February 3rd Working Capital Newsletter

February 3rd Working Capital Newsletter

Liquid Capital Blog

Feb 03, 2012 | Hadaf Zubi

Hadaf Zubi
Liquid Capital™
Canadian Head Office
Toronto, ON



LCC's Weekly Economic Update – Week ending February 3rd, 2012

Hadaf Zubi

(All figures collected Friday, 4pm EST)

Ending the week with a bang!

The recent buying strength we've seen in the markets has intensified. The S&P 500 gained 28 points on the week, mainly on the strength of today's session. 1330 served as a psychological barrier for the past two weeks, but that level was breached on the strength of a very strong Non-Farm Payrolls number. Consensus estimates put January job growth at 155k, but the reported number of 243k handily beat those expectations. In addition, the January unemployment rate was down from 8.5% to 8.3%. These numbers are encouraging, but it should be kept in mind that the unemployment rate was affected by the fact that the participation rate has decreased to 63.4%, which is a 30-year low. Increased employment is a prerequisite for a sustainable recovery, so continued gains in this sector will definitely create more incentive for buyers.

Canadian unemployment remained virtually unchanged last month, with Stats Can reporting an increase of 0.1% to 7.6%. In addition, November GDP was reported as edging-down slightly to 0.1%. Oil and gas extraction declined 2.5% in November, but promisingly manufacturing increased for the third consecutive month at 0.6%. Manufacturers that focus on specialty products are largely responsible for these gains, so Canadian factors would do well to prospect manufacturers that produce niche products. For example, manufacturers involved in the production of aerospace or energy components are going to be doing more business in the future, which will result in new, pre-bankable companies needing working capital. Another bright spot was construction, which although down 0.3%, bodes well to cushioning the impact of falling home prices. A build-up of housing stock at this point would not be good for consumers, as a glut during a softening market creates additional downwards pressure. If the current trend continues, an overhang of housing stock won't be developed and prices should remain relatively stable as softening demand is bolstered by decreased supply.

The LCC Working Capital Newsletter© is meant as a source of financial opinion only. It in no way reflects the opinions of Liquid Capital Corp. Nothing in this document is to be construed as an offer to buy or sell securities.

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