Winter weather conditions may remain on the forecast for most of the country during the coming weeks, but from a U.S. economic perspective, it’s finally beginning to feel like spring. That may be due in part to changes that come from a new administration, shifting priorities, and fresh perspectives.
But this economic thaw is much more than just a financial uptick. It’s a confluence of several positive factors coming together at one time that’s driving greater optimism than we’ve seen in the last several difficult months. If these trends continue in the right direction, we may be in store for a vibrant springtime for the American economy.
Managing Covid-19 & Passing Economic Stimulus
In order to return to normalcy, getting the pandemic under control will be key. Bold and bipartisan action is essential to address the health and economic crises continuing to face the U.S.
First – we must, in a bipartisan way, do all we can to maximize the vaccination effort. This is essential to establishing any short-, medium- or long-term goals for our citizens and our economy.
Second – while politics always plays a role in determining the size and scope of stimulus packages, this iteration needs special consideration as the cause is very different from past financial crises. Parts of our economy are, in fact, hurting and need support, and we must also keep a focus on prudent fiscal and monetary policies that work together without causing significant future structural financial imbalances.
Supporting Small Businesses & Working Americans
An essential component of that stimulus will be supporting American small businesses, which still face an uphill battle in the coming months. The Paycheck Protection Program (PPP) played a critical role in supporting small businesses, allowing organizations like ours to assist small business owners in receiving the federal funding they needed to survive. The Treasury Department estimated PPP loans supported 51 million American jobs through the program’s close on August 8th, 2020. The launch of the second round of PPP – through which the Small Business Administration has already approved 1.3 million loans totaling over $100 billion – is another lifeline, and we are continuing to help those in need.
But according to the Federal Reserve, sales for nearly 90% of small businesses have not yet returned to pre-pandemic levels. As many as 64% would apply for another round of government aid if it were offered – and an astonishing 39% of that group expected they would be unlikely to remain in business without further assistance. Continued support will be essential to keep the lights on for those small businesses.
Rebuilding America’s Infrastructure
One bright spot on the horizon may be the restoration of America’s roads, bridges, mass transit and other infrastructure works. This effort will help build up our communities to 21st century standards and support local economies. The increase in electric vehicle use, for example, will require building hundreds of thousands of charging stations across the country. Collectively, these efforts could create millions of good-paying jobs and untold investment dollars, catalyzing serious economic activity.
I’m optimistic these efforts will be greatly beneficial for the U.S. economy going forward in 2021. With the number of available jobs on job-search site Indeed returning to pre-pandemic levels in January, hiring could begin to normalize in the coming weeks. As long as we are able to keep Americans safe and healthy as we continue to battle Covid-19 and ensure that pent-up demand and economic stimulus don’t negatively impact interest rates, we could expect to see the American economic engine blooming in the coming months.
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.
