capitalists” and draws tens of thousands of people to Omaha.

“I never have a phone call with Charlie without learning something,” Buffett said. “And, while he makes me think, he also makes me laugh.”

(Reporting by Jonathan Stempel in New York; editing by Ira Iosebashvili, Megan Davies and Diane Craft)

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Stocks Close Lower as a Resilient Economy Bolsters the Case for More Rate Hikes - Barchart

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Stocks Close Lower as a Resilient Economy Bolsters the Case for More Rate Hikes  Barchart
Stocks Close Lower as a Resilient Economy Bolsters the Case for More Rate Hikes - Barchart
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German Economy Contracted More Than Expected at End of 2022 - Financial Post

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(Bloomberg) — German output shrank more than expected at the end of 2022 as Europe’s economy struggles with the fallout from the energy crisis and the war in Ukraine.

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Gross domestic product contracted 0.4% in the fourth quarter, double the previously reported drop. The statistics office said that declines in capital investment and private consumption were primarily to blame, while government spending had a positive effect. 

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Analysts predict another negative result this quarter, which would tip the economy into a recession. Even so, an unusually warm winter has meant Germany dodged the gloomier scenarios feared when Russia invaded Ukraine a year ago.

Recent indicators have given reason for optimism in Germany’s resilience, with Ifo and ZEW expectation gauges published earlier this week both increasing more than anticipated. 

Similarly, surveys of purchasing managers signaled private activity returned to growth this month after more than half a year of negative readings, with an easing of supply shortages and expansion in the services sector driving the rebound. 

Still, the manufacturing PMI contracted again in February, with manufacturers highlighting a continued downturn in new orders, led by a sustained sharp drop in export sales.

The jump in energy costs has been particularly tough on industry. German chemical giant BASF SE said Friday will close several factories, including two ammonia plants and related fertilizer facilities, resulting in 700 job cuts at its main Ludwigshafen plant. 

—With assistance from Joel Rinneby and Kristian Siedenburg.

(Updates with BASF job cuts in final paragraph)

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What's Happening in the World Economy: Services Inflation Is Proving Tough - Bloomberg

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What's Happening in the World Economy: Services Inflation Is Proving Tough  Bloomberg
What's Happening in the World Economy: Services Inflation Is Proving Tough - Bloomberg
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N.W.T. poised to miss out on economic benefits of Giant Mine remediation, says oversight board - CBC.ca

The Northwest Territories stands to miss out on the abundant economic opportunities presented by the multi-billion-dollar remediation of Yellowknife's Giant Mine, says the board overseeing the mine's cleanup.

"Where is the strategy for capturing the benefits of that spending?" David Livingstone, chair of the Giant Mine Oversight Board, said before a committee of MLAs on Wednesday.

"There's this huge opportunity and it's slipping through our fingers, and that's very frustrating."

Livingstone said it's up to the Northwest Territories government to make sure money spent on Giant Mine's remediation, and future remediation projects in the territory, stays in the N.W.T. 

He made his remarks during a public briefing on the cleanup of the abandoned gold mine, and how that cleanup could enhance the territory's economy — that is, if the N.W.T. government makes a concerted effort to capture its benefits. 

Giant Mine operated from 1948 until 2004. The federal government took responsibility for the mine after its then-owner Royal Oak Mines Inc. went into receivership in 1999. 

Last November, the Giant Mine Remediation Project updated the estimated cleanup costs from $1 billion to $4.38 billion. Taxpayers will shoulder those costs.

Remediation of the mine involves, among other things, filling pits, taking down buildings, constructing a state-of-the-art water treatment plant, and containing around 237,000 tonnes of highly toxic arsenic trioxide dust deep underground. 

The oversight board estimates the remediation project will spend around $240 million annually for the next 15 years, and boost the territory's GDP by $108 million a year.

A scale model of Giant Mine at the Giant Mine Oversight Board office compares the mine's chambers, which store arsenic trioxide, to a building in Yellowknife. The oversight board estimates the remediation project will spend around $240 million annually for the next 15 years, and boost the territory’s GDP by $108 million a year. (Liny Lamberink/CBC)

Graeme Clinton, an economist and oversight board director, said spending on remediation activities will go into industries like waste disposal, construction, mining services, scientific services, transportation, logistics, accommodation and food services, and medical services — industries that exist in the N.W.T.

