COVID-19 lockdowns choked off 11.6 per cent of Canadian real gross domestic product in April, the biggest one-month economic downturn on record – but preliminary evidence indicates that the economy took the first tentative steps of recovery in May.
Statistics Canada said Tuesday that April’s GDP plunge was the largest since the agency began producing comparable data in 1961. That came on top of a 7.5-per-cent slump in March – a downward revision from the previously reported 7.2 per cent. The two months combined left the economy more than 18 per cent below its level in February, before the COVID-19 pandemic forced businesses to close and consumers to stay home.
But Statscan said its preliminary data suggest that the economy grew by about 3 per cent in May, as COVID-19 containment measures began to ease and some businesses reopened. While the May upturn was decidedly modest compared with the depth of the fall, it nevertheless confirms economists’ view that the worst of the economic damage is behind us.
“The good news, such as it is, is that there are plenty of signs that April will mark the nadir,” Bank of Montreal chief economist Douglas Porter said in a research note. “We expect a bigger bounce in June as the economy reopened more fully.”
Still, the April GDP report provided a stark look at just how harsh the economic blow was from the lockdowns aimed at containing the novel coronavirus, and where it hit hardest.
The accommodation and food-services sector plunged 42 per cent in the month, on top of a 37-per-cent fall in March. Statscan said that the sector was operating about 64-per-cent below its pre-COVID-19 levels in April.
Manufacturing slumped 22.5 per cent, led by a 97.7-per-cent loss in motor-vehicle output, as automakers in both Canada and the United States were shut down for the month.
Construction and retail were both down 23 per cent in April. The arts, entertainment and recreation segment lost 26 per cent, after a 41-per-cent drop in March.
Statscan said no industry was spared from the impact of the lockdowns, as all 20 of the major sectors of the economy posted losses for the month. However, a few were only modestly affected, including the agriculture, fishing and forestry segment (down 1 per cent); the financial sector (down 1 per cent); and utilities (down 1.8 per cent). The country’s energy sector, its biggest source of exports, fell a relatively modest 5.6 per cent.
Economists noted that even with the turnaround in May, the pandemic measures have left the economy in a historic hole.
“As of May, the economy was still operating almost 16 per cent below the level it was in February. To put that into perspective, during the worst of the [2008-2009] financial crisis, the Canadian economy was not operating more than 5 per cent below its prior peak,” Canadian Imperial Bank of Commerce economist Royce Mendes said in a research note.
“The path back for the economy continues to look long and winding, particularly with cases of the virus picking up again in a number of countries across the world, of course most notably in Canada’s largest trading partner, the U.S.,” he said.
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Asian stocks sink after Wall St losses on economy worries – CTV News
Asian stock markets followed Wall Street lower Friday on worries economic recoveries might fade as coronavirus cases increase in the United States and some other countries.
Benchmarks in Shanghai, Tokyo, Hong Kong and Southeast Asia retreated a day after strong gains driven by the rise of U.S. tech stocks.
Global stock prices have recovered most of this year’s losses on optimism about a recovery from the coronavirus pandemic. But forecasters warn the rise might be too big and too fast to be supported by uncertain economic conditions.
On Wall Street, the benchmark S&P 500 index lost 0.6% overnight.
“The market is concerned about the uptick in cases globally,” said Stephen Innes of AxiCorp. in a report. “Money is funneling into perceived safe areas of the market like tech, which should hold up broader indexes to a degree.”
The Shanghai Composite Index lost 1.2% to 3,408.93 and the Nikkei 225 in Tokyo shed 0.7% to 22,368.44. The Hang Seng in Hong Kong retreated 1.9% to 25,702.64.
The Kospi in Seoul lost 1.2% to 2,141.63 and Sydney’s S&P-ASX 200 declined 0.6% at 5,917.60. India’s Sensex opened 0.6% lower at 36,523.82. New Zealand, Jakarta and Bangkok retreated, while Singapore markets were closed.
On Wall Street, the S&P 500 declined to 3,152.05. The Dow Jones Industrial Average dropped 1.4% to 25,706.09.
Three out of four stocks in the S&P declined. The biggest losers were oil companies, airlines and other stocks that are most heavily affected by a reopening and strengthening economy.
The Nasdaq composite, dominated by tech stocks that are seen as relatively resilient to the pandemic, added 0.5% to a record 10,547.75.
U.S. government data showed 1.3 million workers filed for unemployment claims last week. That is down from 1.4 million the prior week and a peak of nearly 6.9 million in late March.
The improvements have helped validate investors’ optimism that the economy can recover as anti-virus controls are relaxed. That helped the S&P 500 rebound to within 7% of its record, after being down nearly 34%.
But economists point to a troubling slowdown in the pace of such changes, including moderating declines in the four-week average of jobless claims.
Investors are worried that worsening infection levels in the populous U.S. states of Florida, Texas and California could derail a recovery. Some states are rolling back their reopenings, while others are ordering people arriving from hotspots to quarantine.
Other countries including Brazil and South Africa also report rising case totals. Australia’s populous state of Victoria closed its border with neighbouring New South Wales this week to contain an outbreak.
In energy markets, benchmark U.S. crude lost 70 cents to $38.92 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, declined 63 cents to $41.72 per barrel in London.
The dollar declined to 106.94 yen from Thursday’s 107.95. The euro edged down to $1.1271 from $1.1286.
Japan's economy to shrink at fastest pace in decades this fiscal year due to pandemic: Reuters poll – TheChronicleHerald.ca
By Kaori Kaneko
TOKYO (Reuters) – Japan’s economy will shrink at the fastest pace in decades in the year through March 2021, forcing the government to compile another stimulus package to cushion the blow from the coronavirus pandemic, a Reuters poll showed on Friday.
