One more indication that the economy is softening. No make that two, no three. Who can keep track? It seems the bad news reports just keep on coming.
Let's backtrack a bit and go over what we learned Wednesday.
First, we had our central bank Governor David Dodge give us his thoughts on the Canadian economy. Turns out, his view is fairly downbeat, which helps explain why he slashed interest rates by 75 basis points this week. Mr. Dodge explained to a Moncton audience that he sees Canadian economic growth languishing at less than 3 per cent till about 2003. Just to put that into perspective, our economy grew at 4.7 per cent in 2000.
Then we found out the state of things in the United States. In the aptly named "Beige Book" report the Federal Reserve told us that things were pretty drab in the various U.S. regions in September. Of course, everyone was prepared for a dismal reading from post-attack New York. But the list of regions sounding glum was a long one: Kansas City; Minneapolis; San Francisco; St. Louis; Dallas - all are apparently facing their own problems.
So on to Thursday.
Thursday morning the U.S. Department of Commerce reported that durable goods orders were down by 8.5 per cent in the month of September. That is far worse than the market's expectation of a 1.3 per cent decline. Excluding the very volatile transportation sector, orders were down by 5.5 per cent. That one was only expected to decline by 0.8 per cent.
Slowing orders tend to signal lower manufacturing activity in the future. Plunging orders do not signal anything good at all.
No wonder that bond yields are going further and further down. Economic weakness means interest are headed down and inflation is headed nowhere. Both things are good for bonds. The long-rally in fixed-income just may go on a bit longer.
As for the Canadian dollar, its little surge earlier in the week seems like a distant memory. Negative signals from the U.S. always make our prospects look worse. Look for lots more debates on "how-low-can-the-loonie-go?".
Stay tuned.
Linda Nazareth is ROBTv's resident economist.