Economic Outlook

First US Economic Data of the COVID-19 Era Emerges. It’s Ugly

Nearly all economic data as reported on a monthly or quarterly basis have so far reflected the era in the US before the economy reacted to the coronavirus. These reactions – from panic-buying of toilet paper to airlines shutting down much of their international and now even domestic routes – were phased into the economy beginning in later February and have now risen to a crescendo. But they’re slow in making their way into the economic data.

We get company by company warnings, and we get the government’s and the Fed’s reaction to the events, but we haven’t seen the impact in the official data yet. The first data to seriously reflect this are the surveys of company executives such as the Purchasing Manager’s Indices for March, out later this month, or the New York Fed’s Empire State Manufacturing index, which was released this morning,

And it’s ugly: The Empire State Manufacturing index of General Business Conditions plunged by 34.4 points, the largest point-drop on record, from a still relatively sanguine level of 12.9 in February, to the level in March of negative -21.5, the lowest since 2009, and right at where it had been in October 2008, following the Lehman bankruptcy in September. And this was just the first reaction related to the impact of Covid-19 mitigation measures…CLICK for complete article

Anglo American Platinum cuts view on plant closure

Anglo American Platinum (Amplats) announced the temporary shutdown of the Anglo Converter Plant and declares “force majeur” following an explosion at its plant in South Africa.

  • Anglo American is the world’s third largest producer of platinum (“Pt”) and palladium (“Pd”)
  • Significant production curtailed due to shutdown, i.e. possible annualized cuts of 500K oz Pt and 300K oz Pd now forecasted for 2020
  • Platinum market expected to swing to deficit of 400K oz from surplus of 100K in 2020
  • Palladium deficit in 2020 now forecasted to increase from ~500K oz to ~800K oz (300K increase to forecasted deficit) Click here for full article.

Third Yukon Resource Gateway Project agreement reached

The territorial government of Yukon has reached an agreement with the Ross River Dena Council to initiate a $71 MM infrastructure program designed to improve the North Canol Road and the Robert Campbell Highway. Recall Macmillan Pass development will require upgrading a ~230 km segment of the Canol Road to ‘all season’ status, for which capital costs are pegged at $105 MM (2018 PEA estimate). Important government commitment aside, it remains to be seen how much will be spent on improving the North Canol Road (versus the Robert Campbell Highway). In the meantime, our conservative model continues to assume Fireweed will finance the access road’s full upgrade requirement. Click here to read full press release.

A closer look at some of the key players in the Lower Mainland’s Wet’suwet’en protests

With near-daily protests and blockades disrupting the Lower Mainland, residents are beginning to see some key faces appearing regularly on their TV screens.

While demonstrators have taken pains to reject the label of “protester,” referring to themselves instead as land defenders supporting Indigenous sovereignty, it has become apparent that behind many of the actions is a much smaller group of activists.

CLICK to watch the full report

OK, it Gets Sticky: Job Openings Plunge the Most Since the Great Recession

Let’s make this clear: these are job openings in December and prior months, before the novel coronavirus had shown up on the business-staffing horizon. Let’s also make clear that the two-month drop was so bad that a statistical flaw might have skewed the data, such as some seasonal adjustments gone berserk. But as we will see, the not-seasonally adjusted data looks even worse. And it’s not just one month. With hindsight we see that the trend started in early 2019 in small uneven drips, and it didn’t really matter until it suddenly did.

The number of job openings in December dropped by 364,000 from November (seasonally adjusted), after having already plunged by 574,000 in November, according to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS). This two-month plunge of 938,000 job openings came after a series of ups and downs with downward trend starting after the peak in January 2019. It brought the number of job openings in December to 6.42 million (seasonally adjusted), same level as in October 2017. Since the peak in January 2019, over 1.2 million job openings have dissolved into ambient air (November and December in red)….CLICK for complete article

Visualizing the 700-Year Decline of Interest Rates

How far can interest rates fall?

Currently, many sovereign rates sit in negative territory, and there is an unprecedented $10 trillion in negative-yielding debt. This new interest rate climate has many observers wondering where the bottom truly lies.

Today’s graphic from Paul Schmelzing, visiting scholar at the Bank of England (BOE), shows how global real interest rates have experienced an average annual decline of…Click for full article.