Connect with us

Economy

Britain's economy racing as lockdown lifts, but outlook has not improved: Reuters poll – The Guardian

Published

 on

Britain's economy racing as lockdown lifts, but outlook has not improved: Reuters poll – The Guardian


By Jonathan Cable

LONDON (Reuters) – Britain will expand at its quickest pace in decades this quarter after shrinking at its fastest pace in centuries last quarter, a Reuters poll found, as vast swathes of the economy have reopened following a nationwide shutdown to control the coronavirus.

Despite near-term optimism, almost 85% of respondents, 32 of 38, thought the outlook for the British economy had stayed the same or worsened over the past month, with only six saying it had improved.

The virus has infected almost 15 million people across the world and Britain has the highest death toll in Europe – despite the government forcing businesses to close and citizens to stay home.

(Reuters Poll: UK economic and monetary policy outlook – https://fingfx.thomsonreuters.com/gfx/polling/qzjvqwkqavx/UK%20economic%20outlook.PNG)

But many restrictions have now been eased and people are emerging from their homes, returning to work and spending money again, so the economy was expected to expand 12.2% this quarter, the July 13-21 Reuters poll showed, better than the 10.5% recovery predicted last month.

That bounceback comes after an historic 18.9% contraction pencilled in for last quarter and nearly all economists who responded to an extra question said the biggest threat to the recovery would be a second wave of virus infections.

“The economy will almost certainly have imploded over Q2 as a whole. The good news is that in terms of the monthly trajectory, there is clear evidence that the economy has remained on an upward path since May,” said Philip Shaw at Investec.

“But the challenge of course is keeping the economy from running out of steam.”

This year, the economy was expected to contract 9.1%, the median in the poll of over 70 economists showed, and then recover to expand 6.0% in 2021. In a worst case scenario it will shrink 13.0% this year.

Official GDP figures said the economy grew a slower than expected 1.8% in May.

To tackle the hit from COVID-19 to the economy the British government has massively ramped up spending, borrowing 128 billion pounds ($163 billion) last quarter, five times the amount during the same period last year.

But only a slim majority said the Treasury’s response had been enough – 14 of 25 respondents to an additional question said.

“The authorities have done broadly what they needed to do,” said Peter Dixon at Commerzbank.

(Reuters Poll: UK economic recovery outlook – https://fingfx.thomsonreuters.com/gfx/polling/yxmvjrogevr/Britain%20economy.PNG)

Forming the centrepiece of the government’s support was a scheme to pay 80% of wage bills if staff were put on leave rather than let go. But that is due to close in October and unemployment was seen peaking at 8.0% in the fourth quarter.

The Bank of England chopped borrowing costs to a record low of 0.10% and restarted asset purchases. But no change in policy was expected at its next meeting on Aug. 6.

The bank rate will not rise until 2022, but an additional 70 billion pounds ($89 billion) will be added to the BoE’s existing 745 billion pounds quantitative easing programme toward the end of this year, the poll showed.

Another risk is the expiry of Britain’s transition period with the European Union at the end of the year, after leaving more than 40 years of membership in March.

The two sides resumed talks on Tuesday but while there has been little movement what divides them. Still, the aim of reaching agreement on future ties by October is ambitious but achievable, German Foreign Minister Heiko Maas said on Tuesday.

As has been consistent in Reuters polls since the June 2016 vote to leave the EU, economists almost unanimously expect the eventual relationship will be a free trade deal.

“Failure to sign a trade agreement with the EU in 2020 will go down as a major policy error. It is inconceivable to me that the British government would be prepared to take such a risk with the economy, particularly in the current climate,” Commerzbank’s Dixon said.

“But then Brexit and a rational approach to economic policy have never been natural bedfellows.”

(Reporting by Jonathan Cable; Polling by Mumal Rathore and Hari Kishan; Editing by Alison Williams)

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Canadian regulator lifts banks’ capital buffer to record, priming for post-pandemic world

Published

 on

Banks in Canada

Canada‘s financial regulator raised the amount of capital the country’s biggest lenders must hold to guard against risks to a record 2.5% of risk-weighted assets, from 1% currently, in a surprise move that could pave the way for them to resume dividend increases and share buybacks.

