This should be peak season for a 12-room hotel near the train station in the Chinese industrial hub of Wuhan. The Chinese New Year usually brings in plenty of travellers and delivers profits of around $3,000 a month.
But the place is empty. Wuhan, the centre of a deadly viral outbreak, is on lockdown. “There is not a single customer,’’ said the hotel’s owner, who gave only his surname, Cui. He still has to pay rent and his utility bills. Instead of counting his earnings, he’s expecting to lose $1,500 a month.
The outbreak arrives at a bad time for Wuhan, China and the world economy.
China, with the world’s No. 2 economy, was decelerating even before the coronavirus hit.
And the world economy is coping with an unexpectedly sharp slowdown in No. 7 India, which prompted the International Monetary Fund last week to downgrade its outlook for global growth this year.
The coronavirus is drawing comparisons to the SARS outbreak, which paralyzed the economies of China and Hong Kong for weeks in 2003. But what happens in China carries a lot more weight these days: In 2003, China accounted for 4% of global output. Now its share is 16%, according to the World Bank.
“A growth slowdown in China could have sizable ripple effects across Asia and the rest of the world, given the size of China’s economy and its role as the key driver of global growth in recent years,” said Eswar Prasad, a Cornell University economist and former head of the International Monetary Fund’s China division.
No one knows exactly how the outbreak will play out or what its economic impact will be.
Authorities are still trying to better understand the new virus. It is from the coronavirus family, which also can cause the common cold as well as more serious illnesses such as SARS.
So far, China has confirmed more than 4,500 coronavirus cases and more than 100 deaths.
The Chinese government has locked down Wuhan and 16 other cities in Hubei province, isolating more than 50 million people. The United States and other countries prepared Tuesday to airlift their citizens out of Wuhan. The outbreak has brought every day business to a standstill and closed down such popular tourist attractions as Beijing’s former imperial palace, Shanghai Disneyland, Hong Kong Disneyland and the city’s Ocean Park.
The significant decline in travel has already caused United Airlines to suspend some flights to Beijing, Hong Kong and Shanghai, the airline said in a statement.
“It’s still too soon to measure what the impact is going to be from an economic perspective,’’ said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
The SARS experience offers some reason for economic optimism. That outbreak, centred in southern China, initially clobbered the Chinese economy. In the April-June quarter of 2003, China’s economic growth dropped to an annual rate of 9.1% from 11.1% the previous quarter, noted economists Tommy Wu and Priyanka Kishore of Oxford Economics. But as the health crisis subsided, growth picked back up, recovering to a 10% annual rate in the second half of the year.
“From what we know, it’s likely to be similar this time,’’ said Andy Rothman, investment strategist at Matthews Asia. “People shouldn’t get panicked that growth is going to slow sharply’’ over a sustained period.
Still, the Chinese economy isn’t the dynamo it was in the early and mid-2000s when growth routinely hit double digits.
The IMF expects China’s growth to drop from 6.1% in 2019, already the slowest since 1990, to 6% this year and 5.8% next. The slowdown reflects China’s difficult transition from fast but unsustainable growth built around often-wasteful investments to steadier but less striking growth built on consumer spending by the country’s growing middle class.
The Chinese economy has also been buffeted by a trade war with the United States. The two countries signed a truce earlier this month that was expected to provide some economic relief. Then the viral outbreak hit.
As part of the so-called Phase 1 deal, China agreed to increase purchases of U.S. products by $200 billion over this year and next. That goal sounded ambitious even before the viral outbreak isolated tens of millions of Chinese consumers and delivered a wallop to consumer and business confidence.
Rothman suspects the United States might give the Chinese a little leeway. “Both governments really want the deal to work,’’ he said. “Ïf it is clear that (Chinese purchases) are off to a slow start not because the Chinese government is not trying its best but because of the virus, the Trump administration is likely to be sympathetic.’’
There has been no immediate impact on China’s vast manufacturing industries because factories already were closed for the Lunar New Year holiday and weren’t due to reopen until this week or later.
“I think the first quarter looks like it will take quite a significant hit,” said Rajiv Biswas, chief Asia economist for IHS Markit. “This still is escalating, so it’s hard to talk about when this will be contained.”
Further delays in restarting production could send shock waves through Asian suppliers of components and exporters of iron ore, copper and other commodities as far away as Australia, Brazil and Africa.
Foreign suppliers usually see a surge in Chinese orders as factories restock after shutting down for 10 days or more during the holiday.
“The loss of economic output could be quite substantial, and that has consequences for the Asian manufacturing supply chain, because orders won’t come in the way people expect,” Biswas said.
The impact in other developing Asian countries might reduce their 2020 economic growth by 1.5 to 2 percentage points, according to a forecast by Edward Glossop of Capital Economics.
Growth in Asian emerging markets “will slow sharply in the first quarter of the year,” Glossop said in a report.
Japanese Economy Minister Yasutoshi Nishimura told reporters Tuesday that Japanese exports, production and corporate profits could be pinched by the new virus, stressing that he was closely monitoring the situation.
A more direct hit is already coming from the decline in tourist traffic from China. Nishimura said Chinese travellers usually account for about a third of tourists from abroad.
Chinese tourists to Japan tend to be relatively big spenders. The virus has hit right at the time when Chinese travel for the lunar new year.
Japan’s economy suffered from the SARS outbreak in 2003, but the damage was limited to several months. The big difference is that Japan has far more Chinese tourists these days.
Now “the impact on the Japanese economy would be far greater,” said Takahide Kiuchi, executive economist at Nomura Research Institute, while adding that much depends on how widespread the outbreak proves to be.
“There is hardly anything good that can be hoped for economically because of the new virus,” he said. Increased sales of masks and other protective gear, he noted, will hardly pick up the slack.
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Wiseman reported from Washington, McDonald from Beijing and Kageyama from Tokyo. AP researcher Yu Bing in Beijing contributed to this report.
Paul Wiseman, Joe McDonald And Yuri Kageyama, The Associated Press
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.
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.
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.
