Americans rediscover their spending mojo

Share

U.S. consumers have historically been a reliable source of spending power that can be counted on to provide a badly needed boost to the economy when it's ailing.

They came through again in the second half of this year.

"The acceleration of second-half growth was largely a result of consumers [getting]back their mojo," said Krishen Rangasamy of National Bank Financial Group.

He predicts the economic outlook for 2012 will again depend on consumer spending behaviour, "and there is reason to be optimistic on that front."

Spending will likely get support from a strengthening labour market. It will also benefit from the apparent stabilization in consumers' attempts to "deleverage," or pay down debt, he writes in a recent report.

Although mortgage debt continues to drop, it is doing so at a slower pace, he points out. And non-mortgage credit in the third quarter posted its first quarterly increase in three years, helped by rising auto loans.

"That, together with the stabilization in the savings rate, is a sign that we may have seen the worst of the deleveraging process."

Barring a global recession or other potential obstacles, "it's clear that American consumers offer much promise in 2012."

Canadian firms go shopping in China

It's been a banner year for deal-making by Canadian businesses in China.

In the months up to Sept. 20, Canadian companies announced $1.4-billion (U.S.) worth of acquisitions in China, a 158-per-cent increase over full-year dollar volumes in 2010, according to PricewaterhouseCoopers.

This upward trend outpaced the broader Canadian mergers-and-acquisitions market, which saw dollar volumes rise only 5 per cent higher than in 2010.

The average value of China-bound deals was $217-million, up 371 per cent over the prior year.

But it's important to note that three large transactions skewed average values. Power Corp. of Canada announced the $276-million acquisition of a 10-per-cent stake in China Asset Management; Bank of Nova Scotia disclosed the purchase of a 19.9-per-cent interest in Bank of Guangzhou Co. Ltd. for $719-million; and CPP Investment Board took a 50-per-cent stake in the Hong Kong Interlink Project for $258-million.

Also keep in mind that since 2007 more than 27 per cent of China-bound buys have been by Chinese companies listed on the TSX for financing purposes, notes the report.

Asia-Pacific hungry for natural gas

The Asia-Pacific region has become a significant consumer of natural gas and Canadian companies stand to reap big rewards.

There has been a "phenomenal growth rate of natural gas consumption in the Asia-Pacific region, which is dominated by [South]Korea, Japan and China, but also includes other southeast Asian countries," said ARC Financial Corp.'s chief energy economist and managing partner Peter Tertzakian. The compound average growth rate is running at over 7 per cent.

Demand this year should be particularly impressive because liquefied natural gas (LNG) was used in Japan as a substitute for nuclear power after the Fukushima incident, he adds.

The market is expected to continue to show high growth over the long term, boosted in part by increased demand in Asian countries for less carbon-intensive sources of energy such as coal, says Mr. Tertzakian.

"Obviously, for Canada, this is an ideal growth market for our natural gas resources. It's also very high value."

Current Japanese LNG prices hover around $16 (U.S.) per million British thermal units, compared with roughly $3 in Canada.

"No wonder there are five LNG export terminal proposals now."