Every week here at theCurrent we bring you the world’s biggest business stories. This week: Crikey! Australia’s surprise growth, global food prices drop, but rise in Canada, natural gas prices fall, Canadian Natural Resources Limited’s profits drop 90%, Trudeau encourages global government spending, and Britain’s potential exit from the EU could be costly.
Australian Surprise Growth
Australia’s economy exceeded expectations, growing by 3% in the final quarter of 2015 compared to the same period a year prior. GDP was up 0.6 compared to Q3 2015. Falling global commodity prices have rattled the Australian economy, which has large oil and mining sectors. Increased public spending, consumption and construction offset the losses incurred by diminished demand for commodities. (Source: http://www.bbc.com/news/business-35703813)
Food prices rise in Canada
Global food prices have fallen 14.5%, but in Canada, the cost of vegetables is up 18.2% in 2015, while meat prices have jumped 5%. Low oil prices have deflated the loonie by 15% over the last 12 months, and because most produce in Canada is imported, food prices have increased to compensate for the low purchasing power of the loonie. (Source: http://www.cbc.ca/news/business/food-costs-world-canada-1.3474241)
Natural Gas Prices Collapsing
Oil prices have dominated the headlines over the last year, but natural gas prices are also on the decline and hitting the Canadian economy hard. Canadian natural gas prices have halved over the last 12 months. AECO, the benchmark Canadian gas prices, are below $1.30 per million cubic feet (mcf). Decreased global demand, and a notably mild winter have deflated prices, which could continue to drop to below $1mcf. (Source: http://business.financialpost.com/news/energy/natural-gas-prices-may-plunge-below-1-on-insane-storage-levels-not-seen-since-1998)
Canadian Natural Resources Ltd (Canada’s 2nd largest oil and gas producer) has suffered from an 89% fall in quarterly profits thanks largely to the 70% drop in crude oil prices since mid-2014. In response, the energy giant announced Thursday that it would cut its 2016 capital expenditure by $1-1.5 billion to between $3.5 billion and $3.9 billion. (Source: http://www.reuters.com/article/cdn-natural-rsc-results-idUSL3N16B3A5)
Trudeau defends spending
Justin Trudeau has urged world leaders to increase government spending, arguing that monetary policy has failed. In an interview on Wednesday in Vancouver Trudeau defended his decision to take Canada deep into the red, arguing that austerity policies had failed across Europe. (Source: http://business.financialpost.com/news/economy/justin-trudeaus-message-to-world-let-government-spending-do-the-work)
Britain will hold a referendum on whether or not the country will remain part of the EU on June 23rd. Opponents of the EU in Britain fear encroaching EU laws and regulations, while supporters cite the benefits of European cooperation. According to Reuters, the German finance minister, Wolfgang Schaeuble said, in case of a British exit (or Brexit) the UK would not be able to negotiate a special trade deal with the EU. Britain’s largest trading partner remains the EU, and the economic impact of a Brexit could be substantial. (Source: http://www.reuters.com/article/germany-eu-idUSU8N15B03I)
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