SYDNEY (Reuters) – Australia’s economy shrank last quarter, setting the scene for what will be the country’s first technical recession in three decades as entire business sectors were shut down to fight the coronavirus.
Wednesday’s data from the Australian Bureau of Statistics (ABS) showed the A$2 trillion ($1.39 trillion) economy contracted 0.3% in the quarter ended March, the first decline in nine years.
That took the annual growth to 1.4%, the slowest since the 2009 global financial crisis, as the economy was hit by the worst bushfire season in living memory, a prolonged drought and a pandemic that shut down businesses and left many without jobs.
Following the data release, the Australian dollar eased from a five-month high of $0.6982 and the benchmark share index .AXJO> slipped to 5,835.1 points from 5,902.2.
Australia’s gross domestic product is expected to fall even more sharply in the current quarter. Two consecutive quarters of contraction would mean Australia would suffer its first technical recession since the early 1990s, ending one of the world’s longest growth streaks.
Household consumption was the biggest drag on growth last quarter with massive falls in spending on clothing, cars, transport, recreation, hotels, cafe and restaurant.
Net exports and government spending supported the economy in the quarter.
The economic fallout deepened in Australia as the number of local coronavirus cases surged from less than 100 in early March to more than 7,000 now, forcing the government to shut borders and restrict large gatherings.
The central bank stepped in by cutting the cash rate to a record low 0.25% and launching an unlimited bond buying programme. The government, meanwhile, unleashed a large fiscal stimulus plan, including a A$60 billion wage subsidy scheme.
The Reserve Bank of Australia (RBA) has recently sounded less gloomy about the economy even though the country is in the midst of its worst downturn since the Great Depression as better health outcomes have led to an earlier-than-expected re-opening of businesses.
“Although the immediate outlook is better than anticipated a couple of months ago, the economy still faces challenges,” said Sarah Hunter, Chief Economist for BIS Oxford Economics.
“The size and speed of the decline are unprecedented,” Hunter added.
“The outlook for investment is also highly uncertain, with the construction sector pipeline and capital goods imports data suggesting that spending will slow markedly in the second half of the year.”
($1 = 1.4391 Australian dollars)
(Reporting by Swati Pandey; Editing by Himani Sarkar and Sam Holmes)
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.
