Economy

U.S. Set to Push Global Economy Over the Recovery Line – The Wall Street Journal

Published

3 years ago

July 25, 2021

The U.S. economy likely returned to its late-2019 size during the three months through June, helping to lift global output above its pre-pandemic level for the first time.

Economists surveyed by The Wall Street Journal estimate that figures to be released Thursday will show that the U.S. gross domestic product rose at an 8.5% seasonally adjusted annual rate in the second quarter. That likely left U.S. GDP—the value of all goods and services produced across the economy, adjusted for seasonality and inflation—above the $19.2 trillion level reached in the final quarter of 2019, the last before the spread of Covid-19 pushed large parts of the global economy to shut down and contract, they say.

The combined economic output of the Group of 20 leading economies exceeded its pre-pandemic level in the first quarter, according to estimates by the Organization for Economic Cooperation and Development. With the U.S. and a number of other large economies crossing that threshold in the second quarter, it is likely that global output is now higher than the level recorded in the final quarter before the coronavirus struck, the group says.

Europe’s economy, however, likely remains smaller than before the pandemic, according to the European Commission, while the spread of the new Delta variant of the coronavirus across Asia threatens to slow its recovery in the second half of the year.

The International Monetary Fund Tuesday will release new forecasts for the global economy. Kristalina Georgieva, the fund’s managing director, on Wednesday told a webinar that while its projection for world economic growth in 2021 will stay at the 6% forecast in April, the outlook for rich countries with speedy vaccination programs has improved, while the outlook for poor countries has weakened.

“Despite the fact that of course the new Delta variant is significant, what we are projecting is a remarkable recovery in 2021,” she said. “But between April and July the composition of this 6% has changed.”

In the U.S., widespread business reopenings, rising vaccination rates and a big infusion of government pandemic aid helped fuel the spring burst of economic growth, and will likely support a solid expansion through this year and into next year, according to economists surveyed by the Journal.

U.S. GDP will likely even be higher by the end of 2022 than was forecast before the pandemic, says the OECD. That robust recovery, however, is unlikely to be shared by much of Europe, or many other parts of the world, it says.

“That’s the return for the big fiscal stimulus, and also the fact that the U.S. never really locked down as fully as Europe did,” said Christian Keller, chief economist at Barclays.

According to the European Commission, the combined economic output of the European Union’s 27 members will return to its precrisis level in the final quarter of this year. But individual countries will get there sooner than others, depending on how much their economies count on tourism and related services, which were more hobbled by the pandemic’s effects than manufacturing and other heavy industries.

The commission said that Poland might already have recovered in the second quarter and is likely to be followed in the third quarter by Germany. What the two have in common is a relatively large factory sector that has benefited from the global surge in demand for goods during the pandemic, when households sharply curtailed their spending on in-person services.

“There is a very close correlation between the share of industry in GDP and performance over the last year,” said

Beata Javorcik,
chief economist at the European Bank for Reconstruction and Development.

By contrast, the Commission expects Spain and Italy to recover only in the third quarter of next year. Both countries have large tourism sectors, and broader hospitality industries.

“The recovery is characterized by great divergences across and within countries and remains exposed to downside risks, in particular the spread of new variants of the COVID-19 virus and different paces of vaccination,” said finance chiefs from the Group of 20 largest economies earlier this month.

India offers the clearest recent example of the economic cost of a fresh surge in infections through a largely unvaccinated population. Of all the G-20’s members, India suffered the largest economic contraction during the second quarter of 2020, but bounced back strongly to end the first three months of this year with output 2.7% higher than its pre-pandemic level.

But the pandemic and government restrictions returned with a vengeance in the second quarter of this year, driven by the fast-spreading Delta variant, with the result that surveys of purchasing managers point to declines in services activity throughout the three-month period, and even in manufacturing toward its end.

Across Asia more broadly, new restrictions are being imposed as infections rise. Earlier this month, Indonesia’s government announced new curbs in hard-hit areas of Java and Bali. Around the same time in Vietnam, the government imposed new curbs on movement in Hanoi, the capital, and other cities. Japan’s delayed Olympic Games started Friday without spectators after the government declared a state of emergency that will last through the event.

“The stringency of restrictions in Asia is even tougher than it was a year ago,” said

Alicia Garcia Herrero,
chief Asian economist at French financial services firm
Natixis.
“Asia may fall behind in returning to normality.”

Write to Paul Hannon at paul.hannon@wsj.com

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

2 days ago

November 8, 2024

Anne Joseph

OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

3 days ago

November 6, 2024

Anne Joseph

The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

4 days ago

November 6, 2024

Anne Joseph

As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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