Canada’s economic recovery continued to moderate as summer wound down, leaving activity still well short of pre-pandemic levels before the second wave of the COVID-19 virus hit, new data from Statistics Canada show.
The agency reported Friday that real gross domestic product (GDP) rose 1.2 per cent in August from July, slightly more than its preliminary estimate of 1 per cent. It was the fourth straight month of growth, as the economy continued its rapid rebound from the lockdowns in the spring aimed at containing the virus, although the pace of the recovery has been slowing after the dramatic effects of the re-openings in May and June.
Statscan also published an advance estimate for September of 0.7-per-cent growth – which, if accurate, would mean the economy expanded by about 10 per cent in the third quarter, consistent with Bank of Canada and private-sector estimates. But that still leaves the economy about 4 per cent below its pre-COVID levels.
With October’s sharp increase in the spread of the virus, both in Canada and abroad, renewed virus-containment restrictions threaten to put the brakes on the recovery.
“The economy is now moving into the recuperation phase, where additional gains in economic activity are harder to come by. With pandemic-related uncertainty weighing on business and consumer confidence, most industries are struggling to return to pre-pandemic levels of output,” Toronto-Dominion Bank senior economist Sri Thanabalasingam said in a research note.
The August GDP gains were led by a continued strong recovery in the service sectors of the economy (up 1.5 per cent), which were more deeply affected by the spring lockdowns and subsequent re-openings, while goods-producing sectors grew a more modest 0.5 per cent. Economists noted that the segments that drove much of August’s gains – services such as arts, entertainment and recreation (up 13.7 per cent) and accommodation and restaurants (up 7.3 per cent) – stand to be the hardest hit in the second-wave containment measures, as authorities focus on reducing contact through indoor gatherings.
“The way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in the fourth quarter,” Bank of Montreal chief economist Doug Porter said in a research report.
Earlier this week, the Bank of Canada issued new forecasts predicting fourth-quarter growth of only 0.2 per cent quarter over quarter – or 1 per cent annualized – in light of the second wave of the pandemic and the return of some government-mandated closures and business restrictions. Ontario and Quebec have already shut down indoor restaurants and bars in large urban centres where COVID-19 cases are highest, while other provinces are clamping down on indoor gatherings and debating whether additional measures are warranted.
Some economists think the central bank’s forecast is overly pessimistic.
“We suspect that with ongoing massive fiscal support, less restrictions than earlier, and, simply, that consumers and businesses have learned to operate in this new environment, the late-year setback should be relatively mild,” said Mr. Porter, who forecast that quarterly growth would top 2 per cent annualized.
“We think there is still scope for continued rebounds in those sectors not directly affected by the restrictions, so we are pencilling in a much larger fourth-quarter gain of 5 per cent annualized,” said Stephen Brown, senior Canada economist at Capital Economics, in a research note.
But the COVID-19 virus remains a massive wild card in any economic forecast, as a growing number of countries face the prospect of renewed restrictions – while at the same time eagerly looking forward to the growing possibility of a viable vaccine in early 2021.
“We are now in a phase of the recovery that could see strong winds and dangerous tides. Navigating through the turbulence will not be easy, as much will depend on the course of the virus,” TD’s Mr. Thanabalasingam said. “Getting the spread under control could right the ship, but seas will remain choppy without a vaccine or effective treatment.”
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The Canadian Press
NEW YORK — Best Buy Co. reported fiscal third-quarter results that blew through analysts’ expectations as the nation’s largest consumer electronics retailer enjoyed surging demand for items like home theatre and appliances that help people learn, cook, work and connect in their homes during the pandemic.
The Richfield, Minnesota-based retailer, said that third-quarter profits rose 33% while sales were up 21%. Sales at stores opened at least a year rose 23%, while online sales in the U.S. surged 174%.
Still, shares fell 5% in Tuesday morning trading as Best Buy warned that sales could slow down during the current quarter as the number of virus cases surge.
