HIGHLIGHTS OF THE WEEK – Nov. 5/12
- Hurricane Sandy hit the U.S. east cost this week, causing the tragic loss of human lives and major damage to public and private infrastructure.
- However, the reality is that, from a purely macroeconomic perspective, Sandy’s legacy will likely show up as a relatively minor shock in future economic statistics.
- The main reason for this is that most of the economic output lost as a result of the disruption caused by the natural disaster will be made up for in the future through reconstruction efforts, the replenishment of inventories, and the resumption of activities halted during the storm.
- Murphy’s Law says that anything that can go wrong will go wrong. First, the economy unexpectedly contracted by 0.1% in August, representing the first decline in six months. Second, consumer and business insolvencies rose by 5.4% and 5.1%, respectively in July. Third, job creation came to a standstill in October, well short of expectations.
- Behind the string of negatives, there were also some positive developments. China’s PMI increased, which helped boost morale surrounding the health of the global recovery. Canada’s export-based economy stands to benefit from this development.
- Canada is expected to emerge from this soft patch in the fourth quarter. However, the near-term domestic outlook remains modest at best. Due to the many global headwinds present, the trajectory should stay bumpy over the near-term.