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GDP: US economy grows 1.1% in Q1, slower than expected

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U.S. economic activity grew at a slower pace than expected in the first quarter of 2023, flashing further signs that the economy is slowing down as recession fears swirl and the Federal Reserve considers more interest rate increases.

The Bureau of Economic Analysis’ advance estimate of first quarter U.S. gross domestic product (GDP) showed the economy grew at an annualized pace of 1.1% during the period, slower than consensus forecasts. Economists surveyed by Bloomberg had the U.S. economy growing at an annualized pace of 1.9% during the first three months of 2022.

The print came in significantly cooler than the previous two quarters, which saw annualized growth at 2.9% and 3.2% respectively.

A slowdown in single-family construction was a factor in Thursday's lower-than-expected US GDP. A slowdown in single-family construction was a factor in Thursday's lower-than-expected US GDP.
A slowdown in single-family construction was a factor in Thursday’s lower-than-expected US GDP.

The BEA attributed the quarterly slowdown to wholesale trade, headlined by machinery, equipment and supplies, and manufacturing. A slowdown in single-family construction also propelled the decline in growth rate, per the BEA.

Meanwhile, growth in consumer spending in goods and services helped keep annualized growth positive for the quarter. Motor vehicles and parts led goods spending while healthcare and food services and accommodations led services.

Overall, the slowdown in GDP is in line with other recent economic data and weakening consumer confidence about the economy. Oxford Economics lead US economist Michael Pearce had noted prior to the report that most of the growth would come in the early part of the first quarter. March retail sales came in lower than expected, and some executives have recently said on earnings calls they’re starting to see demand slow down within their businesses.

“The consumer ended the quarter on a sour note, calling into question the sustainability of economic growth moving forward,” Morning Consult Chief Economist John Leer said Thursday. “While private investment may pick back up later this year, it tends to be highly volatile from quarter to quarter. Without a robust consumer, we’re likely to see more volatility and uncertainty in economic activity through the end of the year.”

The first quarter was likely the high water mark for economic growth, according to Oxford Economics. The research team sees marginal GDP growth in the second quarter followed by a recession in the back half of 2023.

“Growth risks are tilted decidedly to the downside as the drivers that buoyed activity at the start of 2023 lose steam while the crunch from tighter credit conditions could be more severe than we’ve already factored into our forecast,” Oren Klachkin, Oxford Economics’ lead US economist, wrote in a note to clients on Thursday.

The report also revealed a 4.9% increase in the personal consumption expenditures price index, excluding food and energy prices. Economists surveyed by Bloomberg had expected a 4.7% increase. The index, known as Core PCE, is a closely watched inflation gauge for the Federal Reserve.

Josh is a reporter for Yahoo Finance.

 

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Economy

Statistics Canada reports wholesale sales higher in July

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OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.

The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.

The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.

The personal and household goods subsector fell 2.5 per cent to $12.1 billion.

In volume terms, overall wholesale sales rose 0.5 per cent in July.

Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.

This report by The Canadian Press was first published Sept. 13, 2024.

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

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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.

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Economy

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

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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.

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