Let's forget about the U.S. for a minute.
It was all about them last week. Not just militarily but in terms of economic data. Lots of releases from south of the border, very little economic clues from north. The opposite is true this week. As turkey and stuffing preoccupy U.S. market watchers, we will get a flood of economic indicators on Canada.
Unfortunately, the Monday numbers do not show things off to a roaring start.
According to Statistics Canada, manufacturing shipments declined by 2.5 per cent in the month of September. The decline was a not a surprise, and in fact was less marked than the 2.9 per cent dip expected by the market. More worrisome, though, is that the softness was so widespread.
Statscan figures show that 19 of the 21 industries that they surveyed lost ground during the month. It's an extensive list, ranging from aerospace to motor vehicles to computers. Of course, there were extraordinary circumstances affected shipments. With the terrorist attacks in the U.S., orders were postponed or cancelled altogether.
So does that mean that things will bounce back in October?
Unfortunately, that is unlikely to be the case. Even without Sept. 11, it is likely that Canada would still be in the midst of a sliding manufacturing sector. U.S. domestic demand hit a very soft spot in the third quarter, which meant that Canada's fourth quarter was not looking great. So let's figure that it will be well into 2002 before we see Canadian manufacturing activity really start to climb.
Of course, lower interest rates would be helpful in giving the sector a kick-start.
Last week we saw bond yields soar. Based on U.S. indicators, investors figured that things were too sunny to allow for much more cutting by central banks. Both Canadian and U.S. bonds got hammered. This week, though, we may see a little fine-tuning.
The Bank of Canada makes a decision on rates next week. In their last Monetary Policy Report, released a couple of weeks ago, they made it clear they may be willing to cut rates again. Monday's numbers make it likely that they will take another 50 basis points off the 2.75 per cent overnight rate.
And in the still-searching-for-a-bright-side category, take a look at the loonie. After hitting a string of record lows, it has crawled up above the 63 cent level yet again. Of course, all kinds of shocks could send it down again. Still, the steadier it remains, the more options are available for our central bank.
Tuesday get trade numbers from both sides of the border.
Stay tuned.
Linda Nazareth is ROBTv's resident economist.