Sunday, March 1st-2.4°C

Markets to focus on Bank of Canada: will central bank cut rates again?

TORONTO - Market attention moves to the Bank of Canada this week now that the quarterly earnings season has pretty much wrapped up.

There are still a few companies to report, notably Bank of Nova Scotia (TSX:BNS), which hands in results on Tuesday.

A run of generally positive reports from the other big banks helped give some lift to the TSX last week, which finished up 0.04 per cent.

Traders are looking to the central bank's rate announcement on Wednesday to see if it will again surprise markets with a cut as it did in January. At that time, the bank decided to take a pre-emptive move to support the economy to deal with the economic effects of the collapse in oil prices, cutting its key rate a quarter point to 0.75 per cent.

Since then, there has been heightened speculation that the bank would cut again, as early as Wednesday. But Bank of Canada governor Stephen Poloz indicated last week that the bank may not want to move right away.

He said the cut in January has given the Bank of Canada time to figure out how best to steer the country back toward stability. And Poloz added that the rate cut in January has given policy-makers more confidence the economy should be back on a more sound footing by the end of next year, rather than some time in 2017.

"Prior to this week, the market had not just a rate cut almost completely priced in for March, it was assuming there was a good possibility of yet another rate cut after March," said Doug Porter, chief economist at BMO Capital Markets.

"Now, it’s actually seen as a bit of longshot for the bank to cut rates in early March although the market still is of the view there is a good possibility that at some point rates could be trimmed again."

Porter said that another rate cut depends on where oil prices head and the bank getting a better idea of the economic fallout from prices that have plunged 40 per cent from late November alone amid a huge demand/supply imbalance.

"It might take a little bit more time for everybody, including the bank of Canada, to get a better grip on exactly how serious this effect has been," he said.

Statistics Canada releases its latest data on gross domestic product growth for December and the fourth quarter on Tuesday but Porter doesn’t think that report will factor into decision-making on rates.

"I would assume they have a good read on it already," he said.

"It is going to be below what the bank expected in its monetary policy report in January — they were at that time expecting 2.5 per cent growth, it’s going to be closer to two per cent we think."

The other major economic event of the week is Friday when the U.S. government releases its employment report for February. Canadian employment data for February will be released March 13.

"The big story is the (U.S.) job market has turned for real over the last year and will just strengthen the case that the Federal Reserve will raise rates later this year," added Porter.

"We’re leaning towards September (but) I don’t rule out June."

The Canadian Press


Asian demand for Canadian lobster on the rise, prices not so much: fisherman

HALIFAX - Canadian lobster exports to Asia are growing but one lobster fisherman says that hasn't had much impact on Maritime shore prices.

Bernie Berry of the Coldwater Lobster Association said prices are not yet reflecting the increased Asian demand.

"We're not trying to look a gift horse in the mouth, it's just we were expecting maybe a little bit more," said Berry, whose organization represents fisherman in southwestern Nova Scotia.

Berry said prices in his area this year are about 10 cents higher on average than the year before. The bigger advantage of the Asian markets is that it is easier to unload catches, he said.

"Before the market in China really took off ... we were landing so many lobsters some of the times things would get backlogged," he said.

"But now I think there's enough market, it's big enough and still getting bigger, that it just absorbs what we can catch even though we're at record levels."

Exports of live Canadian lobsters to Asia have increased by more than 400 per cent over the past five years, Halifax Stanfield International Airport recently said in a news release.

The airport said during the holiday season last year, Korean Air Cargo made weekly flights to South Korea with each one carrying 40 to 50 tonnes of lobster, with the largest shipment recorded at 100 tonnes.

While China remains the biggest Asian market for Canada's lobster, South Korea is becoming increasingly important, said Geoff Irvine of the Lobster Council of Canada.

Canadian exports of live lobster to South Korea doubled in value between 2011 and 2013, the federal government says.

