Monday, December 4, 2017

In spite of debt warnings Canadians to increase their holiday spending

The Organisation for Economic Co-operation and Development (OECD warns in a recent report that rising private debt loads in Canada as well as the UK and South Korea pose a risk to further growth. The three lead the world in household debt.
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Consumer debt in Canada
The OECD report notes that higher indebtedness does not mean there are necessarily going to be problems. However, it does increase vulnerability to shocks. If the economy turns down or interest rates are raised substantially consumers might have more difficulty handling their debt load.
In Canada, consumer debt is over 100 percent of GDP higher even than in the UK and South Korea where it is over 80 percent.
On a brighter note, the OECD updated its expectations for economic growth from September predicting that the Canadian economy would grow by 3.2 percent this year the best performance among the G7 countries.
Canadian's debt-to-income ratio had reached a record back in September as discussed in a September Digital Journal article.
Canadian holiday spending still expected to be at record levels
Canadians are likely to spend more in spite of their debt loads, probably because most of them think they know how to manage their debt.
A new Manulife Bank of Canada survey shows that 54 per cent of Canadians think they can manage their debt. 64 percent claim they aim to become debt free. Almost a quarter of consumers were embarrassed to talk of the amount of their debt and another 40 percent did not know where to turn for help.
Less than one third achieved their debt reduction goals in the last year. 53 percent of Canadians believed financial challenges took their toll on mental or emotional health. One third also claimed they had a negative impact on physical health as well.
In spite of the negative associations with increasing debt, Canadians are expectedto spend at record levels this holiday season.
A survey by website RetailMeNot.ca found that Canadians are planning to spend on average $1,400 per person this season. The survey was of 1,500 adults. 43 percent said they tended to overspend.
With respect to gift giving each person committed an average of $653, a full one hundred dollars more than last year. It was also $171 more than the average American.
Black Friday and Cyber Monday
In spite of their intention to spend, only 26 percent said they intended to take advantage of deals on Black Friday and Cyber Monday on November 24 and 27th. This contrasts with Americans 54 percent of whom planned to take advantage of the deals.
However, 60 per cent of those responding thought that excitement about the two deal days was growing in Canada.
Previously published in Digital Journal

Sunday, December 3, 2017

Little progress after fifth round of NAFTA talks end in Mexico City

(November 22)The 5th round of NAFTA talks ended on Tuesday that had started on Friday in Mexico City. Even after three months of talks, the parties remain far apart on major issues.

Lack of progress even on minor sections of NAFTA agreement
The negotiations that started Friday ended with negotiators failing to finalize new agreements on even minor sections of the NAFTA pact.
Robert Lighthizer, U.S. Trade Representative, complained that Canada and Mexico are not seriously negotiating on key areas in NAFTA that need to be overhauled. He said that the U.S. will not accept a deal that does not shift trade flows in favor of the U.S.
Lighthizer said: “While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway.”
The U.S. has advanced proposals that neither Canada nor Mexico are willing to accept.
Phil English, a senior adviser at the law firm of Arent Fox in Washington DC said: “They really need to be much further along than this, and I’m concerned that this negotiation is on the verge of stalling out. I’m very concerned that this growing inertia on the big issues is creating an environment that will lead to bad results.”
The three political leaders from each country leading the talks did not take part in this round of talks. They are not expected to attend smaller sessions held between now and the sixth round that is scheduled for Jan.23-28.
An anonymous U.S. government official said that it was still possible to reach a deal by March. In a joint statement the three countries said: “Chief negotiators reaffirmed their commitment to moving forward in all areas of the negotiations, in order to conclude negotiations as soon as possible."
Unresolved issues
The U.S. wants a full sunset clause that would terminate the pact unless all three countries agree on an extension. A revised U.S. list of objectives speaks only of a periodic review of the pact.
On the important issues of auto content there was no movement. Nor was there a solution to the problem of dairy products with Canada insisting that its supply management system be protected. The U.S. also wants to end dispute resolution panels — while Canada just recently submitted U.S. actions imposing duties on some Canadian softwood lumber to the panel arguing they were unfair and a violation of NAFTA.
U.S. demands are already generating tit-for-tat proposals. The U.S. wants to limit foreign access to U.S. government procurement projects resulting in Mexico making a similar proposal with respect to its own projects.
Mexico is planning to put forth a counter-offer to the U.S. content demands in the auto sector. Mexican Economy Minister Ildefenso Guajardo said that the current U.S. proposal was impractical and inefficient for the industry. He said that Mexico was willing to help the U.S. balance its trade with Mexico but only through expansion of exports not limitation on trade between the two countries.
Guajardo said: "It’s a negotiation with a high degree of complexity, but we’re working through it, and at some point we will find spaces for a landing that serves everyone."
Guajardo noted that there had been progress on issues of digital commerce, food safety and the environment. Much of the technical work was already finished he said and that some of those issues could be concluded even between negotiating rounds.
Mexico and Canada have issues with some U.S. proposals
The Canadian Foreign Minister Chrystia Freeland told reporters that there were significant differences in key areas. She said the U.S. position on the sunset clause and the auto proposal were extreme and could not be accepted. Freeland maintained the sunset clause was redundant since any party can withdraw after six months notice. Canadian officials have even warned that there will be no NAFTA deal if the U.S. doesn’t back down on some issues.
The U.S. is demanding that half of the content of all North American-built autos be produced in the U.S. The broader North American content should be increased from 85 percent from 62.5 percent. There is currently no rule in NAFTAgoverning U.S.-only production. The U.S. also wants all steel to originate in North America.
Asked if Canadians should prepare for life without NAFTA, Freeland said Canada's position is to "hope for the best and prepare for the worst and Canada is prepared for every eventuality."
The talks often pit the U.S. against both Mexico and Canada. Steve Verheul, the lead Canadian negotiator said: “Canada and Mexico are working very closely together. We have a lot of issues in common.”
Trump has repeatedly threatened to scrap the deal if the terms don't suit him.
Talks could extend even into 2019
Brett House, an economist at Scotiabank, said that Trump could give notice of withdrawal and not follow through. He could also try to withdraw and face huge resistance in Congress. House thought that there was only a 20 percent chance that there would be a deal by March but that it was much more likely that they would muddle through for the rest of the year and into 2019.


Previously published in Digital Journa