Economy

A Look Back at a Year of Economic Extremes, in 10 Charts – Barron's

Published

4 years ago

February 3, 2021

The pandemic left the economy 3.5% smaller than in 2019. Here, the Westfield Santa Anita... — The pandemic left the economy 3.5% smaller than in 2019. Here, the Westfield Santa Anita shopping mall in Arcadia, Calif.

Frederic J. Brown/AFP via Getty Images

The coronavirus crisis upended large swaths of the U.S. economy last year. But it did so in unusual ways, crushing some sectors far worse than ever before, even as a few select industries prospered.

Overall, real gross domestic product in 2020 was 3.5% smaller than in 2019. That’s a significant drop, comparable only to the global financial crisis and the “Roosevelt Recession” of 1938. Focusing only on household consumption, however, the crisis of 2020 was unlike anything outside of the Great Depression.

Here is a look back at a year of economic extremes, in 10 charts:

With the exception of the post-World War II demobilization, previous downturns were driven by cuts in home building and business investment alongside drops in consumer spending on big-ticket items like cars and furniture. Those categories accounted for roughly 3.1 percentage points of the total 2.5% decline in GDP in 2009, for example, with the impact partly offset by higher government spending and a shrinking trade deficit.

The coronavirus crisis was radically different because household spending on services fell by an unprecedented degree even as many other categories of economic activity held up reasonably well. Overall, the drop in everything from flights to dinners out to trips to the dentist subtracted almost 4 percentage points from GDP. In many categories—including hotels, restaurants, transportation, health care, and recreation—the crisis of 2020 was far more severe than anything on record, including the Great Depression.

By contrast, lower business capital spending subtracted just 0.5 percentage point from annual GDP growth—about half the damage wrought by the tech-stock bust in 2002—while home building contributed about a quarter of a percentage point to growth and household purchases of durable goods contributed almost half a percentage point. It was a terrible time to own a concert venue, but it was a great time to be selling exercise equipment.

The yearly numbers conceal just how remarkable the recent housing boomlet has been. Many Americans were no longer able to go out for avocado toast, had just received massive stimulus checks from the federal government, and were keen on moving to a bigger space to work from home—all at a time when mortgage interest rates dropped from 3.5% before the pandemic to less than 3% by July and just 2.7% now. The uptick was particularly striking in the market for single-family homes, where monthly sales of new homes and the rate of construction starts has soared almost to bubble-era levels.

The rapid surge in demand has led to an unprecedented gap between the number of new single-family homes that builders have finished and the number of new homes getting started. That in turn helps explain why prices have skyrocketed in select metro areas, even at a time when overall shelter costs and rents are rising far more slowly than normal.

Another surprising growth category was “final consumption expenditures of nonprofit institutions,” which added 0.4 percentage point to GDP in 2020—more than ever before, by far. The measure tracks the difference between the value of the services the nonprofits provide to the public and however much they charge people for those services.

If, for example, someone bought a $100 ticket to see a play that cost $200 per audience member to produce, the Bureau of Economic Analysis would count $100 as household spending on entertainment and $100 as consumption spending by the theater itself. That consumption spending in practice is covered by some combination of volunteer labor, donations, government grants, and endowment income, with the mix varying widely depending on the specific nonprofit sector.

The reported surge in nonprofit consumption in 2020 reflected an 8% drop in revenues from selling goods and services even as total output remained essentially flat. In other words, there was a big uptick in donations, volunteerism, and government support that offset the loss of other sources of income. The biggest driver of this shift was the nonprofit hospital sector, which provided 0.4% more services in 2020 despite collecting 8% less from patients and insurers.

The difference was covered by tens of billions of dollars of government aid in the form of forgivable Paycheck Protection Program loans, higher reimbursement rates for Medicare, and direct payments through the Provider Relief Fund. Put another way, the implied operating margin of the nonprofit hospital sector dropped from its stable pre-pandemic level of minus 5% to minus 12%.

Also noteworthy, however, was the “professional advocacy” sector. Donations to this category of nonprofit follow a predictable pattern, with spikes in the third and fourth quarters of even-numbered years. In other words, it’s a reasonable proxy for election campaign spending. The most recent year was unlike any other, with campaign spending in 2020 up by roughly 56% compared to 2018 and up 81% compared to 2016.

All these stories get at one of the most important economic dynamics of 2020: federal government income support was massive, and it made a big difference. Disposable personal income was up more than 7% in 2020—even with massive job losses and business closures—because the government made up the difference.

This support helped power the recovery in the face of a devastating pandemic. It’s why aggregate small-business income was more than 2% higher in 2020 than in 2019 after accounting for government subsidies, but more than 8% lower without those subsidies.

This support has helped power a rapid recovery this is totally unlike the past few downturns. Total wages, salaries, and benefits paid in December were actually higher than in any month before the pandemic emerged, on a seasonally adjusted basis. By this point in the financial crisis, employment income was running 4.5% below the peak.

Even though the U.S. is still short roughly 10 million jobs compared to February, those jobs generally paid very little. In other words, decent wage gains for everyone else have been enough to offset the impact on the aggregate, even as the jobless have benefited from a generous set of enhancements to the unemployment insurance system.

The net effect of higher incomes and lower consumer spending has been a surge in the household saving rate comparable only to WWII rationing.

Assuming vaccinations do their job and American society returns to normalcy, the saving rate should drop and support a consumption boom—just like in the late 1940s.

Write to Matthew c. Klein at matthew.klein@barrons.com

Let’s block ads! (Why?)

Source link

Business

A timeline of events in the bread price-fixing scandal

Published

10 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

Source link

Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

10 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link

Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

1 day ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

Source link