On Jan. 1, the Canada-Korea Free Trade Agreement came into effect, which Irvine said should further increase Canada's share of the Korean market.

"The key thing about South Korea is that the Americans have had a free trade agreement for several years and we haven't," said Irvine.

Irvine said the increased demand in Asia can be attributed in part to rising middle classes in the region.

The Lobster Council of Canada recently announced a branding plan for lobster exports, which Irvine said will include Asian markets as part of its focus.

The marketing plan depends on a proposed levy in which lobster fishermen, buyers and processors across the Maritimes would pay one cent per pound of lobster caught to cover the cost of promotional initiatives.

Nova Scotia Fisheries Minister Keith Colwell has said he hopes the levy can be in place by the fall. However, it has gotten resistance from some fishermen and buyers in the province.

Berry said while he understands the reluctance towards the levy, he believes marketing will be key to bringing up prices.

"As much as China's expanded over the past four, five or six years, I think it could be so much bigger and I guess it's how we get into that market and try to market our product that we're going to get a better price."

The Canadian Press

Federal food safety watchdog says 2 cows with BSE born on same Alberta farm

OTTAWA - Canada's food safety organization says two cows discovered to have mad cow disease in the last five years were born on the same Alberta farm.

Paul Mayers of the Canadian Food Inspection Agency said the most recent case detected earlier this month involves a cow born in 2009.

Another cow born on the same farm in 2004 tested positive for the disease in 2010, Mayers said. No parts of the cows got into human or animal food, the agency has said.

"At this time it would be purely speculative to suggest that because this case was born on the same farm as the previous case that there is some additional risk factor link," he said on Friday.

Mayers said the current investigation will include tracking 750 animals in the same birth cohort, which includes cows born before and after the infected animal.

He added investigators will also look at all the cows born on the farm between 2004 and 2010 which may have been exposed to the same feed.

"The feed cohort is of course larger," he said. "The focus of our feed investigation will include consideration on whether any non-compliance with respect to the feed ban may have contributed to this case.

"The scope of the investigation is broad," he said.

Mayers said it's the first time Canada has had two cases of mad cow disease linked to the same birth farm. It is also the first case detected in a cow in four years, he said.

Officials said China is the latest country to impose temporary trade restrictions on beef imports from Canada, joining Taiwan, Peru, Belarus and South Korea. Indonesia has also suspended imports of non-edible bone meal.

Mayers has said the case in Alberta has been reported to the World Organisation for Animal Health and won't affect Canada's official beef trade status.

"Canada's suite of internationally recognized safeguards effectively protects the safety of food and animal feed," he said.

Canada's chief veterinary officer, Dr. Harpreet Kochhar, said there was a comprehensive investigation into the 2010 case.

"We did a very thorough analysis of that particular feed cohort," he said. "The investigation actually concluded there wasn't one specific cause that could have been pointed out."

He added one possible factor could have been cross-contamination of feed, but Canada has since instituted an enhanced feed ban and improved surveillance measures.

"We are actually much more equipped," he said.

He said since 2005 more than 430,000 cows have been tested for mad cow disease.

A case of bovine spongiform encephalopathy in 2003 at an Alberta farm devastated Canada's beef industry. About 40 countries closed their borders to Canadian cattle and beef products, although most of those markets have since reopened.

— By Clare Clancy in Regina

The Canadian Press


OSC bans Conrad Black from holding company director, officer roles

TORONTO - Former media baron Conrad Black has been permanently banned from acting as a corporate director or officer of a public or private company in Ontario.

In a long-awaited decision Friday, the Ontario Securities Commission ruled that it's in the public's interest to prohibit Black and his ex-colleague, former Hollinger International Inc. chief financial officer John Boultbee, from roles that would enable the pair to direct or influence the management of a company's business.

The ban would "properly limit their ability to undertake conduct in the future that would be detrimental to the integrity of Ontario’s capital markets," according to the 45-page ruling.

