Mark Zandi, chief economist for Moody’s analytics was quoted as saying that if the bill were delayed in the Senate, “things go from being bad, to worse, to catastrophic” in a matter of days.
Confidence in a country’s ability to repay its debts to bondholders is nothing to mess with. The Government Accountability Office estimates that 2011’s debt ceiling debacle raised the government’s borrowing costs by USD$1.3 billion. Lily Adams, a Treasury spokesperson, said: “As Secretary Yellen has warned for months, brinkmanship over the debt limit does serious harm to businesses and American families, raises short-term borrowing costs for taxpayers, and threatens the credit rating of the United States.”
Reuters highlighted tax preparation services, U.S. defence companies and student loan-facing banks as potential stocks that could benefit from the relatively small budgetary changes. Overall, the world’s markets appeared to take the news in stride, as it has appeared that a compromise was likely since late last week.
It’s the economy, stupid!
Despite the fact that two-thirds of Canucks think we’re in a recession, according to a Pollara poll, it hasn’t stopped many from reaching for their wallets. Statistics Canada reports that Canadians increased their spending by 5.7% from the previous quarter, and spending on travel was particularly scorching, as it was up 6.8%.
On Wednesday, StatCan reported that Canada’s gross domestic product (GDP) had risen at an annualized rate of 3.1% for the first quarter of the year. This blew away analyst expectations of 2.3% to 2.5%, and was much higher than the 0.1% decrease we saw during the final quarter of 2022.
Of course, in response to this positive news, markets have begun to anticipate the Bank of Canada (BoC) will “take away the punch bowl” by bringing back key interest rate increases. Futures markets are now pricing in a 40% chance of a rate increase in next week’s BoC meeting, and a 100% chance of at least one rate increase by September.
Only time will tell if Canadian consumers (powered by a historically strong job market) can continue their spending at this rate, or if our pandemic-filled piggy banks will soon run empty. While it will be tough to keep that 3.1% GDP growth figure going forward, we really do need to wake up to the fact that we are most definitely not in a recession. Given how hot the U.S. jobs numbers were this week, I’d say it’s a pretty good bet that North America’s economy will continue ticking along for at least the next six months.
Looking at future sales in the U.S.
It’s a real mixed bag of U.S. earnings results again this week. Personal computing giants HP and Dell traded flat after reporting mostly positive quarterly earnings numbers. The market appears to be focusing on reduced future sales predictions. (Numbers in this section are U.S. currency.)
Read the full article here