BENGALURU (Reuters) – The impact of the coronavirus outbreak in China on U.S. economic growth will be negligible and short-lived, according to economists in a Reuters poll who nonetheless now say risks to their forecasts are skewed more to the downside.
FILE PHOTO: A customer counts her money at the register of a Toys R Us store on the Thanksgiving Day holiday in Manchester, New Hampshire November 22, 2012. REUTERS/Jessica Rinaldi
The outbreak has also significantly increased the chance Beijing doesn’t comply with all of the terms of a Jan. 15 initial trade agreement signed with Washington, potentially reigniting a damaging trade war between the world’s two largest economies.
Still, medians from the Feb. 10-19 Reuters poll of over 100 economic forecasters found the overall U.S. economic growth outlook for this year unchanged compared with last month.
The forecast for growth in the current quarter was reduced just 0.1 percentage point to a seasonally adjusted annualized rate of 1.5% – already slow, even by recent standards. The economy was then expected to grow 1.8-2.0% each quarter until end-2021.
“At this point, we are assuming the coronavirus impact will be relatively small, and more importantly, temporary. So whatever drag there is in the first quarter will largely be reversed in the second,” said Jim O’Sullivan, chief U.S. macro strategist at TD Securities.
“It will not have a significant impact on the U.S. economy. But that is certainly a risk for sure. I mean, that is the source to downside risk if it keeps escalating.”
Growth is expected to pick up to 1.8% in the second quarter of this year, only slightly slower than the 1.9% forecast in the January poll.
In that survey, which was conducted before the World Health Organization declared the coronavirus a global public health emergency, 56% of economists said the risks to their U.S. growth views were more to the upside.
However, as the outbreak spread, that has switched around to nearly 70%, or 33 of 48 respondents now saying the opposite. Around 75,000 people have been reported as carriers of the virus globally, with over 2,000 confirmed dead.
Despite these risks, the likelihood of a U.S. recession in the coming year only edged up to a median 23% from 20% in January.
“The threat the coronavirus outbreak poses in an environment of already subdued global growth underlines the potential for medium-term U.S. economic weakness,” said James Knightley, chief international economist at ING.
“It is impossible to forecast the path of the virus, but it increases the chances the Federal Reserve will cut rates at least once more to provide some support to the economy.”
While the consensus showed the Fed would keep rates unchanged at 1.50%-1.75% at least until the end of next year, Reuters analysis showed nearly 40% of economists polled now expect at least one rate cut at some point this year.
“We think the Fed will keep rates on hold, but we agree with the market that there are asymmetric risks to policy where easing is more likely than tightening,” said Michelle Meyer, U.S. economist at BofA Global Research.
“With underlying economic data remaining robust, core inflation trending higher and policy already accommodative, there is a higher hurdle to cut this year than last.”
The poll found that inflation as measured by the core PCE price index, the Fed’s preferred gauge, would range between 1.8% and 1.9% until the second quarter of next year and touch the central bank’s 2% target in the second half of 2021.
When asked if the chance of non-compliance by Beijing with the terms of the initial trade agreement had increased significantly since the coronavirus outbreak, nearly two-thirds of economists, 30 of 48, said yes.
That stands in contrast to results from a separate poll last week on the hit to China’s economy, in which about 56% of economists said the chance of non-compliance had not increased.
“If domestic activity in China remains severely negatively affected by the outbreak of the virus, in our eyes, it’s highly likely the Chinese would try to reduce the purchases of U.S. goods they have promised,” said Bernd Weidensteiner at Commerzbank.
“There is actually a paragraph in the Phase 1 agreement that in case of natural disasters…there is a way to purchase less than the promised amount, and they have a reason now that they cannot fully live up to their commitments, which are relatively generous,” he added.
Additional reporting by Indradip Ghosh; Graphics by Vivek Mishra and Mumal Rathore, Polling by Manjul Paul and Sumanto Mondal; Editing by Ross Finley and Andrea Ricci
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.
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.
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.
