From the editor: Faltering economy ripples global waters
Oct. 2, 2015 – It’s been anything but a slow-news summer for North America.
Since I last penned my editor’s note in June, there has been a number of constant news stories plaguing our TV screens — the ongoing journey for our next prime minister, the triumph of Canada at the Pan Am/Parapan Am games (a whopping 385 combined medals for us!), and who can forget all of Donald Trump’s controversial statements since announcing his candidacy for U.S. president? But another story has been on my radar the past few weeks.
For months China has showed signs of an economic decline with key sectors, like manufacturing, weakening. In fact, the Caixin purchasing managers’ index fell to a 77-month low of 47.1 in August. A reading less than 50.0 on the index indicates contraction.
The survey also found that output, new export orders and employment all declined at faster rates than in July. “Exports were supposed to grow by six per cent this year, but instead they are shrinking, and factories are shedding millions of jobs,” recently noted The Associated Press. This of course can be problematic worldwide, especially for countries that export industrial commodities to China.
Then things seemed to take a turn for the worst, fast. On August 24, the Chinese stock market tumbled 8.5 per cent — its biggest one-day dive in eight years — triggering a drop in markets in Japan, the U.S. and here at home. It was dubbed Black Monday, after the infamous market crashes of 1987 and 1929.
For Canada, this drop in commodities means petro-powered provinces like Alberta, Saskatchewan and Newfoundland and Labrador will be hard hit, noted Robert Kavcic, senior economist at BMO Capital Markets, while manufacturing heartland Ontario could receive a boost from the lower Canadian dollar.
It’s premature to tell if China is heading for a hard landing; as such, we are left with more questions than answers. Is a poor Chinese economy good for Canada? How can we use this state to our advantage? How volatile will our dollar become? And last but not least, could the next major financial slowdown be eminent?
This column previously appeared in the September 2015 issue of Manufacturing AUTOMATION.