(Bloomberg) — The Federal Reserve held the line on interest rates while the European Central Bank pushed on, and both of the central banking heavyweights signaled a likelihood of further hikes.
Central bank officials in advanced economies are approaching the final stages in their onslaught against the global inflation shock. While recent US and European price data have shown cost pressures are abating, inflation is proving sticky.
In China, officials are reducing rates to help stimulate a weak economy that includes a slump in real estate, a drop in business investment and record-high youth unemployment.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
US
Fed officials paused following 15 months of interest-rate hikes but signaled they would likely resume tightening to cool inflation, projecting more increases than economists and investors expected. Fresh quarterly Fed forecasts showed borrowing costs rising to 5.6% by year end, according to the median projection. That’s higher than the 5.1% in the previous round of projections.
Both the consumer price index and the core CPI — which excludes food and energy — decelerated on an annual basis, highlighting inflation’s descent since peaking last year.
Europe
The ECB lifted interest rates by another quarter-point, with President Christine Lagarde describing a further hike in July as “very likely.” The deposit rate was raised to 3.5% on Thursday — the highest level in more than two decades. Fresh quarterly projections from the ECB suggested inflation will moderate more slowly than previously envisaged. Economic expansion in the 20-nation euro zone is seen a little weaker following recent data revealing a mild winter recession.
British wages shot up and unemployment fell unexpectedly in April, the latest signs that the resilient UK economy continues to defy efforts to cool demand and dampen inflationary pressures.
The Dutch government is set to permanently shut down the Groningen gas field in October, a move that may limit Europe’s supply buffer as it heads into the next winter. The site has caused huge local opposition after hundreds of earthquakes with magnitudes of up to 3.6 damaged thousands of homes. The government previously said it aims to shut the field at the latest by Oct. 2024 depending on the “geopolitical situation.”
A shift in Britain’s mortgage market is delaying the impact of higher interest rates on the economy, increasing the risk of the Bank of England fumbling its decision on how much more it needs to do to curtail inflation.
Asia
China’s weakening economy prompted the central bank to cut interest rates for the first time since August, and expectations are growing for more stimulus targeted at ailing industries including the property sector. Official data showed a slump in real estate, a worrying decline in business investment and record joblessness among young people.
Japan’s exports expanded at the weakest pace in over two years amid a global economic slowdown, adding to uncertainty over the country’s growth outlook. The value of exports rose 0.6% from a year earlier in May, the slowest pace since February 2021.
China’s indebted local governments are increasingly imposing controversial fines on residents in a bid to generate revenue, stoking anger among social-media users. Guangxi alone made 13 billion yuan ($1.8 billion) from fines last year, according to an analysis of government data by Caijing Industry Research Center — equivalent to about 14% of its tax income, rising from 9% in 2021.
New Zealand led the world in raising interest rates to combat the post-pandemic inflation wave. Now it’s officially in recession in a possible harbinger of what lies ahead for others. Gross domestic product fell 0.1% from the fourth quarter, when it dropped a revised 0.7%.
Emerging Markets
Just 30 miles (50 kilometers) offshore from Caracas lie the Western Hemisphere’s second-largest reserves of natural gas. Yet Venezuela has never exported a molecule of that fuel. Now, with the nation’s oil industry in tatters, President Nicolas Maduro is kicking off a long-shot bid to tap those vast deposits to revive an economy devastated by defaulted debt, rampant inflation and crippling US sanctions.
World
The Fed and ECB headlined this week’s central bank meetings. The Bank of Japan decided to stick with ultra-low rates, and Taiwan’s central bankers kept their key rate on hold for the first time since 2021.
–With assistance from Andrew Atkinson, Diederik Baazil, Matthew Brockett, Sophie Caronello, Rebecca Choong Wilkins, Lucille Liu, Yujing Liu, Yoshiaki Nohara, Reade Pickert, Jana Randow, Tom Rees, Garfield Reynolds, Zoe Schneeweiss, Alexander Weber, Lucy White, Erica Yokoyama, Xiao Zibang and Fabiola Zerpa.
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.
