Financial Watch

Buoyed by an improving economy that has reduced the projected deficit by $3.4 billion, Finance Minister Dwight Duncan will announce new social spending in the provincial budget.

“We’re in the springtime of recovery,” an uncharacteristically ebullient Duncan told reporters Wednesday against the hopeful backdrop of construction at Ryerson University.

“I am pleased to inform you that the 2010 budget will forecast a deficit of $21.3 billion for the year just ending – an improvement of $3.4 billion from the deficit forecast in last fall’s statement,” he said.

The sinking euro and a downgrade of Portugal’s debt put renewed pressure on European leaders to come up with a bailout plan for Greece and stem the government debt crisis undermining their shared currency.

But agreement remained elusive as a Thursday summit approached. Markets increasingly expect any bailout for Greece to involve the International Monetary Fund — and EU governments are discussing whether they would permit that and add financial help from eurozone nations.

Germany is holding back a deal, reluctant to put taxpayer money on the line for Greece. But failure to help an indebted eurozone country would be an admission that Europe can’t halt the crisis in its currency union.

Politicians are once again ratcheting up the pressure on oil company executives in the hope of alleviating some of the pain occurring at the pump. In the past the mere mention of Congressional hearings was enough to push speculators out of the oil markets and drive prices lower. This time is much different. The run up in gas prices we’ve seen past times since 2003 have been driven by rumors and wild predictions of supply problems. Financial Watch is going to take a look at the reasons behind the most recent run up in gas prices and put forth a few unexpected, but possible events that could take prices well above where they are now.

No nation dominates the global economy like the United States. Both developing and developed nations view the U.S. consumer as the one marketplace that can lift fortunes at home. For a long time it has been fact that when the U.S. catches a cold, the rest of the world catches the flu. Right now our economy is definitely in the midst of a mild cold. Over the past year economic growth the hangover from the housing boom has dragged growth to levels unseen at home since our last recession. At the same time there are very few signs that our sluggishness is spreading. In late February stock markets across the global sold off steeply as signs of problems in the subprime mortgage sector emerged. However, the U.S. stock markets are among only a handful of markets that have failed to rebound to new record-breaking highs.

Steady, but Unspectacular Growth Predicted for U.S. Economy Next Year

Economic growth in the United States is on pace to have expanded at a 3.6% clip during this past year. A resilient consumer and strong government spending are most responsible for powering the U.S. economy onward during the past year. The coming year will prove to be more difficult as consumers pull back somewhat. The big question going into 2006 is whether corporations will pick up some of the slack and keep the economy rolling. Corporate spending should be robust next year, but a disproportioned percentage of the growth may occur overseas in emerging nations to take advantage of lower costs. Financial Watch remains concerned how long the U.S. trade and current account deficits can remain as large as they are before a crisis emerges. In all likelihood, the coming year will present a few surprises, but nothing completely out of the ordinary. With that in mind, here are Financial Watch’s top ten predictions for the 2006.

Financial Watch expects sales to surpass expectations this Christmas

It should not have been a surprise to Wall Street when Wal-Mart announced yet another disappointing sales month. This is just the most recent in a string of months where the world’s largest retailer has turned in sales number well below its peers. In November Wal-Mart will break a decade long streak of growing its sales on an annual basis. Although its sales will only drop by 0.1% this November, it signifies even deeper troubles for the retailer as it tries to attract a wider range of customers. Wal-Mart’s push to attract more middle and upper class customers by pushing more luxurious products has clearly fallen flat. Outside of Wal-Mart, shoppers turning out in droves at malls across the country helped to turn in sales numbers 6% over a year ago. Coming into the holiday season, analysts were projecting sales would increase a respectable 5% this holiday season.