September 25 - In the News This Week: Five Business and Economic Stories Affecting BC

September 25, 2015
Cheryl Muir

BCBC recaps the weekly business and economic news stories from the week ending September 25 relevant to British Columbia's economy.

1. Global brand takes a self-inflicted hit – and the consequences are felt far and wide

Business headlines this week were dominated by news that Volkswagen installed software into their clean diesel vehicles designed to generate false favorable results while the vehicles underwent emissions testing that were not emulated during regular driving. Some interesting takes on this story include:

  • VW woes infect broader auto credit as BP serves as guide: Analysis - A brief comparison prepared by Bloomberg Business of the VW story with the BP Deepwater Horizon oil spill in 2010 and the impact on their bond ratings and the broader auto industry.
  • VW probably won’t die – but if it does, Europe is in troubleThis article on Wired notes that Volkswagen has set aside $7.3B to deal with the fallout – as a starting point - which ultimately takes away from what the company could be putting into innovation that would help their vehicles move towards meeting the stringent emissions standards. More importantly, however, is the potential impact on the 600,000 worldwide employees and the fact that the German government is a shareholder; and given Germany’s role as a leader for the broader European economy, it is anticipated that German policy makers will be coming to the defense of the company with their international counterparts.
  • Finally, we take a look at what this means for Canadian business with the Financial Post article The Volkswagen contagion: How the emissions-rigging scandal is spreading to Canadian firms. From auto-parts makers and suppliers to major dealerships – a number of Canadian firms are exposed as a result of the turmoil at Volkswagen.

2. The heads of both US and Canada’s central banks look on the bright side

In separate occasions, and with slightly different messages, both Stephen Poloz, the Governor of the Bank of Canada and Janet Yellen, the head of the US Federal Reserve, made comments this week intended to bolster the outlook for their respective national economies. While acknowledging weaker commodity prices and the tanking price of oil, Poloz claimed that Canada has “seen this movie before” and with the low Canadian dollar and the Bank’s commitment to keeping inflation in check, the country’s economy will adjust as it has when oil prices were higher.

Meanwhile, Janet Yellen shed some light on the Fed’s intention to hike interest rates before the end of the year – should the data show that the US economy continues to strengthen.

3. Canadian dollar hits 11-year-low

This week, the Canadian dollar hit an 11 year low – below 0.75 cents US – before making a slight rebound on Friday, fueling expectation that exports will begin to take over consumer spending as the driver of Canadian economic growth in the coming months.

4. Metro Vancouver to lead in economic growth

This week, the Conference Board of Canada released their report, Economic Insights into 13 Canadian Metropolitan Economies in which they note that Metro Vancouver will lead the pack with projected growth of 3.5% in 2015 as a result of strengthening manufacturing, construction and services sectors. This aligns with Business Council projections that see the province as a whole leading the country in economic growth for 2015. For more on the report, read Business in Vancouver’s article which also notes the importance to the local economy of Seaspan’s $8 billion contract with the federal government to build non-combat ships.

5. Premier Clark announces $90 million for small town infrastructure

A the annual Union of BC Municipalities convention this week, Premier Clark announced that the BC economy will see a boost with another round of infrastructure spending into 2016 through the New Building Canada – Small Communities Fund. The joint federal/provincial investment will total $90 million and support infrastructure projects such as green energy, highway and roads, innovation, transit, broadband expansion and improved drinking water. Read the government release HERE.

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