(Bloomberg) — Federal Reserve Chair Jerome Powell signaled US central bankers will wait longer to cut borrowing costs following a series of surprisingly high inflation readings, which reduces room for easier policy around the world.
Global finance chiefs convening in Washington for the International Monetary Fund-World Bank spring meetings are sweating the strength of the US economy, as elevated interest rates and a strong dollar force other currencies lower and complicate plans to bring down borrowing costs.
Meanwhile, an escalation of the conflict in the Middle East is raising concerns of a wider regional war that could send oil prices over $100 a barrel.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, geopolitics and markets:
World
The high tide for global interest rates has passed, but respite for the world economy may be limited as policymakers stay wary at the threat of inflation. Powell’s latest pivot creates a quandary for central bankers around the world.
The IMF inched up its expectations for global economic growth this year, citing strength in the US and some emerging markets, while warning the outlook remains cautious amid persistent inflation and geopolitical risks.
The increasingly hopeful economic story of 2024 so far is that of a world headed for a soft landing. Unfortunately that same world is also becoming more dangerous, divided, indebted and unequal.
US
US retail sales rose by more than forecast in March and the prior month was revised higher, showcasing resilient consumer demand that keeps fueling a surprisingly strong economy. So-called control-group sales — which are used to calculate gross domestic product — jumped by the most since the start of last year.
As President Joe Biden this week hailed America’s booming economy as the strongest in the world during a reelection campaign tour of battleground-state Pennsylvania, global finance chiefs convening in Washington had a different message: cool it. While the world’s largest economy is helping support global growth, it also means the US is “slightly overheated,” the IMF’s Kristalina Georgieva said — thanks in part to Washington’s fiscal stance, with the budget gap pushing toward 7% of GDP.
Emerging Markets
Israel reportedly struck back at Iran on Friday morning, following days of frantic diplomacy from the US and European nations in which they tried to convince Israeli Prime Minister Benjamin Netanyahu not to respond too aggressively, if at all, to the Iranian attack. Their main concern is to avoid a wider war in a region already roiled by the Israel-Hamas conflict and which could send oil prices above $100 a barrel.
India forecast an above-normal monsoon this year, raising optimism that ample rains will spur crop output and economic growth, as well as prompt the government to ease curbs on exports of wheat, rice and sugar. Forecast of a normal monsoon bodes well for easing food costs, and headline consumer price inflation eventually, said Anubhuti Sahay, head of economic research, South Asia, at Standard Chartered Plc.
Europe
European Commission President Ursula von der Leyen is unleashing a barrage of trade restrictions against China as she seeks to follow through on a pledge to make the EU a more relevant political player on the global stage. It’s in the area of clean tech where the EU is most fervently fighting to stave off competition from cheap Chinese imports of everything from EVs to solar panels.
UK inflation slowed less than expected last month as fuel prices crept higher, prompting traders to further unwind bets on how many interest rate cuts the Bank of England will deliver this year.
Asia
China reported faster-than-expected economic growth in the first quarter – along with some numbers that suggest things are set to get tougher in the rest of the year. Gross domestic product climbed 5.3% in the period, accelerating slightly from the previous quarter and beating estimates. But much of the bounce came in the first two months of the year. In March, growth in retail sales slumped and industrial output fell short of forecasts, suggesting challenges on the horizon.
–With assistance from John Ainger, Irina Anghel, Enda Curran, Shawn Donnan, James Hirai, Rajesh Kumar Singh, John Liu, Lucille Liu, Eric Martin, Alberto Nardelli, Tom Orlik (Economist), Pratik Parija, Zoe Schneeweiss, Craig Stirling and Fran Wang.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
