Yikes. September was awful, but everybody thought that the Canadian economy would bounce back in October. These days, however, it is apparently better not to take anything for granted.
According to Statistics Canada, manufacturing shipments fell by 2.9 per cent in the month of October. That's bad enough on its own, but doubly so given that it follows a 2.5-per-cent dip in September. Some of that, we thought, must be a Sept. 11 effect. Maybe so, but it has apparently been followed by something else we should maybe be calling the r-effect (let's not say the word yet). The market, by the way, was looking for a 0.2-per-cent gain in October.
The bottom line is that the U.S. is in recession, has been in one since early in 2001, and that is hurting Canada. Pick your favourite example from today's figures. The value of our petroleum shipments was down because oil prices were down. To a large extent, that's because U.S. demand has softened. Auto, aerospace, electronic products all were weak in October and a lot of the blame simply has to go to the U.S.
Things will get better.
We know this because the bond market is telling us so. Yields have zig-zagged in recent weeks but in general are moving up. That's because the economic signs from the United States are getting better. That does not mean a rapid turnaround for Canada. Manufacturing may have a quarter or maybe two of decline to go. Even so, by the second half of 2002, things should definitely be on a stronger footing.
That's a way off though.
In the meantime, the loonie is coming under some pressure and has slipped back under the 64-cent (U.S.) mark. With more possibly bad news on the horizon (retail sales and trade data are to be released later this week) it could go down still some more.
Stay tuned.