The issue, said Clinton, is that right now demand for these services is greater than the local supply. 

The N.W.T.'s ability to benefit from the Giant Mine cleanup, he added, extends only as far as its capacity to meet the project's labour and business demands. 

"If you want to grow the economy and benefit from spending that's going to occur on Giant Mine, or other remediation projects around the territory, then it's about addressing supply issues in all of those industries, such that you can capture a greater proportion or greater share of the money that's entering the economy," he said.

Remediation project not meeting employment targets

The federally-run Giant Mine Remediation Project tracks employment by hours worked. It reported that Northerners worked around 45 per cent of the total labour hours, on average, and Indigenous employees worked around 21 per cent.

The remediation project is below its employment targets in both categories.

Its target for hours worked by Northerners is between 55 and 70 per cent, and its target for Indigenous workers is 25 to 35 per cent. 

Giant Mine's remediation began in 2020 and is set to wrap up in 2038. 

Natalie Plato, deputy director of the remediation project, said the team extended its timeline by nine years, in large part to maximize participation by N.W.T. workers and businesses.

Natalie Plato is the deputy director of the Giant Mine Remediation Project. She said the project team extended its timeline by 9 years, in large part to maximize participation by N.W.T. workers and businesses. (Liny Lamberink/CBC)

Clinton said it's perhaps unrealistic to expect 100 per cent of the work at Giant Mine to be carried out by Northerners, but that that would be the target if the government sought to reap the maximum benefit from remediation. 

'Better late than never'

"If we really want to build the capacity in the Northwest Territories, it comes back to our education system," said Great Slave MLA Katrina Nokleby. 

"We're not graduating people in the Northwest Territories that can then go on to become these specific type of professionals that are needed for Giant Mine."

Frame Lake MLA Kevin O'Reilly asked if it was too late in the project's timeline to capture more of the spending happening at the mine.

"Better late than never," replied Livingstone. "But it's not going to happen on its own."

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Mohawk College helps launch free national training program with focus on a greener economy - Global News

Mohawk College is playing a major role in a new cross-Canada program that provides free training to help industries become greener and more sustainable.

Quick Train Canada has officially launched with 39 micro-credential courses that are of no cost to workers or companies, thanks to a federal investment in 2021 of $46.5 million.

Filomena Tassi, Minister of FedDev Ontario and MP for Hamilton West-Ancaster-Dundas, was at Mohawk College on Wednesday for the announcement of Quick Train Canada’s launch, saying it will help guide the country toward a net zero economy.

“These courses will help students quickly obtain the new skills in green tech to apply to sectors like agriculture, construction, natural resources, the environment, and transportation,” said Tassi.

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Paul Armstrong, Mohawk’s chief operating officer, said they’ve been working directly with industry partners to create these micro-credentials.

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“Our National Industry Advisory Council has had a number of sessions in which they provided areas of greatest need, which helped us define where the curriculum will be,” said Armstrong.

“We’re now looking at trying to dive a little deeper with larger groups of employers within each industry sector to define where the training needs will be for the next micro-credentials to be developed.”

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The training is free to those who take part, and Armstrong explained that reducing the barrier of cost for both the workers and the companies and organizations that employ those workers.

He also said working as part of a pan-Canadian coalition — called Canadian Colleges For A Resilient Recovery — means that every school that takes part gets to benefit from the creation and deployment of these courses.

“In traditional models … there would have been costs associated with the development of programs that would have been deployed locally. We’re in a very efficient manner being able to take the strengths of one and then deploy it without those costs that we would have normally had around new development and new programs in a way that can happen very quickly.”

The program is expected to provide training and upskilling for as many as 10,000 Canadians by expanding with a total of 80 micro-credential courses within the next six months.

&copy 2023 Global News, a division of Corus Entertainment Inc.

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Russians make Thailand a refuge as Ukraine war enters second year - Al Jazeera English

Bangkok/Pattaya, Thailand – Since Russia invaded Ukraine on February 24, 2022, a growing number of Russians have looked to Thailand as their ticket to a new life.

Tens of thousands of Russians hoping to avoid the threat of conscription and the economic ravages of the war have travelled to the kingdom in the year since the invasion, many of them seeking a new home.