"We have also concluded that, in the circumstances described in these reasons, such prohibitions should be permanent as there is no basis in these specific circumstances in our view for considering that the risk of future misconduct is somehow circumscribed by the passage of time."

Black, who is out of the country, dismissed the impact of the OSC's decision saying, as he did in testimony at the regulator's hearings last year, that he did not have plans to hold a position as a corporate director or officer within Ontario.

"It was never a material issue, since, as I testified, no one could pay me enough to be a director or officer of a public company in that jurisdiction," he wrote in a statement Friday, forwarded by his spokesman.

"The decision is at least welcome as the comparatively inoffensive end of more than 11 years of persecution," Black added.

The commission also ruled Friday that a proposal to personally ban Black and Boultbee from trading securities in the province was too far-reaching, concluding that their U.S. convictions were not related to these activities.

"The role of the commission is to prevent future conduct, having looked at past conduct as a guide, and not to mete out punishment for such past conduct," it said.

Black was convicted of wire fraud in the United States in 2007 while head of Toronto-based Hollinger Inc. in a case that, among other things, involved allegations that he and Boultbee took $600,000 from Hollinger in the form of non-compete payments.

A U.S. jury found Black, Boultbee and former business partner Peter Atkinson, guilty of three counts of fraud each. Black was also convicted of one count of obstruction of justice.

Later, the 7th U.S. Circuit Court of Appeals tossed two of the three fraud convictions against the men after the U.S. Supreme Court ruled that one of the laws used to convict had been too broadly applied.

As a result of the initial verdict, Black was sentenced to 42 months and fined $125,000, serving 37 months in a Florida prison. Boultbee was sentenced to time served, fined $500 and ordered to pay $15,000 in restitution to the Sun-Times Media Group. Atkinson was given time served and fined $3,000.

Another former colleague, David Radler, reached a deal with U.S. prosecutors in return for testimony against the men. He pleaded guilty to one count of mail fraud at U.S. District Court, and was sentenced to 29 months in jail and ordered to pay a fine of $250,000.

Friday's decision by the Ontario provincial regulator follows years of litigation surrounding Black's activities while he was head of the Hollinger group, which owned several major newspapers around the world.

Last October, he testified in front of the OSC that he had "no alternative" but to fight regulatory prohibitions on his activities and seek to clear his name of allegations and convictions that he considered illegitimate.

Black has previously been a director of several major companies, including CIBC (TSX:CM), and was both an officer and director of several of the companies within the Hollinger newspaper group that he also controlled as a major shareholder.

Despite the convictions in the U.S., Black has always insisted that he didn't break the law.

In contrast, staff with the commission argued that Black had the potential to commit further acts of fraud because he didn't show remorse for his actions.

Follow @LindaNguyenTO on Twitter

The Canadian Press

Most actively traded companies on the TSX

Some of the most active companies traded Friday on the Toronto Stock Exchange:

Toronto Stock Exchange (15,234.34, down 6.82 points):

Penn West Petroleum Ltd. (TSX:PWT). Oil and gas. Up five cents, or 2.03 per cent, to $2.51 on 27.9 million shares.

Bombardier Inc. (TSX:BBD.B). Aerospace, rail equipment. Down one cent, or 0.38 per cent, to $2.60 on 23.9 million shares. Its newest plane, the Bombardier CS300, made a five-hour test flight Friday, carrying Bombardier's hopes for recovering confidence in the company following repeated delays and mounting costs for its new line of passenger jets.

Pacific Rubiales Energy Corp. (TSX:PRE). Oil and gas. Down six cents, or 1.58 per cent, to $3.73 on 18.4 million shares.

Manulife Financial Corp. (TSX:MFC). Financial services. Down one cent, or 0.05 per cent, to $21.77 on 8.9 million shares.

BCE Inc. (TSX:BCE). Media. Down 34 cents, or 0.62 per cent, to $54.71 on 8.6 million shares.