The new measures, which take effect on Oct. 31, is a sign that the economic and market disruptions stemming from the coronavirus pandemic have abated and banks’ capital levels have been resilient, the Office of the Superintendent of Financial Institutions (OSFI) said in a statement.

But the regulator acknowledged that key vulnerabilities, including household and corporate debt levels, as well as asset imbalances caused by steep increase in home prices over the past year, remain.

In a sign of concern about the housing market, OSFI and the Canadian government raised the benchmark to determine the minimum qualifying rate for mortgages, starting June 1.

The increase in the Domestic Stability Buffer (DSB) to the highest possible level raises the Common Equity Tier 1 (CET1) capital – the core bank capital measure – to 10.5% of risk-weighted assets; a 4.5% base level, a “capital conservation buffer” of 2.5%, and a 1% surcharge for systemically important banks, plus the DSB.

The change “gives OSFI more leeway to loosen a restriction down the road, namely the freeze on buybacks and dividend increases,” National Bank Financial Analyst Gabriel Dechaine said.

OSFI felt it was “useful for the banks to understand what our minimal capital expectations are and to give them time to adjust to that… ahead of any lifting of the temporary capital distribution restrictions,” Assistant Superintendent Jamey Hubbs said on a media call.

Even with the higher requirement, Canada‘s six biggest banks would have excess capital of about C$51 billion, dropping from C$82 billion as of April 30, according to Reuters calculations.

That was driven in part by a moratorium on dividend increases and share buybacks imposed by OSFI in March 2020, although a pandemic-driven surge in loan losses has so far failed to materialize.

The Canadian banks index slipped 0.25% in morning trading in Toronto, while the Toronto stock benchmark fell 0.1%.

The increase is the first since the last one announced in December 2019, which did not come into effect as planned in April 2020, as OSFI made an out-of-schedule change https://www.reuters.com/article/canada-mortgages-regulation-idUSL1N2B636J that dropped the rate to 1% in March. It has maintained that level at its twice yearly reviews.

Prior to that, OSFI had raised the required level by 25 basis points at every twice yearly review since it was introduced at 1.5% in June 2018.

($1 = 1.2326 Canadian dollars)

 

(Reporting By Nichola Saminather; Editing by Marguerita Choy and Jonathan Oatis)

Continue Reading

Economy

Canada Economic Indicators

Published

 on

Fed to focus on next steps to save economy – BNNBloomberg.ca

The economic indicators used to gauge the performance of an economy and its outlook are the same across most nations. What differs is the relative importance of certain indicators to a specific economy at various points in time (for instance, housing indicators are closely watched when the housing market is booming or slumping), and the bodies or organizations compiling and disseminating these indicators in each nation.

Here are the 12 key economic indicators for Canada, the world’s 10th-largest economy:1

GDP Growth

Canada's GDP grew by 3% in July as more sectors reopened – CBC.ca

Statistics Canada, a national agency, publishes growth statistics on the Canadian economy on monthly and quarterly bases. The report shows the real gross domestic product (GDP) for the overall economy and broken down by industry. It is an accurate monthly/quarterly status report on the Canadian economy and each industry within it.2

 

Employment Change and Unemployment

Key data on the Canadian employment market, such as the net change in employment, the unemployment rate, and participation rate, is contained in the monthly Labour Force Survey, released by Statistics Canada. The report contains a wealth of information about the Canadian job market, categorized by the demographic, class of worker (private sector employee, public sector employee, self-employed), industry, and province.3

Consumer Price Index

Statistics Canada releases a monthly report on the consumer price index (CPI) that measures inflation at the consumer level. The index is constructed by comparing changes over time in a fixed basket of goods and services purchased by consumers. The report shows the change in CPI monthly and over the past 12 months, on an overall and core (excluding food and energy prices) basis.4

International Merchandise Trade

This monthly report from Statistics Canada shows the nation’s imports and exports, as well as the net merchandise trade surplus or deficit. The report also compares the most current data with that for the preceding month. Exports and imports are shown by product category, and also for Canada’s top ten trading partners.5

