WASHINGTON — The Federal Reserve says economic activity has picked up in most regions of the country but still remains well below pre-pandemic levels with the country facing high levels of uncertainty.
The Fed reported Wednesday that its latest survey of economic conditions around the country found improvements in consumer spending and other areas but said the gains were from very low levels seen when widespread lockdowns push the country into a deep recession.
article continues below
Trending Stories
And the report said that business contacts in the Fed’s 12 regions remained wary about the future.
“Outlooks remained highly uncertain as contacts grappled with how long the COVID-19 pandemic would continue and the magnitude of its economic implications,” the Fed said in its latest Beige Book.
The information in the report will provide guidance for Fed officials at their next meeting on July 28-29. Economists expect the central bank to keep its benchmark interest rate at a record low as it tries to cushion the economy from the pandemic downturn.
The Beige Book found only modest signs of improvement in most areas, noting that consumer spending had picked up as many nonessential businesses were allowed to reopen, helping to boost retail sales in all 12 Fed districts but construction remained subdued.
Manufacturing activity moved up, the report said, ’but from a very low level.”
The economy entered a recession in February, ending a nearly 11-year long economic expansion, the longest in U.S. history. Millions of people were thrown out of work and while 7.3 million jobs were created in May and June that represented only about one-third of the jobs lost in March and April.
And now, in recent weeks with virus cases surging in many states, there are concerns that the fledgling recovery could be in danger of stalling out.
The Beige Book reported that employment had increased in almost all districts in the latest survey, which was based on responses received by July 6, but layoffs had continued as well.
“Contacts in nearly every district noted difficulty in bringing back workers because of health and safety concerns, child care needs and generous unemployment insurance benefits,” the Fed said.
The report said that many businesses who had been able to retain workers because of the government’s Paycheck Protection Program said they might still be forced to lay off staff if their businesses do not see a pickup in demand.
The Fed in March cut its benchmark interest rate to a record low of 0 to 0.25% and purchased billions of dollars of Treasury and mortgage-backed bonds to stabilize financial markets.
But Fed officials have recently expressed concerns that a resurgence of the virus in many states may require more support from the central bank and from Congress.
Fed board member Lael Brainard said in a speech Tuesday that the economy was likely to “face headwinds for some time” and that continued support from the government will remain “vital.”
The Trump administration has said it plans to negotiate another support package once Congress returns from recess next week. Republicans and Democrats remain far apart on what should be in the new package with Democrats pushing for a package of around $3 trillion while GOP lawmakers have called for smaller support of around $1 trillion.
Congress will only have two weeks to reach a compromise before two of the most popular programs providing paycheque protection for workers and expanded unemployment benefits expire. The unemployment support provided an extra $600 per week but many Republicans say that amount was too high and kept some people from returning to work
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
