Bond market already signalling the pace of growth could slow as coronavirus cases rise in the United States
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TORONTO — With some 60 per cent of its population vaccinated against COVID-19, Canada tops a ranking of major countries fighting the pandemic, but that success is unlikely to fully shield its commodity-linked economy from the global spread of the Delta variant.
The bond market already is signalling the pace of Canada’s economic growth could slow as coronavirus cases rise in the United States, its largest trading partner, and in some other major export markets.
While the high vaccination rate reduces the chances of large-scale lockdowns in Canada, a slower rate of inoculation in some parts of the world could add to supply chain disruptions and weigh on exports, analysts said.
“For Canada, as a small trading nation, we need to care about what’s going on in other parts of the world,” said Royce Mendes, senior economist at CIBC Capital Markets. “Not only for the ethical and human reasons but also because of the economic reasons.”
Canada is a major exporter of auto parts and commodities, including oil and copper, so its economy tends to be sensitive to the global growth outlook. The United States, which accounts for about 75 per cent of Canadian exports, is facing a Delta-driven surge in infections as the pace of its inoculation program slows.
Fears that the highly-contagious variant will hold back the economic recovery has contributed to a plunge in U.S. and Canadian bond yields in recent weeks. The yield on U.S. 10-year Treasury Inflation-Protected Securities, the so-called real yield, hit a record low on Tuesday at around minus 1.19 per cent, while Canada’s equivalent rate was at minus 0.62 per cent.
The price of oil has retreated 10 per cent after notching a seven-year high near US$77 a barrel in July, while the price of copper has eased from May’s record peak.
“Where the Delta variant will have more impact is probably in the emerging markets where vaccination is not as high, and that could affect supply chains,” said Jimmy Jean, chief economist at Desjardins Group.
“If that means that industrial production globally takes a hit, for sure we’re going to feel that effect in Canada through our exports,” Jean added.
Data on Thursday showed no slowdown in demand for Canadian goods, with exports rising by 8.7 per cent to a record $53.76 billion in June. The Bank of Canada expects the economy to grow 6 per cent this year.
But supply chain pressures are already being felt in Canada’s manufacturing sector, with activity growing in July at the slowest pace in five months.
Additionally, businesses in the travel and airline industries may be nervous that rising U.S. infections could disrupt Canada’s plans to allow fully vaccinated American travellers into the country. Canada is scheduled to reopen its border to that group on Monday.
“If things take a certain trajectory in the U.S., you could think that we would close borders again to prevent that spilling over to Canada,” Jean said.
Pent-up demand for services could mean that Canada’s economy is less dependent than usual on trade. Still, analysts are paying close attention to the economic impact of the Delta variant.
The outlook for trade “is heavily contingent on what happens with the virus in the U.S.,” Mendes said.
© Thomson Reuters 2021
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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