Teranet – National Bank House Price Index

This composite index of house prices across Canada was developed by Teranet and the National Bank of Canada and represents average home prices in Canada’s six largest metropolitan areas. A monthly report shows the change in the index monthly and over the past 12 months, as well as monthly and 12-month changes in Canada’s six and 11 largest metropolitan areas.6

RBC Manufacturing Purchasing Managers’ Index – PMI

Released on the first business day of each month, this indicator of trends in the Canadian manufacturing sector was launched in June 2011 by Royal Bank of Canada, in association with Markit and the Purchasing Management Association of Canada. RBC PMI readings above 50 signal expansion as compared to the previous month, while readings below 50 signal contraction. The monthly survey also tracks other information pertinent to the manufacturing sector, such as changes in output, new orders, employment, inventories, prices, and supplier delivery times.7

The Conference Board’s Consumer Confidence Index

The Conference Board of Canada’s Index of Consumer Confidence measures consumers’ levels of optimism in the state of the economy. It is a crucial indicator of near-term sales for consumer product companies in Canada, as well as an indicator of the outlook for the broad economy since consumer demand comprises such a significant part of it. The index is constructed on the basis of responses to four questions by a random sampling of Canadian households. Survey participants are asked how they view their households’ current and expected financial positions, their short-term employment outlook, and whether now is a good time to make a major purchase.8

Ivey Purchasing Managers Index – PMI

 An index prepared by the Ivey Business School at Western University, the Ivey PMI measures the monthly variation in economic activity, as indicated by a panel of purchasing managers across Canada. It is based on responses by these purchasing managers to a single question: “Were your purchases last month in dollars higher, the same, or lower than in the previous month?” An index reading below 50 shows a decrease; a reading above 50 shows an increase. Panel members indicate changes in their organization’s activity over five broad categories: purchases, employment, inventories, supplier deliveries, and prices.9

Housing Starts

Canada Mortgage and Housing Corporation (CMHC) issues a monthly report on the sixth working day of every month, showing the previous month’s new residential construction activity. The data is presented by region, province, census metropolitan area, and dwelling type (single-detached or multiple-unit). The indicator is an important gauge of the state of the Canadian housing market.10

Home Sales

This key indicator of housing activity is compiled by the Canadian Real Estate Association (CREA) and is based on the number of home sales processed through the MLS (Multiple Listing Service) Systems of real estate boards and associations in Canada. The monthly report from the CREA shows the change in home sales across Canada, as well as for major markets, from month to month. The report also includes other important housing-related information, such as the change (as a percentage) in newly listed homes, the national sales-to-new listings ratio, months of housing inventory, the change in the MLS Home Price Index, and the national average price for homes sold within the month.11

Retail Sales

Statistics Canada releases a monthly report on retail sales activity across Canada, with changes shown on month-over-month and year-over-year bases. The headline number shows the percentage change in national retail sales on a dollar basis; the percentage change in volume terms is also shown. The retail sales figures are shown by industry and for each province or territory, and provide insights into Canadian consumer spending.12

Building Permits 

The building permits survey conducted monthly by Statistics Canada collects data on the value of permits issued by Canadian municipalities for residential and non-residential buildings, as well as the number of residential dwellings authorized. Since building permit issuance is one of the very first steps in the process of construction, the aggregate building permits data are very useful as a leading indicator for assessing the state of the construction industry.13

The Bottom Line

The 12 economic indicators briefly described above show the health of key aspects of Canada’s economy: consumer spending, housing, manufacturing, employment, inflation, external trade, and economic growth. Taken together, they provide a comprehensive picture of the state of the Canadian economy.

Continue Reading

Economy

Canada adds jobs for fourth straight month in May

Published

 on

B.C. saw close to 55000 new jobs in Septmber

Canada added 101,600 jobs in May, the fourth consecutive month of gains, led by hiring in the education and health services sector as well as in professional and business services, a report from payroll services provider ADP showed on Thursday.

The April data was revised to show 101,300 jobs were gained, rather than an increase of 351,300. The report, which is derived from ADP’s payrolls data, measures the change in total nonfarm payroll employment each month on a seasonally-adjusted basis.

 

(Reporting by Fergal Smith; Editing by Alex Richardson)

Continue Reading

Trending