Currency exchange rates are intrinsically linked to the global economy. That’s why every week at theCurrent we bring you the world’s biggest business stories. This week: Alberta’s wildfire won’t have as large of an impact on the economy as previously thought, but we’re underprepared for future disasters like ‘the big one’, the Fed could raise rates, Japan dodged recession, and China slapped with 522% taxes by the US.
The big one
Alberta’s wildfire spread into neighbouring Saskatchewan this week, while the damage already caused by the fire amounts to billions of dollars. The head of the Insurance Bureau of Canada called for a national strategy to address future natural disasters. Calling the current approach “undeveloped” Don Forgeron insisted that “We are one of the best countries in the world at responding to disasters, there’s no question about that. We are not one of the best when it comes to preparing, either physically or financially,” in an interview with the CBC. Forgeron’s remarks also addressed the lack of preparedness for ‘the big one’ – an overdue major earthquake on the west coast. (Source: http://www.cbc.ca/news/canada/ottawa/insurance-bureau-canada-fire-strategy-1.3587384)
Wildfire’s cost less
Contrary to recent reports by Canada’s leading banks suggesting that the Alberta wildfires could cost as much as 1-2% of GDP, the Conference Board of Canada now says any losses will be much smaller. According to the report most oil sands producers will be back to full production by the end of the month, and any losses will be offset by growth elsewhere in Alberta. All totalled, the losses could amount to just .33% lost GDP in Alberta, and 0.6% nationally. (Source: http://www.conferenceboard.ca/press/newsrelease/16-05-17/economic_impacts_of_the_fort_mcmurray_wildfires.aspx?&utm_source=Home&utm_medium=Banner&utm_campaign=Slide1)
Owe you one (or $21,348)
The average Canadian now owes $21,348, up 2.7% since last year according to TransUnion. Canadians now have more debt in all forms, including credit card debt, car payments and instalment loans. The figure is actually down from an all time high of $21,512 reached in Q4 last year. The number of people that are three or more months behind on their payments remain relatively low, at just 2.52%, and the delinquency rate is not above 4% in any province. (Source: http://www.marketwired.com/press-release/transunion-subprime-borrowers-help-push-canadian-debt-levels-up-3-nyse-tru-2126048.htm)
Rates Rise?
The US Federal Reserve could raise interest rates in June. But the move is dependent on economic, employment and inflation data. Reports suggest that the Fed is wary of the possibility of unstable markets in Europe with the upcoming British EU referendum and persistent uncertainty in China. The Fed has held rates at between 0.25% and 0.5% since December of 2015. (Source: http://www.bbc.co.uk/news/business-36327353)
Japan dodges recession
Japan exceeded expectations, finishing the first quarter of 2016 with annualised growth of 1.7% (or .4% this quarter) following a disappointing last quarter of 2015. The positive news results from increased government spending designed to offset faltering business investments. The last four quarters have alternated between growth and contraction. (Source: http://www.theguardian.com/world/2016/may/18/japans-annual-growth-rate-jumps-to-17-on-back-of-consumer-spending)
Chinese Steel Tax
Chinese steelmakers have been hit with 522% taxes by the US in response to accusations that the Chinese have been selling their steel at below market prices. 71% duties were also levied on Japanese cold-rolled steel. European and US steel producers have accused both countries of dumping their excess steel on the global economy, distorting the market. Some have even accused China of “war…not trade”. (Source: http://www.cnbc.com/2016/05/20/china-steel-overcapacity-war.html)
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