OTTAWA — Interest rates are dropping, the oilpatch and aerospace sectors are booming, yet the high-tech and auto industries are slashing jobs and stock markets are wonky.
With so many conflicting economic messages, what’s a consumer to think? And do?
The stumbling economy has worried the U.S. Federal Reserve so much that in a surprise move Wednesday, it hacked half a percentage point off interest rates to stimulate growth.
But even that sends a mixed signal, say analysts. Lower borrowing costs are good for consumers and should boost economic expansion, but so unexpected a step by the Fed suggests it must be really worried.
The Fed announcement, coming one day after the Bank of Canada trimmed a quarter-point off its key rate, is a “mixed blessing for Canadian consumers,” said Andrew Pyle, senior economist with Bank of Nova Scotia.
Canadian rates have now dropped a full percentage point; U.S. rates are down two per cent and more cuts could come from both next month.
And whatever hurts our largest trading partner — about 85 per cent of Canadian exports head south — sloshes back here.
“At some point, we know the unemployment rate is going to go up, consumer confidence is going to fall and some spending is going to down and that’s what’s worrying the Fed — when the consumer falls off the table, then you can start talking seriously about R-words.”
