Briefly: “UBS: Canada struggling” and more news

The way UBS sees it, Canada just cannot escape the U.S. and global undertow.

Unveiling their updated ‘Global Economic Outlook 2012’, UBS sees another year of trend-like growth, with the developed economies characterized by slow and uneven recoveries, which offsets superior growth.

Shouldering what is going on with the rest of the world and a domestic demand that has far less ground to recover before reaching sustainable levels, as well as the natural expiration of fiscal stimulus in 2011 and 2012, Canada will experience a deceleration of growth. After growing an expected 3.1% in 2010 and 2.8% in 2011, UBS sees 2.6% growth in 2012.

As for the global GDP, they are predicting a rise of 4.1% in this year, 3.7% in 2011 and 3.8% in 2012.

– John Powell

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U.S. consumer spending posts tiny gain

Americans slowed their spending in September to the weakest pace in three months and their incomes fell for the first time in 14 months.

Personal spending rose at an annual rate of 0.2 per cent in September, the Commerce Department said Monday. That’s below the 0.5 per cent gains recorded in July and August.

Incomes fell 0.1 per cent in September, following a 0.4 per cent rise in August that had been pushed higher by the return of extended unemployment benefits.

The drop in incomes was the first decline since incomes fell 0.3 per cent in July 2009. The August gain had been skewed by the reinstatement of an extended unemployment benefits program, which had temporarily lapsed in July after Republicans had blocked an extension.

Those extended benefits expire at the end of November. It’s unclear if Democrats can muster enough votes to pass one more extension of benefits before the year ends.

The weak growth in spending and incomes underscored how fragile the economy remains. Consumers facing high unemployment and slow job growth remain reluctant to spend.

“In the current environment, consumption cannot outgrow incomes for long. Without a meaningful acceleration in jobs growth, which remains unlikely, consumption growth will slow again,” Paul Dales, chief U.S. economist at Capital Economics, said in a research note.

Consumer spending is watched closely because it accounts for 70 per cent of total economic activity.

The government reported Friday that the economy grew at an annual rate of two per cent in the July-September quarter. That’s only slightly better than 1.7 per cent growth in the April-June quarter.

Many economists believe that growth in the current quarter will be little changed from the third quarter.

Consumer spending had helped boost third-quarter growth. It was the best showing since a 4.1 per cent rise in consumer spending at the end of 2006, before a severe recession hit.

However, Monday’s report suggested the strength occurred in July and August and that spending slowed considerably in September.

The savings rate fell to 5.3 per cent in September, the lowest rate since August 2009. But it is still well above the 2.1 per cent average savings rate for all of 2007.

An inflation gauge tied to consumer spending rose a slight 0.1 per cent in September and was flat after excluding volatile food and energy.

In response to the weak economy, the Federal Reserve this week is expected to announce a program to buy Treasury bonds. The effort is designed to drive interest rates lower and spur economic activity.

– Associated Press

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U.S. manufacturing expands

U.S. manufacturing activity expanded last month at the fastest pace since May due to a surge in new orders and production.

The Institute for Supply Management says its manufacturing index read 56.9 in October, up from 54.4 in September. It was the 15th straight month of growth. A reading above 50 indicates growth.

Stocks rose after the report was released. Wall Street expected a small decline.

Manufacturing has helped drive the economy out of recession last year, but growth had slowed in recent months.

Meanwhile, manufacturing activity in China rose last month. A survey affiliated with the government said its measure rose to 54.7 in October from 53.8 in September. That caused the stock market to rise in morning trading.

– Associated Press

(11/01/10)