Economy

The truth about how much Delta is hurting the US economy

Published

3 years ago

August 24, 2021

New York (CNN Business)Is the Delta variant hurting the economy? It depends on who you ask.

A handful of businesses over the past several weeks have said customers are closing their purses. Consumer confidence fell through the floor, and retail sales sank.

Yikes, right? Well, maybe not.

Job growth remains electric. Inflation has come off its highs, and the broadest measure of the economic activity showed considerable strength in the spring.

The US economy is putting out a lot of mixed signals: While the Delta variant is weighing on economic data and consumer sentiment, the recovery is still chugging along and plenty of businesses remain optimistic about the future.

So what gives?

Economic data are a weird beast. On the one hand, it’s the best shot we have at learning about what’s going on. But month-to-month, these stats can be noisy, distorted by temporary factors. That makes it harder to see trends.

It’s too early to tell if the Delta variant is slowing the pace of the economic recovery enough to be concerned. Infection rates are reported nearly in real time, but economic data are always looking backward. Meanwhile, companies are looking forward, trying to judge how their customers might react to outside factors in the future. It’s a cloudy crystal ball at best.

Either way, the bottom line is this: The pandemic isn’t yet over. That means economic conditions keep evolving, maintaining businesses, consumers and the recovery in a chokehold.

What the data says

First, let’s tackle the bad news: Some recent economic data are painting a lousy picture. Early consumer sentiment data for August showed a crash below pre-pandemic levels, falling to its lowest mark since December 2011. People are judging that Delta will hurt the recovery, as well as their daily lives. After hot vax summer was cut short by the variant, people are digesting the realization that the pandemic is not in fact about to be over.

Retail sales fell more than expected in July, both including and excluding auto sales.

On Monday, data from IHS Markit showed US private sector growth slowed sharply in August, as supply chain and capacity constraints continued and the variant added a new negative into the mix. The composite purchasing managers’ index, which measures business activity in the services sector and manufacturing output, fell to its lowest level in eight months.

But here’s the good news: Economists are confident that the higher case numbers won’t lead to lockdowns like last year, particularly now that vaccines are widely available.

The Back-to-Normal Index created by CNN Business and Moody’s Analytics has been holding steady at 92% in recent weeks, but some states’ economies are better now than they were before the pandemic.

And inflation is finally starting to show up in the rearview mirror. Higher prices have been a hallmark of the recovery, but in July, consumer price inflation began to moderate.

Job growth has been booming, with more than 900,000 jobs added in both June and July. For August, economists predict another 725,000 jobs added, according to Refinitiv. The August jobs report will come out next week Friday.

“The Delta variant is a relatively new wrinkle to a jobs recovery that has been uneven to date,” Nela Richardson, chief economist at ADP, told CNN Business. With companies keen to hire and take advantage of the reopened economy and many workers still hesitant to put themselves at risk, the mismatch between labor demand and supply will likely continue in the face of the variant.

That said, each resurgence in the virus has resulted in less and less economic damage, said Jack Janasiewicz, portfolio strategist at Natixis Investment Managers — not least because state and local governments have become hesitant to lock down their economies again, instead pushing vaccines and masking indoors.

It will be another two months until we get some bigger picture data with the third quarter gross domestic product numbers, the single broadest measure of economic activity. Until then, the jury is still out on how much of a mark Delta will leave on the pandemic recovery.

What businesses say

The reaction to Delta among American businesses isn’t unanimous, either.

Travel and leisure companies such as Southwest Airlines (LUV), Airbnb and Disney (DIS) said last week that rising Covid infections are hurting business. TJX (TJX), the owner of TJ Maxx, Marshalls and HomeGoods, said during last week’s earnings that sales had begun to slow down in the last week of July and into the first two weeks of August, which it attributed to the variant.

“If you are concerned about Delta, the first thing you do is stop getting on planes or going to restaurants,” Michael Baker, a retail analyst at D.A. Davidson, said in an email.

That’s why hospitality and leisure, once again, will be worse affected by the resurgence in Covid cases than other areas of the economy, including shops.

But other major retailers that reported earnings last week remained cautiously optimistic regarding sales for the rest of the year.

Big box giants Walmart (WMT) and Target (CBDY) said shoppers have been returning to stores in recent months and stocking up on back-to-school supplies, clothing, beauty, food and other essential items. Customers “have emerged from a year in which digital was the primary growth driver and they’re now returning to our stores in droves,” Target CEO Brian Cornell said on a call with analysts last week.

“We’re seeing tremendous resilience in the consumer today. And our traffic patterns, I think, represent that, as we see this consistent flow of traffic into our stores,” he added.

So far, the Delta variant hasn’t yet altered customer behaviors, but the company is carefully monitoring the impact, executives said.

Macy’s (M) and Kohl’s (KSS) also reported benefiting from customers refreshing their wardrobes after months of working from home, but Kohl’s executives said Delta’s effect on consumers was unpredictable.

“There’s a heightened level of uncertainty as we look to the back half of the year with the Delta variant,” said the company’s CFO Jill Timm. “What is that going to do for consumer confidence?”

Source link

Economy

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

Published

2 days ago

September 10, 2024

Anne Joseph

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.

Source link

Economy

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

Published

2 days ago

September 10, 2024

Anne Joseph

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.

Source link

Economy

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

Published

2 days ago

September 10, 2024

Anne Joseph

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.

Source link