OTTAWA — The worsening price rout in commodities is hitting home far beyond the oil patch, darkening the mood of Canadian consumers, businesses and investors.
As the price of crude slumped to near $31 (U.S.) on Monday, two new confidence surveys suggest the main drivers of the economy – consumers and businesses – may be stalling. That points to weaker spending and hiring this year.
In spite of optimism from the Liberal government, the glum mood was on full display in financial markets on Monday. The Standard & Poor’s/TSX composite – already 20 per cent off its 2014 high – lost more ground, falling 1 per cent to 12,319.25. Meanwhile, the oil industry took another hit when the B.C. government said it has not been given enough information to allow it to support the expansion of Kinder Morgan’s Trans Mountain pipeline.
The growing pessimism is rekindling concerns about anemic growth, or worse, outright recession. The situation is ratcheting up pressure on Bank of Canada Governor Stephen Poloz to provide more interest rate relief, perhaps as early as next week’s scheduled rate announcement, as well as more fiscal stimulus from the new Liberal government in Ottawa.
On Monday, a closely watched Bank of Canada quarterly survey of businesses across the country showed that hiring and spending plans are weaker than they have been since 2009. The Conference Board of Canada also released its consumer confidence index for December, which fell sharply.
Finance Minister Bill Morneau insisted the answer is to follow through on Liberal campaign promises, including middle-class tax cuts, enhanced child benefit payments to parents and $60-billion in additional infrastructure spending over the next 10 years.
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