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Federal Reserve officials this week embarked on a campaign of tighter monetary policy with the first increase in the U.S. benchmark interest rate since 2018 as inflationary pressures build.
The Bank of Japan is choosing a different course. Japanese central bankers opted to keep policy stimulative in order to support an economy still contending with the coronavirus.
Meantime, global inflationary pressures persist as Russia’s war in Ukraine drives up commodities costs.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
U.S.
The Fed kicked off a campaign of interest rate hikes that’s set to be the most aggressive since the mid-2000s. After raising rates by a quarter point and signaling six more increases this year, Fed Chair Jerome Powell told reporters that inflation is too high, the labor market is over-heated and price stability is a “pre-condition” for the central bank as it tackles the hottest price pressures in 40 years.
Prices paid to U.S. producers rose strongly in February on higher costs of goods. The producer price index for final demand increased 10% from February of last year and 0.8% from the prior month.
U.S. importers, straining under a tapped-out supply chain, are increasingly offering top dollar for long-term shipping contracts that may not even be honored as they try whatever it takes to guarantee the arrival of their products. The pandemic-driven boom in demand for goods pushed both contract and spot rates for shipping to records — getting merchandise from place to place costs about 11 times more than it did before the Covid-19 outbreak.
World
Russia is a commodities powerhouse, producing and exporting huge amounts of materials the world uses to build cars, transport people and goods, make bread and keep the lights on. Its invasion of Ukraine is constraining those crucial supplies — or threatening to — as it becomes increasingly isolated from the global economy, driving up prices in the process.
Russia’s oil output may slump by about a quarter next month, inflicting the biggest supply shock in decades as buyers shun the nation’s exports following its invasion of Ukraine, the International Energy Agency said. Russian oil production could plunge by 3 million barrels a day, further squeezing a world market already strained by the post-pandemic rebound in demand.
Europe
France’s central bank said the war in Ukraine is already affecting the economy and creating high uncertainty that makes it tricky to forecast how much inflation will accelerate, or the extent to which the recovery from the Covid pandemic will slow.
Asia
China’s surprisingly robust economic data for the first two months of this year sparked heated discussions among analysts struggling to reconcile the figures with underlying indicators showing a much weaker picture. Some of the strong headline numbers in the release by the National Bureau of Statistics are not supported by a detailed breakdown of the data, several economists have highlighted.
Bank of Japan Governor Haruhiko Kuroda doubled down on his commitment to continue with stimulus even if inflation continues to accelerate, in a rebuttal of the need to join a global wave of central banks normalizing policy. The BOJ left its interest rates and asset purchases unchanged and downgraded its assessment of the economy, citing the impact of Covid.
Emerging Markets
Central banks in five African nations will likely raise interest rates in the coming weeks to tame inflation pressures that threaten to become entrenched. Those in another seven are expected to keep borrowing costs on hold as they assess the impact of supply shocks caused by Russia’s war on Ukraine.
Argentina’s inflation accelerated in February at its fastest pace in nearly a year, surpassing forecasts and challenging the government’s targets for this year in its preliminary agreement with the International Monetary Fund.
©2022 Bloomberg L.P.
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 Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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