Harte Gold Corp. (TSX:HRT). Miner. Up 1.5 cents, or 37.50 per cent, to 5.5 cents on 5.5 million shares.

Companies reporting major news:

Aimia Inc. (TSX:AIM). Loyalty programs. Down $1.50, or 10.45 per cent, to $12.85 on 8.2 million shares. It posted adjusted earnings of $60 million or 20 cents a share, four cents short of forecasts, although revenue of $761.1 million beat estimates.

Royal Bank of Canada (TSX:RY), Bank. Up 24 cents, or 0.31 per cent, to $78.31 on 3.8 million shares. Brand Finance ranked RBC the country's most valuable corporate brand for the second year in a row, estimating its brand value at US$12.5 billion — up from just over US$11 billion in 2014.

The Canadian Press

TSX advances amid rising oil prices, lower than expected U.S. growth

TORONTO - The Toronto stock market pulled back slightly Friday amid soft U.S. economic data and despite rising resource and financial stocks.

The S&P/TSX composite index closed down 6.82 points at 15,234.34. The Canadian dollar gained 0.15 of a U.S. cent to 79.98 cents.

New York indexes were significantly lower following a report that U.S. gross domestic product grew at an annual rate of 2.2 per cent in the October-December quarter, weaker than the 2.6 per cent first estimated last month in a reflection of weaker business stockpiling and a bigger trade deficit.

A bigger surprise was a glum reading on the manufacturing sector in the U.S. Midwest, which fell to a 5 1/2-year low in February. The Chicago Purchasing Managers Index fell to 45.8 from 59.4 in December, a reading indicating contraction.

"That number is a bit of a shocker, because that PMI number has remained consistently above 50 for many, many years," observed Himalaya Jain, portfolio manager, portfolio advisory group at Scotia McLeod.

"So, there is something very unusual (and) I would say that number would be treated with a very, very high degree of skepticism."

Also, the University of Michigan's widely watched consumer sentiment index slipped to 95.4 from 98.1 in January.

The Dow Jones industrials fell 81.72 points to 18,132.70, the Nasdaq lost 24.36 points to 4,963.53 and the S&P 500 index retreated 6.24 points to 2,104.50.

The TSX metals and mining sector led advancers, up 1.70 per cent as May copper was virtually unchanged at US$2.69 a pound.

April gold rose $3 to US$1,213,10 an ounce and the gold sector gained 1.1 per cent.

The energy sector fell 0.59 per cent even as oil prices advanced after having plunged almost $3 a barrel on Thursday to the lowest level in a month as data continued to show large buildups of crude inventories in the United States.

On Friday, the April crude contract in New York closed up $1.59 at US$49.76 a barrel though still own more than a dollar on the week as U.S. inventories remain at their highest levels in 80 years. Also depressing oil and other commodity prices lately is a steadily strengthening U.S. currency.

Tech stocks led decliners, down 2.07 per cent.

The TSX finished the week up 0.04 per cent amid a run of generally well-received earnings reports from most of the big Canadian banks.

In corporate news, Aimia Inc., (TSX:AIM) the company that operates customer loyalty programs for Air Canada (TSX:AC) and for TD Bank (TSX:TD) and CIBC (TSX:CM) credit cards and other business partners posted adjusted earnings of $60 million or 20 cents a share, four cents short of forecasts. Revenue of $761.1 million beat estimates, but the stock dropped $1.50 or more than 10 per cent to $12.85.

And Bombardier Inc.'s (TSX:BBD.B) CS300 passenger jet made its long-awaited maiden flight Friday. Prior to liftoff, Bombardier announced that it will get about $1.1 billion from a previously announced equity financing to help pay for the sharply higher costs of the CSeries program. Also, the Wall Street Journal says Bombardier plans to issue 3 1/2-year and 10-year debt but pricing has yet to be set. Bombardier shares lost a penny to $2.60.

