adplus-dvertising
Connect with us

Economy

The Economy Is Surging. These 4 Things Will Determine What Happens Next – NPR

Published

 on


Travelers head to a security checkpoint at Denver International Airport on July 2. The economy likely surged in the April-June quarter as vaccine rollouts sparked a surge in pent-up activity. A slowdown is now seen as inevitable, although the pace of growth should remain strong.

David Zalubowski/AP

David Zalubowski/AP

The U.S. economy likely grew at a blistering pace as the country emerged from the darkest days of the coronavirus pandemic. The question now is what happens next, especially as the delta variant continues to spread.

On Thursday morning, the Commerce Department is expected to report that gross domestic product grew around 8% in the period between April and June from a year earlier as the rollout of vaccines spurred a surge in economic activity.

That would potentially be the second-fastest quarterly growth since 1983, after a 33.4% annualized surge in the July-September period of last year, when the pandemic led to intense volatility in the economy.

“Consumer spending was very strong in the second quarter,” says Jay Bryson, the chief economist at Wells Fargo. “In general, you’re looking at very, very strong growth.”

But GDP data is backward looking, and many analysts expect growth to have marked a peak. For the second half of the year, the pace of growth will inevitably slow down, even as it is likely to remain strong.

The question is how much the economy could slow. Here are four factors that could determine the path forward:

The delta variant and the here-we-go-again impact

The pandemic is clearly not over yet. The highly transmissible delta variant of the coronavirus is fueling a surge in cases around the U.S., and multiple municipalities have reinstated indoor mask mandates, including Los Angeles County and St. Louis.

The Centers for Disease Control and Prevention this week revised its guidance to recommend that some fully vaccinated people wear masks indoors if they live in areas with substantial or high transmission.

Although few people expect the type of economic impact we saw when the pandemic started last year, it remains a real concern, given that only about half of the U.S. population is fully vaccinated.

Some small-business owners and their employees are worried about a repeat of last year, when many were forced to shut down their stores.

Ethnie Grazette, who works at Duman Home in Brooklyn, N.Y., says the spread of the virus could upend what has been a few very good months for the shop, which sells bedding and towels.

“These last few months have been pretty good,” Grazette says, smiling. “I got a lot of customers coming in. They’re spending money. It’s good for me and the people to get out.”

“I’m worried about what might happen,” she adds, however, remembering the anxiety and uncertainty during the first part of the pandemic. “If this new variant makes us shut down again, it’s going to put a lot of strain on the economy

High inflation: temporary or here to stay?

Another risk is inflation. Data this month showed consumer prices surged 5.4% in June from a year earlier, the highest increase in nearly 13 years.

On Wednesday, after the Federal Reserve’s two-day meeting, Chair Jerome Powell again maintained that these increases are a result of pandemic disruptions to the economy and will be short-lived or “transitory.”

Others are not so sure. Some economists worry that inflation could prove harder to reverse if Americans and businesses start to expect that prices will be high — and act accordingly.

A person wears a mask while walking at Grand Central Terminal on July 27 in New York City. Masks continue to be required at many places despite the rollout of vaccines. The Centers for Disease Control and Prevention this week recommended that fully vaccinated people begin wearing masks indoors again in places with high coronavirus transmission rates.

Spencer Platt/Getty Images

Spencer Platt/Getty Images

Stores could raise prices, and consumers could stop buying certain things, for example.

Even if it proves temporary, high inflation is already weighing on businesses and their customers.

“Just because it is transitory — that is, caused by some dislocation of the pandemic — that does not mean it is not disruptive and extremely impactful to certain segments of the economy,” says Constance Hunter, the chief economist at KPMG.

The big debate over workers in America

Perhaps no issue has split opinions more sharply than why some Americans have remained reluctant to return to work, hindering some sectors like leisure and hospitality.

Republicans have consistently blamed the enhanced unemployment benefits passed during the pandemic. They say the benefits are a disincentive to work, and about half of states — almost all led by Republican governors — are ending the benefits early.

The data so far has been inconclusive, and analysts cite a number of reasons that some Americans have stayed on the sidelines, including health concerns, difficulty finding child care and, yes, the financial cushion provided by expanded benefits.

Ralph Elia owns KC Arts in Brooklyn, and he says it has gotten harder for him to find workers.

“I feel like small business has been in competition to get employees with the benefits,” Elia says. “I agreed with it in the beginning. We really needed it. But at some point, they should have slowed it down or cut it off. Because we need to hire people. People need to get out and work.”

Chips and the supply chain chaos

It’s a problem that has bedeviled industries from carmakers to homebuilders since last year: A surge in demand from people cooped up at home has led to shortages of key materials, such as chips used in all kinds of electronics and cars, as suppliers struggle to keep up.

Pickup trucks and vans are seen in a parking lot outside a General Motors assembly plant on March 24 in Wentzville, Mo. Chip shortages have forced automakers to temporarily halt production through this year.

Jeff Roberson/AP

Jeff Roberson/AP

Though some of the supply chain constraints are starting to ease — in the lumber sector, for example — there’s no certainty of when global trade will approach normality.

So far the impact has been manageable overall, though much depends on how long the shortages of key materials last.

“If there will be any drag on growth in the second quarter, it could be from inventory,” says Bryson, of Wells Fargo. “[There are] lots of supply constraints, businesses can’t produce as much and so, because of that, they may have been selling out of their inventory, and that could be a mild headwind to growth.”

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

 on

 

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

 on

 

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

Published

 on

 

HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending