Every week here at the Current we round up the biggest business stories. This week: Canada posts a deficit for August, inflation in the eurozone rose to 0%, US growth falls, a Sharp fall in profits for the electronic manufacturer, London’s housing market is overpriced according to UBS, Deutsche Bank cuts jobs, American banks post big profits, China’s imports and exports fall.
Canada’s deficit grew to $2.3 billion last August, but remains on course for annual surplus. Last year the deficit was a mere $300 million in August. Despite the losses, Canada posted a surplus of $2.8 billion over the first 5 months of the fiscal year beginning in April. The federal budget had projected a $1.4 billion surplus for the current year, but the economic slowdown caused by low oil prices, as well as the eurozone crisis and slowdown in China, have affected the Canadian economy to a greater degree than expected.
Up to Nothing
Inflation in the eurozone rose to 0% from -0.1% in September. Food, alcohol and tobacco prices all increased slightly. In the same report Eurostat said that unemployment fell from 10.9% in August to 10.8% in September. Greece’s unemployment still stands at 21.6% while economic powerhouse Germany has a rate of just 4.5%. Energy prices are still on the decline, but slowing from an 8.9% decrease in August to 8.7% in September.
US Growth falls
Growth in the United States has slowed significantly in the 3rd quarter of 2015. GDP fell from 3.9% in the second quarter to just 1.5% in the third quarter. Economists attribute the trend in part to companies selling down their stock (i.e. selling the products they already have, rather than continuing to manufacture more), a trend which should end relatively soon. Low energy prices have hurt oil energy companies but consumers have benefited and consumer spending remains strong, although it did fall from 3.6% to 3.2%. The Fed has made it clear that until economic metrics improve the bank will likely continue to be reluctant to raise rates.
Sharp fall in profits
Tech firm Sharp has seen an 86% fall in profits in the third quarter of 2015 compared to a year ago partly down to falling smartphone display sales. The company has already been bailed out twice by its banks in the last three years. The company’s LCD business has been hemorrhaging money but Sharp is in negotiations to sell the failing arm of its business.
Calling London Out
Swiss bank UBS has warned that London, England has the world’s most overpriced property market, calling it a bubble. The ratios of income to property prices and property prices to rent are unsustainable. UBS also warned that London must expect a major price correction, but the timeline on when this correction might take place remains unclear. Since 2013 house prices have increased nearly 40%. Hong Kong is home to the second most inflated property market according to the bank.
Deutsche bank cuts jobs
Deutsche Bank will cut 9 000 full time and 6 000 contractor jobs. It will also sell businesses that employ 20 000 people. The cuts caused a 5.5% drop in the company’s share price, despite that the cuts represent only 15% of the total workforce. Slow European growth has led to a €3.8 billion loss. The bank will not pay dividends through 2015 and 2016.
Oil out of ideas
Oil companies are taking a big hit as oil prices remain low. Chevron’s profits have fallen 64%, Exxon’s are down 47%, while Royal Dutch Shell announced a $7.4 billion loss on Thursday. Chevron will cut an additional 6-7 thousand jobs and cut capital spending by 25% compared to last year. Exxon’s spending is also down 22% and has sold off nearly half a billion dollars worth of assets.
Wal-Mart Shares Profits
Wal-Mart’s share prices fell after the company announced that it was forecasting a fall in profits in 2016. The company has succumbed to pressure and agreed to pay employees more, which will take a bigger bite out of the company’s profits in the future. Additionally online competitors are beginning to take a toll on the brick and mortar giant.
Dell agreed to buy EMC – a data storage company – for $67 billion, a move that seeks to shift the company from hardware into cloud based services. Dell’s bread and butter has been hardware but since the company went private two years ago it has been working hard to reshape the company in order to remain competitive.
Banks Making Bank
JP Morgan Chase’s profits rose by 22% to $6.8 billion while Wells Fargo grew to $5.4 billion and Bank of America’s profits were $4.5 billion. Despite these huge profits, the revenue generated failed to meet expectations.
China’s Trade Falls
China’s exports fell 3.7% in September, while imports were down by 21%. The numbers are not promising for a country that is in the midst of a slowdown. imports of some commodities reversed the recent trend and actually rose, sending mixed signals to global markets.
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