The Canadian Press

Signed contracts to buy US homes climb in January to highest level in nearly 18 months

WASHINGTON - The number of Americans signing contracts to buy homes rose at a healthy pace in January, a sign that home sales are poised to accelerate after a slow start to the year.

The National Association of Realtors said Friday that its seasonally adjusted pending home sales index increased 1.7 per cent to 104.2 last month. December's figure was also revised higher to show a decline of only 1.5 per cent, considerably better than a previously estimated drop of 3.7 per cent.

The index is now 8.4 per cent above its level one year ago and is at the highest level since August 2013.

The data point to a rebound in sales of existing homes in the coming months, particularly as the spring buying season gets underway. Measures of sales and construction fell last month, raising concerns that the housing market would continue to struggle after a weak 2014. But economists expect that strong job gains, low mortgage rates and solid consumer confidence will give a moderate boost to home sales this year.

"Through the volatility, the trend in home sales is probably up modestly at least," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.

The largest increase in signed contracts occurred in the South, where they rose 3.2 per cent, followed by the West, where sales rose 2.2 per cent. Contract signings inched up just 0.1 per cent in the Northeast, where heavy snow may have weighed on housing. Pending homes sales slipped 0.7 per cent in the Midwest.

The increase in signed contracts comes after some disappointing data at the start of the year. Sales of existing homes tumbled 4.9 per cent in January to a nine-month low, while sales of new homes slipped 0.2 per cent. And new construction of homes and apartments fell 2 per cent in January.

But healthy hiring should encourage more Americans to start looking at homes. There are 3.2 million more Americans earning paychecks than there were 12 months ago. And younger Americans are finally seeing strong job gains, which could push up the number of first-time homebuyers, a critical ingredient in any housing recovery.

Mortgage rates remain near historic lows. The average 30-year fixed mortgage rate was 3.76 per cent last week, according to the mortgage giant Freddie Mac. That has ticked up in recent weeks, but is well below the 4.33 per cent average from a year ago.

The Canadian Press

US consumer sentiment index slides in February as wintery weathers chills consumer spirits

WASHINGTON - Harsh winter weather left U.S. consumers feeling a bit less confident this month, the University of Michigan says. But confidence levels still remain at the highest level in eight years.

The University of Michigan says its index of consumer sentiment slid to 95.4 in February from an 11-year high of 98.1 in January.

"It is hard not to attribute the small February decline to the temporary impact of the harsh weather," said Richard Curtin, chief economist of the surveys. Consumer confidence sank dramatically in the hard-hit Northeast and Midwest and rose in the South.

Overall, consumers' assessment of current economic activity and their expectations for the future both fell.

Earlier this week, the Conference Board, a business research group, said that its consumer confidence index fell a bit this month but remained at the highest levels since before the Great Recession began in late 2007.

A big drop in gasoline prices — which left money in consumers' pockets and contributed to their improving outlook — has reversed in recent weeks: Gasoline prices have risen to an average $2.37 a gallon nationwide from $2.04 a gallon a month ago, according to AAA.

"Consumers remain sensitive to any hint of decreased spending power, " Terry Sheehan, senior analyst at Stone McCarthy Research Associates, noted in a report, "and the rise in gasoline prices starting in February after seven months of declines was unwelcome." Still, it noted that confidence "levels remain among the strongest since before the financial crisis and recession."

The Canadian Press

Canadian dollar advances

The Canadian dollar was higher Friday morning but well off session highs amid some disappointing U.S. economic data and rising oil prices.

The loonie rose 0.1 of a U.S. cent to 79.93 cents.

U.S. gross domestic product grew at an annual rate of 2.2 per cent in the October-December quarter, weaker than the 2.6 per cent first estimated last month in a reflection of weaker business stockpiling and a bigger trade deficit.

A bigger surprise was a glum reading on the manufacturing sector in the U.S. Midwest, which fell to a 5 1/2-year low in February. The Chicago Purchasing Managers Index fell to 45.8 from 59.4 in December, a reading indicating contraction.