In Phuket, a popular resort island, Russians are buying off-plan condos with half a million dollars or more to facilitate their relocation or provide a landing pad for a future time when they may feel forced to leave their homeland.

Between November 1, 2022, and January 21, 2023, more than 233,000 Russians arrived in Phuket, according to data from Phuket International Airport, making them the biggest group of visitors by far.

Phuket has long been a favourite escape from the harsh Russian winter but property sales have surged since President Vladimir Putin in September ordered Moscow’s first wartime mobilisation since World War Two, suggesting many arrivals are intent on staying well beyond the length of a typical holiday.

“My clients are mostly young, 30-35… they’re wealthy, high-budget clients,” Sofia Malygaevareal, a real estate agent in Phuket who originally hails from Russia, told Al Jazeera.

“A lot of people have decided to move to Phuket from three to six months… to one year.”

To stay on the idyllic island, Russian arrivals need homes, schools, jobs and visas – which takes time in Thailand, where obtaining long-term residency rights can be difficult to achieve.

For many of the newcomers determined to swap a home on a war footing for a life in the Thai sunshine, money is not a problem. Realtors in Russian-dominated areas of the island say the influx of wealthy visitors, fuelled by the growing realisation the war has no end in sight as it enters its second year, has driven prices up to record levels.

Luxury condos that until recently were available to rent for about $1,000 a month can now go for three times that. Meanwhile, extravagant villas on the market for $6,000 or more are booked out up to a year in advance.

The buyers’ market is similarly red hot. In 2022, Russians bought nearly 40 percent of all condominiums sold to foreigners in Phuket, according to the Thai Real Estate Information Center (REIC). Russians’ purchases amounted to $25m in sales – several times the amount spent by Chinese nationals, the next largest group of buys, according to the REIC.

Some buyers have spent upwards of $500,000 on luxury off-plan homes by the sea, according to local real estate agents.

“The situation has changed at home,” Malygaevareal said, referring to the tough economic conditions in Russia. “People who have money come abroad and are ready to pay money for international school, which costs less than in Moscow.”

A Russian travel agent in Phuket, who spoke on condition of anonymity due to the sensitivity of the issue, said some Russians have arrived on one-way tickets and tourist visas. “[They] just do not go home… they are here to get away from conscription.”

Russians are among the biggest groups of visitors to popular Thai resort areas such as Pattaya [Vijitra Duangdee]

The mass influx of Russians is also reflected in other popular tourist areas such as Koh Samui, Thailand’s second-biggest island, and the eastern seaboard resort of Pattaya, where there has been a sizeable Russian community concentrated in the beach town of Jomtien for years.

“More Russians have moved to Pattaya since October. They’re mostly young couples who fear for their safety,” Mikhail Ilyin, the head priest of the All Saints Russian Orthodox Church in Pattaya, told Al Jazeera.

But the impact of Putin’s invasion works both ways.

Dar, a Thai masseuse in her 40s, said she left her job at a high-end spa in Moscow as the rouble collapsed and her salary – which was generous by Thai standards – plummeted in value. Dar has found new work in Jomtien, where her rare language skills win over repeat Russian clients.

“The women tell me they are desperate to get their husbands, boyfriends or children to come over here to stay,” she said, asking to be referred to by only her first name. “So they come over first and find houses and try to make visas for their men.”

Visas, though, are not as easy to obtain as they used to be after a major scandal was uncovered in November involving Thai immigration police helping the Chinese mafia bring thousands of people into Thailand through fake work and volunteer schemes.

That means Russians who can afford it are having to apply for expensive property ownership visas known as the “Elite Card”, which allows a long-term stay for a family for approximately $25,000.

“It’s not as easy as they think to do long-term living here,” said IIyin, the priest. “Some are thinking of returning as they run out of options.”

The flow of Russians and Russian money into Thailand is also generating resentment in some quarters.

On Phuket, which was hit especially hard by the collapse of global tourism due to the COVID-19 pandemic, some local tourism businesses have expressed anger about Russians allegedly taking local jobs.

Tourism operators have complained about Russian taxi drivers shuttling their compatriots around the island and leading tour groups around Phuket’s historic Old Town, often without the required permits or visas.

