Not any more

Statistics Canada expected to report economy shrinking

In Canada on September 30, 2010 at 13:54

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Economy shrinks but mining shines
Canada’s economy contracted in July for the first time in 11 months, shrinking 0.1 per cent, Statistics Canada said today. Many sectors – such as manufacturing, construction and forestry – were hit hard but the mining industry in particular rebounded after hitting a soft spot in June.

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GDP slips

“Metal ore production increased significantly as some producers in the copper, nickel, lead and zinc mines industry boosted their output following the end of labour disputes,” Statistics Canada said, noting the sector expanded 1.1 per cent.

Home resales were also hit, falling markedly for the third month in a row, leading to an 8-per-cent drop for real estate agents and brokers. “The output of this industry atood at about two-thirds of its level recorded at the beginning of 2010,” the federal statistics gathering agency said.

“The decline was likely temporary in nature,” Toronto-Dominion Bank economist Diana Petramala said of the overall dip in the economy. “In particular, retail sales in July suffered a heavy blow from the introduction of the HST in Ontario and B.C., and once consumers shake off the initial shock, growth should continue.”

Wall frets over Potash
Premier Brad Wall is worried about the hit to Saskatchewan’s coffers if BHP Billiton Ltd. succeeds in its quest for Potash Corp. of Saskatchewan POT-T.

“We don’t have the final estimates yet, but there is a real risk in terms of a substantial, potential decrease in corporate income taxes,” Mr. Wall told reporters yesterday, according to Reuters, which noted that the interest on the loan BHP would need to take over the resource giant could be written off on taxes. “We will balance the desire that we have for a positive investment climate with also the need to think long term.”

There are also fears that prices, which affect the royalties paid to the province, could fall if BHP eventually quits Canpotex, the marketing group for the country’s major producers, to market potash itself.

Mr. Wall expressed concerns over a potential takeover by a Chinese buyer, Globe and Mail reporter Brenda Bouw reports.

Ireland unveils bank bailout
Ireland moved today to calm market jitters over its banking sector, unveiling a costly bank bailout that includes taking control of Allied Irish Bank and put money into smaller institutions. Ireland said it will put up to €40-billion euros into the country’s two biggest banks, Anglo Irish and Allied Irish. It already owns Anglo-Irish.

The cost to Ireland of bailing out the banking sector is dramatic, with the country’s deficit this year now likely to top 30 per cent of GDP.

“We have to get bondholders from overseas to fund the Irish state, and to fund the substantial deficit,” Finance Minister Brian Lenihan told a national broadcaster. “You can’t go to your bank manager and say, ‘I want to default,’ and at the same time, ‘I want more loans.’ If that’s the underlying message coming out of Ireland, we’re not going to flourish as a country.”

Mr. Lenihan said he’s still committed to bringing down the deficit to 3 per cent of GDP within about four years, which will be “a very tough task” indeed, noted BMO Nesbitt Burns economist Benjamin Reitzes.

“While the figures are certainly astounding, markets welcomed the clarity provided by the announcement,” Mr. Reitzes said. “Government bond yields tumbled across the curve, down 10-to-23 basis points, narrowing the gap vs. German Bunds. Even so, yields and spreads remain uncomfortably high. A period of calm with no more surprises is what Ireland needs now.”

AIG reaches deal with government
American International Group, the giant insurer that became a poster child for government bailouts, has reached a deal with U.S. officials that would see the Treasury Department no longer hold majority control.

Under the plan announced today, The Treasury Department would convert almost $50-billion (U.S.) of preferred shares into common stock next year, which would actually boost the government’s interest in the company. But it would then sell those common shares over time.

From today’s Report on Business

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