Many respondents predicted the Bank of Japan’s (BOJ’s) next policy step would be to expand stimulus, but they do not see the pandemic triggering a banking sector crisis this year.
The world’s third-largest economy is forecast to contract 5.3% this fiscal year, a July 3-9 poll of over 30 economists shows, the most it has shrunk since comparable data became available in 1994.
It will rebound 3.3% next year, according to the poll.
The economy will grow at an annualised 10.0% pace in the current quarter of the calendar year 2020 after having shrunk 23.9% in the second quarter ended June, the poll shows.
“It would take two to three years for economic activity to return to normal levels in Japan as its overseas markets are likely to continue suffering from the spread of the virus,” said Atsushi Takeda, chief economist at Itochu Research Institute.
Two-thirds of economists polled expect Japan to compile its next stimulus package this year to ease the pain on companies and households. Japan has so far rolled out two packages totalling $2.2 trillion.
Arata Oto, market economist at Societe Generale Securities Japan, expects the next stimulus package to be worth about 1-2% of the country’s gross domestic product.
The package “would aim at accelerating Japan’s recovery … once there are more signs the pandemic is beginning to subside, or to help further cushion the blow from COVID-19 if the likelihood of a second wave heightens”, he said.
Globally, more than 12 million have been infected by the virus and over half a million people have died. In Japan, more than 21,000 people have been infected and over 900 killed.
Policy support for hard-hit firms should help counter worries about Japan’s financial system, over 90% of economists surveyed said.
Asked about BOJ’s next move, 26 of 40 economists said they expect it to expand its stimulus, with 18 saying it would happen this year and five predicting it would be next year.
At next week’s rate review, the BOJ is expected to roughly maintain its view the economy will gradually recover this year from the virus-led downturn, sources have said, even as fears of a second wave of infections cloud the outlook.
Japan’s core consumer prices, which exclude volatile fresh food but includes energy costs, will drop 0.4% this fiscal year and rise 0.3% next fiscal year, the latest poll showed.
(For other stories from the Reuters global long-term economic outlook polls package)
(Reporting by Kaori Kaneko; Polling by Daniel Leussink in Tokyo and Shaloo Shrivastava, Tushar Goenka and Manzer Hussain in Bengaluru; Editing by Leika Kihara and Himani Sarkar)
Biden offers 'build back better' approach to reviving economy – BNN
Joe Biden launched his plan on Thursday to revive the economy from the coronavirus-related recession with a promise to “build back better” than what existed before the crisis.
Offering a contrast with President Donald Trump’s insistence that the economy is bouncing back, the Democratic nominee framed his economic agenda for the general election. The economy is the one policy area on which he lags Trump in public opinion polls.
One part of the plan is intended to foster manufacturing and encourage innovation, adopting some ideas from his progressive primary rivals but avoiding the big-ticket proposals like the Green New Deal.
“The challenges faced today are among the biggest in our history,” he said at a metalworks factory in Dunmore, Pennsylvania, a few miles away from his childhood home in Scranton, a place that’s been synonymous with the blue-collar workers who helped Trump win the state in 2016.
“I have no illusion how tough the road ahead is going to be for our country,” Biden added.
But he said he’s still “an optimist” because the American people are up to those challenges if they follow his lead.
“I see a different America than Trump. One that despite all our flaws and shortcomings and failures is still, after more than two centuries, dedicated to equality, liberty and human decency,” he said.
Biden also said the idea that U.S. companies only bear responsibility to their shareholders is “an absolute farce” because corporations have a duty to workers and their country.
“It’s time corporate America pay their fair share of taxes,” Biden said, reiterating his plan to raise the current corporate tax rate back to the 28 per cent it was during the Obama administration from the current 21 per cent.
The former vice president’s economic plan is divided into four areas, the first of which he addressed in some detail on Thursday: a push to buy American and create manufacturing jobs, costing at least $700 billion; building infrastructure and clean energy; advancing racial equity; and modernizing the “caring” economy such as child-care and elder-care workers and domestic aides.
He said he would roll out his plans to rebuild U.S. infrastructure and emphasize clean energy next week.
Biden covered a wide range of issues, from what he called Trump’s lack of empathy for people suffering from the current crises to the removal of Confederate monuments. He took from his standard stump speech his admiration for the middle-class and unions, which he says “built this country.”
On Thursday, he proposed US$400 billion in additional federal purchases of products made by American workers over the course of his first term — based on a proposal that his primary opponent Senator Elizabeth Warren offered — as well as US$300 billion for federally funded research and development. In all, the Biden campaign estimates that its proposals on manufacturing and buying American will create 5 million jobs.
He didn’t offer a plan to pay for these initiatives.
“When the federal government uses taxpayers’ money we should use it to buy American products and support American jobs,” he said of his buy American plan.
Steve Moore, a conservative economist and informal adviser to Trump, said the plan represents “a radical plan of wealth redistribution, not wealth creation.”
“I believe if this plan were implemented all of the economic gains from the Trump era would be erased and we would be thrust into a second great depression that would hurt the poor and minorities most,” he said in a statement.
There was small progress toward recovery in the jobs numbers released Thursday. Applications for unemployment benefits in the U.S. declined last week by more than projected, easing concerns of a renewed downturn in the labor market after several large states reported an increase in coronavirus cases.
Trump has made buy-American policies and protecting the U.S. steel and aluminum industry a centerpiece of his administration but some domestic manufacturers have complained his actions didn’t go far enough.
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