Monday-ne

Weekend update coming today or tomorrow...

Alberta exports to top $70B

Sky-high energy prices have Alberta on track to set a new export record in 2005, with the value of goods and services shipped from Wild Rose Country preparing to smash through the $70-billion mark for the first time. Figures obtained from Statistics Canada and Industry Canada show Alberta exported $63.2B of products in the first ten months of 2005, a 16% increase from the same period of 2004 and more than the province exported in all of 2003. At this rate, Alberta's exports could exceed $75B by year-end, eclipsing the $66B level seen in 2004. The trade numbers also indicate that, for the first time, the $9.2B in energy shipments from Canada in October were the country's No. 1 export, surpassing perennial heavyweights manufactured goods at $7.9B and automobiles at $7.8B. It's further evidence Alberta's energy-based wealth may be changing the economic dynamics of the Canada confederation, analysts say. Not all analysts believe energy prices will stay high in 2006, but, if they do, it could start to reshape structure of Canadian industry along regional lines, said Peter Hall, deputy chief economist with Export Development Canada. "If that's a permanent move up to that level you can start talking about a rebalancing of the industrial production of Canada that favours the energy sector," Hall said from Ottawa. "But we don't believe that that new price regime is going to persist," he added.
(Calgary Herald 051219)

It's a very interesting to consider how this economic shift could affect the political power struggles of the Canadian federation. I think the analysts might be surprised how persistent the price of oil might remain over the next few years, and what that means for the political status quo of Canada. If the power shifts to the West, you might potentially see a permanent breakup of the Confederation someday.

Business, not consumers, new driving force of growth

For economic guru Philip Cross, the proof that consumers were no longer driving the Canadian economy came when he read that Canadian Natural Resources was investing $25-billion in oil sands expansion. The announcement came in early November, and is an eye-popping example of the mountain of cash that Canadian companies - not just in the oil patch but across the economy - are sitting on, and are preparing to invest. With his keen eye for economic trends, Cross, chief of economic analysis at Statistics Canada, knew the Calgary oil company's ambitious plan marked a seismic shift for the Canadian economy. For the past few years, consumers have been the driving force behind growth, spending their way through the tribulations of a high dollar, high energy prices and a manufacturing downturn. But now, business investment has taken the lead, and consumer spending has become a secondary force, recent data indicate. “This clearly was the year household spending passed the baton to investment spending first, and exports second,” Cross said in an interview. “Clearly, investment is the most dynamic sector of the economy now.”

In 2004, household spending was responsible for 84% of all growth in Canada, Statscan reports. The consumer side of the economy had been strong since interest rates slid in the wake of the terrorist attacks of September, 2001, in the US. Meanwhile, business investment, together with exports, were actually a 4% drag on overall growth in 2004, following on a weak 2003. But by the third quarter of this year, consumers had started to swap places with business investment. Household spending contributed less than half of total growth, while business investment and exports accounted for 57%. The consumer is not dead, economists say. However, consumers are no longer the mainstay behind Canada's steady, solid growth. “The sources of growth have shifted and will continue to shift in a more profound way, away from the household sector to the business sector,” said Don Drummond, chief economist at Toronto-Dominion Bank. Much of that is because the housing market boom has exhausted itself, he explained.
(Globe and Mail 051219)

A shift from dependency on consumer spending for economic growth back to the corporations and businesses is a good thing, especially in Canada where business investment and productivity has been sorely lacking the past few years. There is a potentially cataclysmic fundamental overextension of consumer debt and financing that is going to bite the global economy in the collective ass sooner rather than later, and by reducing dependency on this sector of the economy is probably a good thing.

China to become 4th biggest economy

China will leapfrog Italy, France, and Britain to be officially recognized as the world's fourth biggest economy if, as expected, it revises upward its 2004 gross domestic product by nearly US$300-billion, analysts said. But such a move will again bring into question China's ability to accurately report its economic statistics and further unmask a government already obsessed with controlling how the media and public view the huge nation, they said. “As if China's economy was not growing fast enough, thanks to a statistical revision, growth in 2005 looks like being about 30 per cent,” Standard Chartered economist Stephen Green said in a research note. China's National Bureau of Statistics is expected to announce tomorrow the results from the country's first nationwide economic census, which, according to Hong Kong's South China Morning Post, will show that China's GDP has been understated by about $300B. Green said the revised figures would greatly bolster per-capita GDP, while lowering China's external debt in terms of its percentage to GDP as well as the country's burdensome non-performing-loan/GDP ratio. “The IMF [International Monetary Fund] was looking for domestic debt at year-end 2005 to be worth 19.6 per cent of GDP. That can now be revised down to about 16 per cent,” Green said. Other analysts agreed that the revised figures would allow the Chinese government to spout more good news about its booming economy, but expressed caution about the intentions behind the move. “They are making this announcement for two purposes. The government has been criticized for overinvestment, so this will make the investment a smaller percentage of GDP,” said Andy Xie, chief Hong Kong-based economist for Morgan Stanley. “Also they want to sustain optimism, especially optimism among foreign investors.”
(Globe and Mail 051219)

The Red Dragon is roaring and smashing across the landscape! It's scary that so much is questionable in the numbers released by the Chinese government. Really, how big is the Chinese economy? How quickly is it growing? Appears to me to be a similar situation as true global oil production and consumption rates. Does anyone really know the true numbers, or is it essentially a monster running out of control, with no one really knowing how to control it let alone cool it down?