(Bloomberg) — The Federal Reserve, European Central Bank and Bank of England all left interest rates unchanged this week, but signaled different paths for policy going forward.
Officials in the US are prepared to cut interest rates in 2024, while those in Europe said they’d step up their exit from pandemic-era stimulus. Meantime, policymakers in the UK were more hawkish, with several still supporting a rate hike at Thursday’s meeting.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
US
The Federal Reserve pivoted toward reversing the steepest interest-rate hikes in a generation after containing an inflation surge so far without a recession or a significant cost to employment. While Chair Jerome Powell said Wednesday policymakers are prepared to resume rate increases should price pressures return, he and his colleagues issued forecasts showing that a series of cuts would be likely next year.
US consumer prices picked up in November on increases in housing and other service-sector costs, keeping inflation stubborn enough to thwart any Federal Reserve interest-rate cuts soon.
Europe
The European Central Bank kept interest rates on hold for a second meeting with inflation tumbling, but said it will step up its exit from €1.7 trillion ($1.8 trillion) of pandemic-era stimulus. Officials, meanwhile, said they’d accelerate the end of reinvestments under the PEPP bond-buying program. That will put all policy tools into tightening mode, even as fresh projections showed a weaker economy softening the inflation outlook.
The Bank of England kept interest rates at a 15-year high, sticking with its message that borrowing costs will remain elevated for some time despite growing bets on a wave of cuts in 2024. Governor Andrew Bailey said in a statement released alongside the decision that “there is still some way to go” in the fight to control inflation.
The UK economy shrank more than expected in October as elevated borrowing costs and wet weather took their toll, setting the stage for another quarter of stagnation that is widely forecast to persist through 2024. With the full impact of Bank of England interest-rate increases yet to be felt, the economy is forecast to eke out a small gain at best in the fourth quarter, with some even predicting the start of a shallow recession.
The euro zone suffered a bigger-than-expected drop in industrial production in October, a sign of weakness that could mean the economy is in a recession. Such a drop at the start of the final three-month period of 2023 means that manufacturing and the rest of the economy have more ground to cover to avoid two consecutive quarters of contraction that would amount to a downturn.
Asia
China’s top leaders including President Xi Jinping vowed to make industrial policy their top economic priority next year, a letdown for investors hoping to see more forceful stimulus to boost growth. The meeting’s emphasis on supporting companies to produce higher-value products above trying to spur consumer spending is unlikely to significantly juice growth in the near-term.
Singapore is closing in on Hong Kong’s lead in real estate deals as the city-state benefits from its status as a wealth haven, while distressed property sales afflict the rival Asian financial hub.
Emerging Markets
Brazil’s annual inflation rate fell to within the central bank’s target range, preceding a fourth-straight cut to borrowing costs by policymakers. The country’s central bankers are forging ahead with plans to ease monetary policy with “serenity” and “moderation” as annual inflation is seen ending the year within the target range for the first time since 2020.
Argentina’s inflation soared above 160% in November ahead of President Javier Milei’s massive currency devaluation that’s likely to accelerate price increases ever further this month. The first days of December have already seen price increases of 15% compared with a month earlier, and may end the month up around 20%, according to consulting firm C&T Asesores.
World
Outside of the major central banks, Norway’s central bank pushed ahead with a final hike in borrowing costs. Russia also raised borrowing costs. Mexico, Pakistan, the Philippines, Switzerland, Taiwan held rates. Brazil, Peru, Ukraine, cut.
–With assistance from Andrew Atkinson, Krystal Chia, Tom Hancock, Zhu Lin, Yujing Liu, Jana Randow, Tom Rees, Andrew Rosati, Augusta Saraiva, Catarina Saraiva, Zoe Schneeweiss, Craig Stirling, Manuela Tobias, Craig Torres, Fran Wang, Alexander Weber and Lucy White.
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.