Also, the University of Michigan's widely watched consumer sentiment index slipped to 95.4 from 98.1 in January.

Oil prices advanced after plunging almost $3 a barrel on Thursday to the lowest level in a month as data continues to show large buildups of crude inventories in the United States. On Friday, the April crude contract in New York was up 88 cents to US$49.05 a barrel.

Crude prices have moved generally lower this week as the Department of Energy said U.S. crude inventories rose for a seventh straight week, leaving supplies at their highest levels in 80 years. Also depressing oil and other commodity prices lately is a steadily strengthening U.S. currency. A stronger greenback makes commodities more expensive for holders of other currencies and depresses demand.

Metal prices declined Friday with April gold up $5.70 to US$1,215.80 an ounce while May copper was down two cents to US$2.67 a pound.

The loonie looks to end this week higher amid lower expectations for another interest rate cut by the Bank of Canada.

There has been speculation that Canada's central bank would follow up its surprise quarter-point cut in January with another cut next week to support the economy against the negative effects of the collapse in oil prices.

But expectations for such a cut started to fade earlier this week following remarks from Bank of Canada governor Stephen Poloz, who said the January rate cut gives central bankers time to figure out how best to steer the country back toward stability as the effects of the plunge in crude prices ripples across the economy.

The bank makes its next interest rate announcement on Wednesday.

The Canadian Press

Bombardier's new planes takes to the air

Canada's newest airplane flew for the first time Friday, carrying Bombardier's hopes that it will help put the company's latest turbulence behind it.

The CS300 quietly lifted off under -21C temperatures from the same Montreal area runway as did the smaller CSeries 17 months earlier.

The two are from a family of narrow-body, twin-engine commercial jet airliners under development by Bombardier.

The CS300 is a 135- to 160-seat aircraft slated to enter into service in mid-2016, about six months after the smaller CS100.

Weather wasn't the only difference that marked the plane's first flights.

While optimism surrounded the CSeries' initial flight on Sept, 16, 2013, Bombardier said Friday's flight renewed its momentum following a series of challenges that have tested investor patience.

New CEO Alain Bellemare said the company is at an important "inflection point."

"We've been struggling, we have had our share of challenges because of just the pure workload of developing such a complex and high-tech aircraft...but we're getting close to the goal line so I feel good about where we are," he told reporters in the hangar that houses several CSeries test aircraft.

Bombardier's share price has plummeted 47 per cent since that first test flight amid financing concerns that prompted the company to obtain $1.1 billion in equity financing, seek another US$1.5 billion in debt, suspend its dividend and pause development of its Learjet 85.

There's also been a shuffling of senior executives, including the CEO and former head of aerospace, as the plane's development costs have soared to US$5.3 billion from the original estimate of US$3.4 billion.

Test flights for the CSeries resumed last fall, more than three months after an engine failure shut down the trials.

The Canadian Press

Netflix's risky bet has paid off

Even if it never wins another award, "House of Cards" already ranks among the most influential series in television history.

The political drama launched Netflix's expansion into original programming two years ago, a risky bet that might have toppled the Internet video service had "House of Cards" flopped and squandered its estimated $100 million investment. Instead, the show was an immediate hit with viewers and critics, giving Netflix the financial clout and creative firepower to further transform how we watch and define "television." And it spurred other online services such as Inc. and Google's YouTube to spend more on their own original content to create shows that rival those produced by broadcast and cable channels.

Season three debuted early Friday, giving fans a chance to see Frank and Claire Underwood continue their machinations, now from a hard-won White House perch. The show marks just one of more than 20 original series or movies that Netflix is scheduled to show this year. Producing that much original content would have seemed like a long shot before "House of Cards" first established Netflix as more than a convenient and cheap way to watch recycled TV series and movies previously released on DVD. Launched in February 2013, "House of Cards" was among the first major series to release an entire season at once, a move that fed into viewers' desire to devour several episodes at a time instead of having to wait a week to see another installment.

