Economy

Q2 GDP: US economy contracted by worst-ever 32.9% in Q2, crushed by coronavirus lockdowns – Yahoo Canada Finance

Published

4 years ago

July 30, 2020

The US economy contracted at the sharpest rate on record in the second quarter this year, affirming fears that the coronavirus pandemic and measures to contain it drove a historic plunge in consumer and business activity.

Here were the main metrics from the Bureau of Economic Analysis’ (BEA) advance Q2 GDP report, compared to consensus estimates compiled by Bloomberg:

Q2 GDP annualized, quarter over quarter: -32.9% vs. -34.5% expected vs. -5.0% in Q1
Q2 Personal consumption: -34.6% vs. -34.5% expected vs. -6.8% in Q1
Core Personal consumption expenditures, quarter over quarter: -1.1% vs. -0.9% expected vs. 1.7% in Q1

Market participants were bracing for an ugly second-quarter print, with the coronavirus pandemic forcing business closures and disrupting daily life for much of the April through June period.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“The decline in second-quarter GDP reflected the response to COVID-19, as ‘stay-at-home’ orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses,” The BEA said in its statement. “This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending.”” data-reactid=”23″>“The decline in second-quarter GDP reflected the response to COVID-19, as ‘stay-at-home’ orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses,” The BEA said in its statement. “This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending.”

“The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the second quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified,” it added.

At 32.9%, the second-quarter annualized contraction marked by far the worst plunge ever recorded, based on Bureau of Economic Analysis data spanning back to 1947. Before the pandemic, the worst GDP print on record was in the first quarter of 1958, when GDP fell 10.0% on an annualized basis.

US economic activity contracted by 5.0% in the first quarter of 2020, which captured only the start of the coronavirus pandemic and business shutdowns in March.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Estimates for the margin of decline in second-quarter GDP spanned a relatively wide range. On the low end, several economists expected GDP sank as much as 40%. On the high end, Mizuho Securities economists estimated GDP declined by 25% in the second quarter. The Atlanta Federal Reserve’s closely watched GDPNow tool forecast a 32.1% decline in second-quarter GDP.” data-reactid=”27″>Estimates for the margin of decline in second-quarter GDP spanned a relatively wide range. On the low end, several economists expected GDP sank as much as 40%. On the high end, Mizuho Securities economists estimated GDP declined by 25% in the second quarter. The Atlanta Federal Reserve’s closely watched GDPNow tool forecast a 32.1% decline in second-quarter GDP.

Consumer-driven downturn

The second-quarter cliff in economic activity was driven by a drop-off in consumer spending, which appeared as a 34.6% drop in the personal consumption metric in Thursday’s report, or slightly worse than had been expected. Consumer spending comprises about two-thirds of the US economy, and prior to the pandemic had been the main engine of economic growth.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="But spending sputtered during the second quarter, with businesses forced to close from mid-March onward to accommodate social distancing due to the coronavirus outbreak. Spending at retailers sank by a record 14.7% in April, according to the Commerce Department, before rebounding in each of May and June.” data-reactid=”30″>But spending sputtered during the second quarter, with businesses forced to close from mid-March onward to accommodate social distancing due to the coronavirus outbreak. Spending at retailers sank by a record 14.7% in April, according to the Commerce Department, before rebounding in each of May and June.

“In contrast to prior recessions, where plunging investment and inventories have usually been the biggest drivers, the coronavirus downturn has been mainly the result of an unprecedented collapse in consumption as lockdown measures imposed in late March forced consumers to stay at home,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, said July 24.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With July coming to a close, and with many states having struggled to contain a resurgence in coronavirus cases, a number of economists noted that the pace of recovery coming out of the second quarter may be slower than the quick bounce some had anticipated. The second-quarter GDP report was released at the same time Thursday morning as the Labor Department’s report on weekly unemployment claims, which showed jobless claims rose for a second-straight week during the period ended July 25 following months of improvement.” data-reactid=”32″>With July coming to a close, and with many states having struggled to contain a resurgence in coronavirus cases, a number of economists noted that the pace of recovery coming out of the second quarter may be slower than the quick bounce some had anticipated. The second-quarter GDP report was released at the same time Thursday morning as the Labor Department’s report on weekly unemployment claims, which showed jobless claims rose for a second-straight week during the period ended July 25 following months of improvement.

“While the initial rebound in monthly activity was stronger than expected, the recent flattening in high frequency indicators suggests a more gradual pace of recovery from here,” Nomura economists led by Lewis Alexander said in a note Friday.

This post is breaking. Check back for updates.

—

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.” data-reactid=”46″>Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

5 days ago

November 8, 2024

Anne Joseph

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.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

6 days ago

November 6, 2024

Anne Joseph

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.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

7 days ago

November 6, 2024

Anne Joseph

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.

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