SYDNEY (BLOOMBERG) – Australia’s economy will record its first recession since 1991 as the hit from the coronavirus-induced slowdown is amplified by slumping confidence and domestic disruptions from the outbreak intensifying Down Under, according to Bloomberg Economics’s James McIntyre.
Gross domestic product will fall 0.4 percentage point in the first three months of the year and 0.3 percentage point in the second quarter, ending a 28½-year stretch of economic growth, he said in a report on Monday (March 9).
“Isolations and domestic disruptions to contain the spread of the virus will have a mounting economic impact, which is likely to result in a further GDP contraction in 2Q and potentially beyond,” McIntyre said. “Stimulus, both fiscal and monetary, will help to reduce the damage, but is unlikely to be enough to offset the impacts.”
GDP will expand by just 0.4 per cent in 2020, he forecasts, some 1.5 percentage points below his pre-coronavirus estimate.
PANIC SELLING
An all-out price war between the world’s biggest oil producers is adding to the prospect of a recession as the coronavirus wreaks havoc across the world. Panic reigned in currency markets Monday as orders from traders and algorithmic machines snowballed.
That saw the Australian dollar plunge almost 5 per cent in less than 20 minutes, the biggest one-day decline since 2008. Australia’s benchmark S&P/ASX 200 stock index had slumped 6.2 per cent at 3 p.m. in Sydney.
The Reserve Bank cut interest rates last week and money markets are pricing in a further reduction in April, which would bring it to the estimated lower bound of 0.25 per cent and open the door to unconventional policy. The government is finalizing a fiscal “boost” that could amount to A$10 billion (S$9 billion) to support firms struggling with cash flow and help them keep on employees.
McIntyre predicts large budget deficits ahead as the automatic stabilizers – increased welfare payments and reduced tax collection – begin to take hold. That’s on top of the fiscal stimulus needed to boost demand and confidence.
Alan Oster, chief economist at National Australia Bank, expects the RBA will deploy unconventional policy as early as May, after reducing the cash rate to its estimated lower bound of 0.25 per cent in April.
He sees the preferred option as yield-curve control – setting a target level for government bond yields at a specific duration – with the aim of flattening the yield curve and lowering the cost of debt funding.
The Treasury and RBA estimate the impact on tourism and education from China’s shutdown and other virus fallout will cut 0.5 percentage point from GDP in the first quarter. That doesn’t include supply chain disruptions and is in addition to a 0.2 point cut from wildfires over summer.
McIntyre said the comparison with the 2003 Sars epidemic is problematic because of the massive increase of China’s importance to both the Australian and global economies. He notes that in the Australian Dollar Trade-Weighted Index of the exchange rate, the weighting of the renminbi rose to 30 per cent, higher than any other currency in the 36-year history of the gauge.
The channels through which the reduction in domestic activity transmits during a pandemic were laid out in a 2006 Treasury paper whose author is Steven Kennedy, the current secretary to the Australian Treasury. That analysis saw the economy contracting 5 per cent in the first year.
Transmission of the virus in Australia is now occurring, meaning disruptions and shutdowns of aged-care facilities, child-care centres and schools. Health authorities anticipate several months of disruptions from the virus.
The economy will bounce back, McIntyre said, noting that fourth-quarter GDP released last week showed several segments turning around, including housing and mining investment. China is also set to stimulate its economy, which traditionally benefits Australia.
“How Australia’s housing market weathers the virus outbreak will be a key area of interest given the earlier downturn in construction activity,” he said. “Australia’s resources sector also stands well placed to benefit from a resumption of activity in China’s construction sector and stimulus measures.”
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
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.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