Many analysts now view "House of Cards" and Netflix's other award-winning series released a few months later — "Orange is the New Black" — as turning points in the company's evolution, similar to the impact "The Sopranos" and "Sex and the City" had for HBO. Netflix CEO Reed Hastings now regularly likens the company to the HBO of the Internet.

Just how many Netflix subscribers have watched "House of Cards" remains a mystery because the company has refused to reveal the viewership of any of its series. But this much is clear: "House of Cards" came along at a pivotal juncture for Netflix.

The Los Gatos, California, company was still recovering from a subscriber backlash triggered in mid-2011 by a dramatic increase in its prices and a bungled attempt to spin off its DVD-by-mail service. Undaunted, Netflix continued to commit billions of dollars to long-term licensing agreements with movie and TV studios while also spending heavily on an international expansion. Some analysts questioned whether the company could survive.

Wall Street's doubts have dissipated, and Netflix's service has become an entertainment staple around the world. Since "House of Cards" was released, Netflix's stock has nearly tripled to about $480 while its Internet video service has grown subscribers by 24 million subscribers to 57 million. Half of those gains have come in the U.S.

The momentum emboldened Netflix last year to raise its monthly streaming prices by a $1 to $9. There was little blowback from customers this time. Netflix's widening appeal may have also contributed to HBO's decision to begin selling its channel as a separate Internet service later this year. HBO hasn't yet announced its prices for the HBO Go service.

The next challenge for Netflix will be proving that it can consistently deliver series as good as "House of Cards," which has received 22 Emmy nominations and won four awards so far, and "Orange Is The New Black," which has collected three Emmy awards among its 12 nominations.

While some of Netflix's other original programs, such as "Hemlock Grove" and "BoJack Horseman," have attracted enthusiastic followings, they haven't proven to be a subscriber drawing card like "House of Cards," said Rosenblatt Securities analyst Martin Pyykkonen. "Netflix needs to get to the point where it's showing three or four high-quality shows like 'House of Cards" every quarter if it wants to retain subscribers," he said.

The Canadian Press

US economy grew at moderate 2.2 per cent in fourth quarter, weaker than initial estimate

WASHINGTON - The U.S. economy slowed more sharply in the final three months of the year than initial estimates, reflecting weaker business stockpiling and a bigger trade deficit.

The Commerce Department said Friday that the economy as measured by the gross domestic product grew at an annual rate of 2.2 per cent in the October-December quarter, weaker than the 2.6 per cent first estimated last month. It marked a major slowdown from the third quarter, which had been the strongest growth in 11 years.

Economists, however, remain optimistic that the deceleration was temporary. Many forecast that growth will rise above 3 per cent in 2015, which would give the country the strongest economic growth in a decade. They say the job market has healed enough to generate strong consumer spending going forward.

For all of 2014, the economy expanded 2.4 per cent, up slightly from 2.2 per cent growth in 2013.

Consumer spending, which accounts for 70 per cent of economic activity, was a bright spot in the fourth quarter. It expanded at an annual rate of 4.2 per cent, down slightly from the first estimate of 4.3 per cent growth but still the best showing since the first quarter of 2006.

Friday's report was the second of three estimates for fourth quarter GDP, the broadest measure of the economy's total output of goods and services.

The downward revision stemmed largely from slower stockpiling by businesses. Last month, the rise in inventories was estimated to have added 0.8 percentage points to fourth quarter growth. But that was lowered to a contribution of just 0.1 percentage point in the new estimate. The change, however, will likely translate into stronger growth in the current quarter because businesses will not have to work down an overhang of unsold goods.

Trade also weighed more heavily on growth than first thought, subtracting 1.2 percentage points as imports grew much more strongly than first thought. That could be a reflection of the rising value of the dollar, which makes imported products cheaper for U.S. consumers.

