Spotlight on Industry Headlines

CANADA’S FACTORY SECTOR GROWS AT SLOWEST PACE IN 6 MONTHS C anadian factory activity grew at the slowest pace in six months in January, highlighting increasing challenges to the economy as restrictions to contain the coronavirus pandemic threaten to slow activity even further. The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) fell to a seasonally adjusted 54.4 in January, its lowest since July, from 57.9 in December, but remaining well above the 50 threshold that marks expansion in the sector. A surge in COVID-19 cases has led to lockdowns in a number of Canadian provinces. The Bank of Canada expects the econ- omy to contract in the first quarter after rebounding sharply since the first wave of the virus in the spring. Border restrictions and port congestion contributed to deliv- ery times lengthening for the 17th straight month, with the suppliers’ delivery times index nudging up to 34.0 from 32.7 in December. CANADA’S ECONOMY SUFFERED BIGGEST GDP DROP EVER IN 2020 The measure of future output fell to a six-month low of 60.2 from 64.1, but still showing that manufacturers were optimis- tic about output levels in the year ahead, hoping restrictions would ease. T he Canadian economy likely posted its largest con- traction ever in 2020, with GDP seen down 5.1 per cent on the year, according to a preliminary estimate from Statistics Canada, which also showed fourth quarter annualized GDP likely up 7.8 per cent. Canada’s economy continued to outpace expectations in November, rising 0.7 per cent, ahead of analyst estimates of a 0.4 per cent gain. December GDP is likely to be up 0.3 per cent, Statscan said, though economic activity remains 3 per cent below pre-pandemic levels. The growth in November and December was stronger than expected, but post-holiday lockdowns are expected to weigh on economic activity in the new year. Ontario, Canada’s most populous province, entered a lock- down on Dec. 26 that has now been extended into February inmany parts of the region. Quebec is also amid a strict lock- downandcurfew,whileotherprovincesalsohaverestrictions. The goods-producing sector posted a 1.2 per cent increase in November, while the service-producing sector grew by 0.5 per cent.

U.S. PRIVATE COMPANIES ADDED 174,000 JOBS IN JANUARY Today, the U.S. federal government awards an esti- mated US$600 billion in goods and services contracts every year. S ome Canadian politicians are spooked after U.S. President, Joe Biden signed an executive order that tightened the rules to ensure that U.S. tax- payer dollars aren’t handed out to foreign companies. But economists said Biden’s ‘Buy American’ policy is likely to have little impact on Canadian companies. That’s because the U.S. government has restricted foreign companies’ ability to bid on its contracts for nearly a century, and also historically, the amount of Canada’s economy tied to U.S. government spending has been small to negligible. The Buy American Act dates back to 1933 and put measures in place to ensure that U.S. taxpayer dollars support the U.S. economy — although exactly how to do so has been a challenge as the economy has become more and more global in nature. ‘BUY AMERICAN’ ORDER LIKELY TO HAVE LITTLE IMPACT ON CANADIAN FIRMS A month after reporting the first loss since April in the U.S., the employment picture bounced back in January as companies added 174,000 new jobs, according to a report from payroll processing firm ADP. The gain beat the 50,000 estimate from economists surveyed by Dow Jones and improved on the 78,000 December decline, a number that was revised from the initially reported drop of 123,000. While the U.S. economy has reclaimed 12.3 million jobs since May, that still leaves 10.7 million American workers unemployed, more than 5 million above pre-pandemic levels.





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