(Bloomberg) — The rapid spread of the delta variant has sown volatility in financial markets this week, but thus far economists are maintaining their forecasts for an historically strong U.S. recovery.
Key to their relative confidence: officials are unlikely to order renewed lockdowns, and most consumers won’t drastically alter their plans. Any change in that assessment, and bets are off.
“The delta variant is posing a growing risk, but it’s probably not to the point that we should be making big, negative changes in our outlook,” Claudia Sahm, a former Federal Reserve economist who’s now a senior fellow at the Jain Family Institute, said in an interview. The outbreak has largely affected the unvaccinated so far, but Sahm said if it keeps spreading, “we’re going to find out a lot more about how much of that impacts the vaccinated and how much it freaks them out.”
For now, the rough consensus is that spending, travel and business activity will only be affected at the margin. Even late last year, when waves of Covid-19 cases hit the U.S., the recovery continued apace.
U.S. GDP is on course to jump 6.6% this year, and quarterly growth rates will be handily beating the average of the past decade well into 2022, Bloomberg surveys of economists show.
Andrew Husby at Bloomberg Economics highlights three factors that give him some confidence:
While Covid-19 cases have been surging, hospitalizations and deaths haven’t
The biggest impact has been in areas of lesser economic importance, such as some southern U.S. states
Some of the groups most at risk are least likely to change behavior
Bloomberg Economics: What’s the Delta From Delta Variant? Not Much
Nationwide high-frequency data show that Americans continue to spend and eat out at restaurants, as seen from compilers including OpenTable. New York City last week saw demand for hotel rooms hit its highest since the pandemic hit.
Still, there are inklings of potential change: Los Angeles County has reimposed a mask mandate. Apple Inc. delayed its office reopening. In markets, longer-term Treasury yields — those most sensitive to the outlook for growth — on Thursday were heading for a fourth straight week of declines.
Following are the comments of a number of economists on the delta variant’s economic impact:
‘Fluid Situation’
“So far, we haven’t seen any impact in the U.S. when it comes to real-time data,” said Aneta Markowska, Jefferies chief U.S. economist, by phone. “In fact, it looks like momentum actually improved in June, with foot traffic in particular. And that requires the opposite of social distancing.”
If Covid-19 “spikes stay localized, it’s hard to imagine a big national impact. Is a school reopening in New York State or in California going to be delayed because of a localized outbreak in Louisiana? Probably not. Obviously, it’s a fluid situation. It changes the risk profile, but it doesn’t change the base case for the U.S. outlook.”
JPMorgan’s Caution
“The delta variant may impart a little more caution in consumer behavior,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., wrote in a note Thursday.
JPMorgan trimmed its estimate for consumer spending growth to 4.5% for the third quarter from 5% previously. Still, with inventory gains offering upside risks, Feroli left this quarter’s gross domestic product forecast unchanged at 8.3%.
Local Caseload
“I do not think the impact will be marginal,” said William Spriggs, chief economist at the AFL-CIO, in an email. Policy makers are underestimating how many people will remain home from work amid rising infections, and that it will hit prime-age workers hardest this time, he said.
“Even though the most-affected states are extremely unlikely to shut down, people stopped economic activity because of local caseload — not because of public orders. So, we could see retail sales continue to remain flat, as they have since March.”
Watch Schools
“The variant will do meaningful economic damage if it causes people to resume sheltering-in-place and forces schools to remain online when the school year starts in a few weeks,” Mark Zandi, chief economist at Moody’s Analytics, said in an email.
“Odds are uncomfortably high there will be other variants that are highly contagious, virulent, and elude our vaccines,” he said. But, “putting aside these dark scenarios, it remains highly unlikely the Delta variant would short-circuit the economic recovery.”
Vaccination Shield
“At least in the U.S., I just do not see the appetite for taking steps that would discernibly slow the economy — even mask mandates look like they will only be re-applied in a few places,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, in an email.
Stanley pointed out in a research note to clients that even though cases have risen at a faster-than-expected pace, nearly half of Americans are now fully vaccinated and more are seeking to be inoculated each day as public health efforts ramp up. That limits the risk of the new Covid-19 variant and helps assuage consumers, he said.
British Example
In the U.K., where the delta variant spread rapidly before it became prevalent in the U.S., “hospitalizations and deaths remain so far below where they were the last time cases were this high,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research.
“I don’t see much downside to the economy. Consumers remain flush with cash and spending continues apace. Inventories remain low and are likely to rebuilt in the months ahead, supporting manufacturing production. Homebuilders are working through backlogs, particularly now as construction costs have moderated, supporting residential investment. Capital spending intentions remain strong.”
OTTAWA – Bank of Canada governor Tiff Macklem says there is a lot of uncertainty around how artificial intelligence could affect the economy moving forward, including the labour market and price growth.
In a speech in Toronto at the Economics of Artificial Intelligence Conference, the governor said Friday that the central bank is approaching the issue cautiously to get a better understanding of how AI could affect its job of keeping inflation low and stable.
“Be wary of anyone who claims to know where AI will take us. There is too much uncertainty to be confident,” Macklem said in prepared remarks.
“We don’t know how quickly AI will continue to advance. And we don’t know the timing and extent of its economic and social impacts.”
The governor said AI has the potential of increasing labour productivity, which would raise living standards and grow the economy without boosting inflation.
In the short-term, he said investment in AI is adding to demand and could be inflationary.
However, Macklem also highlighted more pessimistic scenarios, where AI could destroy more jobs than it creates or lead to less competition rather than more.
The governor called on academics and businesses to work together to shed more light on the potential effects of AI on the economy.
“When you enter a dark room, you don’t go charging in. You cautiously feel your way around. And you try to find the light switch. That is what we are doing. What we central bankers need is more light,” he said.
This report by The Canadian Press was first published Sept. 20, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
