Oil slump enters ‘second round’ as pinch spreads far beyond oil patch

Oil slump enters ‘second round’ as pinch spreads far beyond oil patch - image

For a quick glance at how the oil slump is walloping areas beyond those tied directly to the energy industry, look no further than publicly listed companies on the TSX.

In a month where oil prices are down another 15 per cent, one could have expected the energy sector to have once again trailed the pack. Yet that hasn’t been the case.

Companies that sell us everything from cellphone services to groceries are feeling the strain of a market downturn that’s reflecting anxieties about the global and Canadian economies.

Consumer discretionary companies have seen the biggest stock market declines, but the pain is spread almost across the board (see chart).

“The hit from crude isn’t limited to the oil patch” anymore, Nick Exarhos, an economist at CIBC who compiled the chart, said.

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MORE: Latest coverage — plunging oil

Economy-wide angst was apparent in survey results on Monday from the Bank of Canada showing hiring intentions among businesses have chilled to levels not seen since the 2009 recession.

“The adverse effects of the [oil price] shock are increasingly being felt across most regions and sectors,” the central bank said.

Round 2

CIBC’s Exarhos said companies and sectors that have been expected to take a hit “down the road” or were areas investors could hide while energy shares got pummeled, like consumer discretionary stocks, are now feeling the pinch (or at least their stock prices are, as investors anticipate weaker earnings).

The broad-based drops are “evidence of a further softening in the national economy,” he suggested. Like other forecasters, CIBC believes the economy is in for a lacklustre year.

“Second round effects as the shocks spill over into other industries is a reason why we have only muted expectations for national growth this year,” Exarhos said.

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