Economy

5 charts show what the global economy looks like heading into 2021 – CNBC

Published

4 years ago

December 27, 2020

Two men paint graffiti of frontline workers on a wall during the coronavirus pandemic in Mumbai, India.

Imtiyaz Shaikh | Anadolu Agency | Getty Images

SINGAPORE — The Covid-19 pandemic has sent the global economy into one of its worst recessions ever, and it isn’t yet clear when a full recovery will be in place.

Recent progress on coronavirus vaccines has brightened the economic outlook, but some economists said a potentially slow rollout of vaccines across developing economies could hamper the return of activity to pre-pandemic levels.

Even among advanced economies, renewed lockdowns in Europe in a bid to stave off a resurgence in infections could push back economic recovery, according to economists.

“The vaccine discovery is a shot in the arm, but not until 2022,” Citi economists said in a report in early December. Still, there will be “clear improvement” in the global economy in 2021, partly because “it’s not hard to be better than 2020,” they said.

Steep decline in activity

The rapid spread of Covid — which was first detected in China — forced many countries into months of lockdown in 2020 that markedly reduced economic activity.

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As a result, gross domestic product — the broadest measure of activity — plunged to record lows across many economies.

The International Monetary Fund forecast the global economy could shrink 4.4% this year, before bouncing back to 5.2% growth in 2021. The IMF said in October the world economy has started to recover, but warned the return to pre-pandemic levels will be “long, uneven, and uncertain.”

Travel restrictions remain

One main feature of coronavirus lockdowns around the world is the complete or partial closure of borders, which brought much of international travel to a halt.

As of Nov. 1, more than 150 countries and territories had eased Covid-related travel restrictions, according to the United Nations World Tourism Organization.

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But many restrictions remain in place to limit movements across the borders, said UNWTO. That include:

Only opening borders to visitors with specific nationalities or from certain destinations;
Requiring visitors to present a negative Covid test before letting them enter the country;
Requesting visitors to quarantine or self-isolate upon arrival.

Job losses accelerate

A major consequence of the pandemic-induced economic slump is an increase in job losses globally.

The Organisation for Economic Co-operation and Development, an intergovernmental entity, said that in some countries, the early effects of Covid-19 on labor markets were “ten times larger than that observed in the first months of the 2008 global financial crisis.”

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“Vulnerable workers are bearing the brunt of the crisis. Low-paid workers have been key to ensure the continuation of essential services during lockdowns, often at a substantial risk of exposing themselves to the virus while working,” the OECD said in a report.

“They have also suffered greater job or income losses.”

Government debt soars

Governments have increased spending to protect jobs and support workers. Globally, government measures to cushion the pandemic’s economic blow totaled $12 trillion, the IMF said in October.

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Such staggering levels of spending have pushed global public debt to an all-time high — but governments should not withdraw fiscal support too soon, said the fund.

“With many workers still unemployed, small businesses struggling, and 80‑90 million people likely to fall into extreme poverty in 2020 as a result of the pandemic — even after additional social assistance — it is too early for governments to remove the exceptional support,” said IMF.

Central banks step in

Central banks, too, have come in to support the economy by cutting interest rates — many to record-low levels — which will help governments to manage their debt.

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The U.S. Federal Reserve, whose policy affects economies worldwide, slashed interest rates to near zero and committed to not raising them until inflation exceeds its 2% target.

Central banks in advanced economies — including the Fed and the European Central Bank — have also increased their asset purchases to inject more money into the financial system. That’s a move also adopted by an increasing number of central banks in emerging markets as they explore ways to support their respective economies hit hard by the pandemic.

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Economy

Energy stocks help lift S&P/TSX composite, U.S. stock markets also up

Published

1 day ago

September 17, 2024

Anne Joseph

TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.

The S&P/TSX composite index was up 34.91 points at 23,736.98.

In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.

The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.

The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.

The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.

This report by The Canadian Press was first published Sept. 17, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Canada’s inflation rate hits 2% target, reaches lowest level in more than three years

Published

1 day ago

September 17, 2024

Anne Joseph

OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.

The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.

Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.

Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.

The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.

The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.

“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.

Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.

“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.

The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.

The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.

A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.

Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.

Its key lending rate currently stands at 4.25 per cent.

CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.

The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.

This report by The Canadian Press was first published Sept. 17, 2024.

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Economy

Federal money and sales taxes help pump up New Brunswick budget surplus

Published

2 days ago

September 16, 2024

Anne Joseph

FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.

Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.

The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.

Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.

Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.

Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.

Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.

This report by The Canadian Press was first published Sept. 16, 2024.

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