Are economies slowing down or is this just an economic readjustment

Weekly Statistics:

Today

Week Ago Year Ago
16-Jan-15 09-Jan-15

31-Jan-14

S&P TSX

14,673.48

14,779.35

13,694.94

S&P 500

1,994.99

2,051.82

1,794.19

DJIA

17,164.950

17,672.60

15,848.61

OIL

$47.70

$45.33

$88.60

USD vs CAD

0.7867

0.8049

0.9038

Gold

$1,283.80

$1,294

$1,244.20

 

The US economy showed signs of slowing down today. The Gross Domestic Product, the value of all the goods and services produced by US, grew at 2.6% annual clip in the fourth quarter. This is well below the 5% growth recorded in the quarter ending September 2014. Analysts polled by MarketWatch forecasted that the GDP will grow by a seasonally adjusted 3.2% in Q4. The GDP growth rate in US has averaged 3.3% from 1947 until 2014 and reached an all time high of 16.9% in the first quarter of 1950 and  a record low of -10% in the first quarter of 1958. The news did not fare well with Wall Street. All the major US indices suffered more than 1% loss today. The S&P 500 broke the ‘psychological’ support level of 2,000 and closed the week at 1,994.99.

 

Oil prices jumped by 8% at one point today and settled up 6% from the previous day after news of a big drop in US rig count broke, as producers respond to oversupply. We believe that the main reason for the spike was short covering on the last day before the first delivery date for Feb crude. Even with the 6% spike on the last day of January, oil prices were still down 9.4% for the month of January. Alberta is facing the biggest economic struggles in many years due to the recent collapse in oil prices. Alberta’s Premier, Jim Prentice, is expected to discuss wage costs with public sector unions in the face of declining oil revenues. According to the Premier, the oil price decline will translate into $7 Billion loss in royalty revenue. Alberta’s union leaders are also concerned that a 5% cut in the provincial cabinet members’ pay, which was announced on Thursday, could affect other public sector employees’ salary as well.  The Alberta government is working to construct a budget with sub-$50 oil.

Source- Bloomberg, Zerohedge, Globe Investor Gold, CBC, Financial Post

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