Economy

Why the US economy won't gain any traction until 2021 – CNN

Published

4 years ago

October 21, 2020

The economy’s travails are evident in the Back-to-Normal index (BNI) developed by Moody’s Analytics and CNN Business. The index is a compilation of a wide range of economic statistics available from the government and third-party sources. The BNI measures how the economy is performing compared to its pre-pandemic normal. Currently, the index is sitting at just over 80%. In other words, the economy is operating 20% below where it was when the pandemic hit back in March. That is a long way from normal, and only about halfway back from where the economy was at its April low.

The BNI also indicates the economic recovery has more or less stalled since the summer. The index isn’t much higher today than it was back in June when it was closer to 75%. The re-intensification of the pandemic has been a major cause of this painfully slow recovery. There is a clear relationship between the health care crisis created by the pandemic and the economic crisis: More infections result in a weaker economy.

Based on our analysis tying confirmed Covid-19 infections with unemployment rates across states and since the pandemic began, rising infections result in fewer jobs and higher unemployment one month later. This relationship is not materially different between states like New York that have aggressively shut down businesses and states like Florida that have kept businesses largely open. We also found that it isn’t true that the recession caused by the pandemic was our own doing because we shut businesses down. There would have been a recession regardless, as worried households and businesses would have pulled back on their activities whether or not businesses were shut down.

It is thus not surprising that as infections have significantly increased across Europe over the past several weeks, the European economy is faltering again. Europe had meaningfully brought down infections with its stringent lockdowns early on in the pandemic, and its economy had begun a strong comeback in the summer, but that recovery looks to be flagging with the re-intensifying pandemic. The same dynamic also appears to have begun here at home. As people start to move indoors with the colder weather, infections in recent weeks are up in much of the country. This doesn’t bode well for our economic recovery.

The impending presidential election could also weigh on our economy. The process of electing a president has historically been neither here nor there when it comes to the economy. Even the highly contentious George W. Bush vs. Al Gore election in 2000 had no meaningful impact, save perhaps for a few bad days in the stock market, which was already struggling with the dot-com stock bust. This time may be different. The nation feels like it could boil over if we have a close election and one side or the other believes that the election is being stolen.

This would be much less of a concern if the winner wins handily, making it indefensible to question the outcome. Current polling suggests this may happen. However, our election model of the state Electoral College, which takes into account a range of political factors, including previous state voting patterns and the President’s approval rating, and a range of economic factors, such as unemployment, housing and stock prices, suggests the results will be much closer. Assuming that turnout by Republicans and Democrats isn’t lopsided, then our modeling shows Biden winning the Electoral College with 279 votes. Of course, 270 votes are needed to win. If the election is this close, it seems certain to be contested, which could make the next couple of months difficult as the mess gets sorted out. There is nothing but downside to the economy in such a disquieting scenario.

But perhaps the most serious blow to the economy as this monumental year ends will be the failure of President Trump and Congress to come to terms on providing more help to those hit hardest by the pandemic. It makes economic sense for lawmakers to agree on legislation providing substantial additional fiscal support, including more aid to the unemployed, small businesses, the airlines, state and local governments and a long list of others. Without these additional funds, the already fragile recovery threatens to come undone. It also makes political sense given the approaching election and the need for lawmakers to demonstrate that they have voters’ backs. Yet a deal has not come to fruition and it appears we will have to wait until the next president and Congress take office before any real help is put in place.

Until then, much could wrong, driving the economy off the proverbial rails. It would be prudent to buckle in.

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Economy

Federal money and sales taxes help pump up New Brunswick budget surplus

Published

10 hours ago

September 16, 2024

Anne Joseph

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.

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Economy

Liberals announce expansion to mortgage eligibility, draft rights for renters, buyers

Published

13 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.

She says the changes will come into force in December and better reflect the housing market.

The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.

The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.

On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.

Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.

Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.

The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.

The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.

This report by The Canadian Press was first published Sept. 16, 2024.

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Economy

Statistics Canada says manufacturing sales up 1.4% in July at $71B

Published

14 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.

The increase followed a 1.7 per cent decrease in June.

The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.

Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.

Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.

In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.

This report by The Canadian Press was first published Sept. 16, 2024.

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