Many analysts believe 2015 will start slowly, in part reflecting the disruptions caused by a rough winter. However, it's unlikely to be as bad as the first quarter of 2014, when heavy snow and cold contributed to a 2.1 per cent plunge in growth in the first quarter of 2014.

That big drop was followed by sizzling growth rates of 4.6 per cent in the second quarter and 5 per cent in the third quarter.

Analysts are looking for less of a roller-coaster ride this year. JPMorgan economists say growth will come in around 2.5 per cent in the current quarter and then hover between 2.5 per cent to 3 per cent for the rest of the year. They are forecasting growth of 3.1 per cent for the entire year, a significant improvement from the 2.4 per cent growth seen in 2014.

If the forecast proves accurate, it would be the best GDP performance since the economy grew by 3.3 per cent in 2005, two years before the beginning of worst economic downturn the country has experienced since the 1930s.

Joel Naroff, chief economist at Naroff Economic Advisers, is even more optimistic. He's forecasting economic growth of 3.5 per cent this year.

Naroff and other economists believe the key to the economy shifting into a higher gear will be further improvements in the labour market, when stronger job gains leading to rising wage gains.

"I see 2015 as a really good year for consumer spending because of the wage gains," Naroff said.

Even though the recession ended nearly six years ago, wage growth has been weak as businesses were able to pay less with so many unemployed looking for jobs.

Several large companies have already signalled a willingness to pay more to retain workers. Retailers like TJX and The Gap, as well as the health insurer Aetna.

News last week that Wal-Mart, the nation's largest private employer, would also increase its minimum pay could be a sign that a tighter labour market are finally leading to increased wages, some analysts believe.

The unemployment has fallen to 5.7 per cent.

Federal Reserve Chair Janet Yellen, testifying to Congress this week, listed stronger wage growth as one of the elements the central bank is looking for before deciding to start raising interest rates. She said as long as wage gains remained weak and inflation low, the Fed was prepared to remain "patient" in moving to raise rates.

Many private economists believe the Fed's first move to increase its key rate, which has been near a record low of zero for six years, will not come until June at the earliest.

The Canadian Press

Turn it down: Millions of young risk hearing loss from loud music, UN health agency warns

BERLIN - The World Health Organization says millions of young people around the world are at risk of hearing loss from loud music.

The U.N. agency said Friday that a review of data from middle- and high-income countries shows almost half of all 12 to 35-year-olds listen to unsafe levels of music on their personal audio devices or cellphones.

And about 40 per cent of teens and young adults are exposed to damaging levels of sound at nightclubs, bars and sporting events.

WHO says volumes above 85 decibels for eight hours or 100 decibels for 15 minutes are unsafe.

The Geneva-based agency recommends that young people take listening breaks, use apps to limit the volume on their smartphone and consider using personal audio players for no more than one hour a day.

The Canadian Press

Aimia posts $21.5 million net profit in fourth quarter, revenue up 10.7%

MONTREAL - Aimia Inc. (TSX:AIM) posted a $21.5 million net profit and $60 million of adjusted earnings in the fourth quarter, recovering from losses on both counts a year earlier due to a change in its Canadian banking partners for Aeroplan.

The net profit equalled nine cents per common share and adjusted earnings were worth 20 cents per share.

Analysts had expected 24 cents per share of adjusted earnings but Aimia said it met or exceeded all its major financial objectives for 2014.

The company operates customer loyalty programs for Air Canada, TD and CIBC credit cards and other business partners.

It had a net loss of $125.7 million or 74 cents per share in the fourth quarter of 2013 and an adjusted loss of $111.1 million or 50 cents per share, due to costs related to the selection of TD Bank (TSX:TD) as its main Aeroplan credit card issuer.

Aimia's revenue in the fourth quarter ended Dec. 31 was $761.1 million, up 10.7 per cent from a year earlier — ahead of analyst estimates from Thomson Reuters.

The Canadian Press

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