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)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