Earlier this month, Bhummikitti Ruktaengam, president of the Phuket Tourist Association, complained about the prospect of Russians cutting into locals’ livelihoods.

“If it’s true they’re taking our jobs in our own home, we can’t allow this to happen,” Ruktaengam wrote on his Facebook page.

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Russia will see more ‘economic costs’ for war in Ukraine: G7 ministers - Global News

The foreign ministers of the Group of Seven (G7) said on Tuesday their countries would continue to impose economic costs on Russia and urged the broader international community to reject what they described as Moscow’s “brutal expansionism.”

“We will impose further economic costs on Russia, and on individuals and entities – inside and outside of Russia – that provide political or economic support to these violations of international law,” the leaders said in a joint statement.

Joe Biden also said Tuesday that the United States and its partners will announce more sanctions against Russia this week over Moscow’s invasion of Ukraine that started nearly a year ago, the U.S. president said in a speech in Poland following a surprise visit to Ukraine.

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Meanwhile, European Union diplomats said the bloc hopes to reach a deal on Wednesday on its 10th sanctions package against Russia for its invasion of Ukraine.

“We were discussing today the 10th sanctions package against Russia,” Polish ambassador to the EU Andrzej Sados said after talks by ambassadors of the EU’s 27 governments in Brussels.

“We will restart the discussion tomorrow afternoon in the hope that we can find a common denominator,” he said.

— Reporting by Ismail Shakil, Jan Strupczewski and Andrew Gray.

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China Likely to See Slowdown in Debt Ratio as Economy Recovers - BNN Bloomberg

(Bloomberg) -- The Chinese economy’s debt ratio will likely slow this year, according to a top official newspaper, amid growing concerns over the sustainability of rising levels of local government borrowing.

The macro leverage ratio — or total debt as a percentage of gross domestic product — rose to 273.2% as of the end of 2022 from 262.8% a year earlier, according to a commentary carried in the Economic Daily on Tuesday. The article cited a report published last week by a government-backed think tank. 

The newspaper is affiliated with the State Council, China’s cabinet.

The ratio could go up further this year, albeit at a slower pace, the article said. The think tank — the National Institution for Finance and Development — forecast the ratio to rise by 5.5 percentage points this year, or about half of last year’s increase, if economic growth reaches 5.5%. The consensus forecast for GDP growth this year is 5.2%, according to a Bloomberg poll of economists.

The commentary came as concerns over local government finances and their ballooning debt are mounting. Income accrued by those governments was slashed last year during Covid Zero and the ongoing property downturn, while their spending continued to rise. 

Economists, meanwhile, have been calling on the central government to borrow more to aid the country’s economic recovery this year and lessen the debt burden on local authorities.

In an attempt to assuage fears, the Economic Daily said in the article that China’s debt ratio is basically stable, and that financial risks are “generally under control.” That should create room for banks to further enhance support for the economy, it added. 

While the debt ratio has risen since the pandemic began, its uptick was still markedly lower than in other major economies, according to the article, which said that means China used a relatively small amount of debt to drive the economy’s rebound.

The increase in China’s debt-to-GDP ratio last year was mainly led by slowing economic growth, according to the NIFD report cited in the article. The ratio for the government sector rose faster than expected, while corporate debt expanded as bank loans to companies surged. 

However, the ratio for the household sector was unchanged due to the property slump and as income was hit by Covid outbreaks and controls, according to the NIFD.

Chinese authorities embarked on a deleveraging campaign in 2016 to rein in the rapid buildup of debt in the economy as financial risks increased. After reaping some initial success, the government halted the effort in 2020 in order to stimulate the pandemic-stricken economy. 

The economy’s debt ratio surged by 24 percentage points in 2020 before it fell 8 percentage points the next year, when economic growth rebounded, according to NIFD data.

©2023 Bloomberg L.P.

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Rising geopolitical uncertainty could create a war-time economy that drives gold to $2000 - BCA - Kitco NEWS

(Kitco News) - Rising geopolitical tensions could provide critical support for gold and eventually push prices above $2,000 an ounce, according to commodity analysts at BCA Research.

In a research note published late last month, the Montreal-based research firm said it was increasing its year-end gold price target to $2,000 an ounce as war-time economies start to be established in the West and the risk of 'fiscal dominance' continues to grow.