“As we start the fourth quarter, the demand for the products and services we sell remains at elevated levels, but similar to last quarter, it continues to be difficult for us to predict how sustainable these trends will be,” Matthew Bilunas, Best Buy’s chief financial officer, told analysts during the call. “In fact, we are seeing COVID cases surge throughout the U.S. and Canada at a time of significant holiday volume through our stores, online and supply chain. “
Bilunas also noted other factors such as potential government stimulus, the risk of continued high employment and the availability of inventory like computers to match customer demand.
Best Buy joins big box stores like Walmart, Target, Home Depot and Lowe’s in reporting strong fiscal results. Unlike mall-based stores and other businesses that sell non-essentials, big box retailers were allowed to stay open during the lockdown in the spring and have all seen their dominance increase as consumers focus on necessities and home-related activities.
Before the pandemic, Best Buy had expanded its services to such options as at-home consulting and same-day delivery. It also sped up its online shipping. But the pandemic has forced Best Buy to adjust its operations and launch new shopping experiences that provide more convenience and safety for customers.
Early fall, Best Buy began using 250 of its stores as fast-shipping hubs for online orders. It’s now adding 90 more locations during the holiday period. It says its goal is to have all 340 stores ship more than 70% of its ship-from-store units during the holiday quarter. It’s also testing new store formats as it transforms locations to fulfilment hubs.
For example, in four Minneapolis locations, Best Buy reduced its square footage for shopping to 15,000 square feet from an average of 27,000. The product assortment on the sales floor will still include the primary categories these locations featured before the remodel, but instead the focus will be on the most popular items, the retailer said. The remodels will result in increased space for staging product for in-store pickup and to help ship-from-store transactions, as well as provide the ability to stage inventory for items that may not be on the sales floor.
Best Buy reported fiscal third-quarter profit of $391 million, or $1.48 per share, compared with $293 million, or $1.10 per share, in the year-ago period. Earnings, adjusted for restructuring costs and amortization costs, were $2.06 per share.
The results exceeded Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.76 per share.
The consumer electronics retailer posted revenue of $11.85 billion in the period, also beating Street forecasts. Eight analysts surveyed by Zacks expected $11.02 billion.
Shares fell $6.69 to $1150 in late morning trading. Shares have increased 39% since the beginning of the year, while the S&P 500 index has increased 11%. The stock has increased 69% in the last 12 months.
Elements of this story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on BBY at https://www.zacks.com/ap/BBY
Anne D’Innocenzio, The Associated Press
German economy grew by 8.5% in third quarter, but recession fears grow – The Guardian
BERLIN (Reuters) – Germany’s gross domestic product grew by a record 8.5% in the third quarter as Europe’s largest economy partly recovered from an unprecedented plunge caused by the first wave of the COVID-19 pandemic in spring, the statistics office said on Tuesday.
The stronger-than expected rebound was mainly driven by higher household spending and soaring exports, the office said.
“This enabled the German economy to make up for a large part of the massive decline in gross domestic product caused by the coronavirus pandemic in the second quarter of 2020,” it added.
The reading marked an upward revision to an earlier flash estimate of 8.2% growth, and followed a 9.8% plunge in the second quarter.
The outlook is clouded by a second wave of coronavirus infections and a partial lockdown to slow the spread of the disease. Restaurants, bars, hotels and entertainment venues have been closed since Nov. 2, but shops and schools remain open.
Chancellor Angela Merkel and regional state premiers are planning to extend the “lockdown-light” on Wednesday until Dec. 20, according to a draft prepared for their meeting.
A contraction in the service sector is expected to weigh heavily on gross domestic product in the fourth quarter, while lockdown measures in other countries are likely to hit export-oriented manufacturers as well.
DIW economist Claus Michelsen said a decline in economic output was therefore on the cards, with initial estimates indicating a GDP drop of around 1% in the final quarter.
“Germany and many important trading partners are likely to slide back into recession,” Michelsen said.
(Reporting by Michael Nienaber and Rene Wagner; Editing by Riham Alkousaa and EKevin Liffey)
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