"The risk of fiscal dominance, when monetary authorities peg rates at low levels, will intensify as government policy driven by environmental and defense imperatives continues to expand in the West," wrote Robert Ryan, chief commodity and energy strategist at BCA and the lead author of the latest report.

Since BCA's comments last month, political relations between the U.S. and China have deteriorated further after the U.S. shot down a suspected Chinese spy balloon two weeks ago.

This weekend, the U.S. stoked fears that the war in Ukraine could continue to escalate as China is considering supplying Russia with "lethal support."

At the same time, China held joint military drills with Russia and South Africa as the war in Ukraine reached the one-year mark.

Ryan noted that the rise in geopolitical uncertainty comes as economic conditions continue to deteriorate. He added that in the current environment, he doesn't see the Federal Reserve raising interest rates beyond 5% this year.

At the same time, BCA expects the ongoing conflict in Ukraine will continue to disrupt commodity prices, keeping inflation elevated. Ryan added that market disruptions, Western nations' commitment to developing green energy infrastructure, and increased defense spending are all factors that will continue to support higher inflation.

The analysts said they see headline inflation hovering between 4% and 5% during the next few years.

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"Commodity prices will remain volatile this year as well, as governments – primarily in the EU – interfere in markets," the analysts said in the report. "If Russia's position in the war deteriorates, Putin and his government may become irrational actors and take more extreme measures. One of these includes a cut-off in global crude and/or oil products supply, resulting in a global oil supply shock. While global uncertainty is high and US real rates are low, investors will flock to gold as a safe-haven investment."

Another positive aspect for gold amid the rising geopolitical tension is the growing impact on the U.S. dollar. BCA said it sees a marginal increase in petro-yuan trading as nations buy oil in China's currency.

While this trend won't see massive growth this year, BCA said it is still enough to disrupt the U.S. dollar's role as the world's reserve currency, and a weaker U.S. dollar is one less headwind for gold prices.

"Our geopolitical strategists do not expect Saudi Arabia to store the bulk of its wealth in currencies other than the dollar, or to break with the US and realign its national strategy with China, but they do accept that the Saudis can hedge against the dollar," the analysts said.

BCA also noted that the global dedollarization trend is expected to support gold as central banks continue diversifying their holdings in 2023.

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China Renaissance shares plunge after founder goes missing - Al Jazeera English

China Renaissance Holdings shares fall as much as 5 percent after earlier recovering some losses.

Shares of China Renaissance Holdings, the boutique investment bank founded by missing tech dealmaker Bao Fan, have fallen as much as 5 percent after earlier regaining some ground from record losses.

After climbing as much as 3.5 percent early on Monday, the Hong Kong-listed stock gave up its gains and fell to as low as 6.82 Hong Kong dollars ($0.87).

The share price hit an all-time low of 5 Hong Kong dollars ($0.64) on Friday before recovering some ground to close at 7.18 Hong Kong dollars ($0.92), down 28 percent.

China Renaissance, founded by Bao in 2005, said on Thursday that it was unable to reach its chairman but its operations were continuing as normal.

Bao, a high-profile investment banker known for overseeing mergers involving Chinese tech giants Didi and Meituan, is the latest in a long line of prominent business figures to go missing in China, where authorities can detain suspects for lengthy periods without charge or access to legal representation.

Chinese-Canadian billionaire Xiao Jianhua disappeared from public view for five years after being whisked from his Hong Kong hotel in 2017 by people believed to be Chinese security agents before reemerging in mainland China five years later to face corruption charges.

Yim Fung, the chief of Chinese broker Guotai Junan International, vanished for more than a month in 2015 before returning to his company after “assisting in certain investigations”.

Jack Ma, the founder of tech behemoth Alibaba, dropped out of public view for a year after making critical comments about China’s financial regulators before reemerging in public in late 2021.

Bloomberg News reported on Friday that Bao’s family has been told the investment banker is assisting with an investigation, citing an unnamed person familiar with the matter.

Chinese President Xi Jinping has led a sweeping crackdown on corruption since taking power in 2012.

Critics have accused Xi, who has consolidated power more than any Chinese leader since Mao Zedong, of using the anticorruption drive as a pretext to purge political rivals.

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