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Charting the Global Economy: Maritime Attacks Drive Up Costs

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(Bloomberg) — Shipping costs are rising as hundreds of container ships that typically transit the key maritime artery of the Red Sea and Suez Canal are rerouting after a multitude of attacks by Iran-backed Houthi militants.

Combined with disruptions at a drought-stricken Panama Canal in the Western Hemisphere, the rise in merchant shipping rates poses headwinds for central bankers in their inflation fight.

Meantime, the economy in Vietnam exceeded expectations this year and is poised for better results in 2024. For economies in many African nations next year, credible elections and improved governance are key.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

World

Half of the container-ship fleet that regularly transits the Red Sea and Suez Canal is avoiding the route now because of the threat of attacks, according to new industry data. The tally compiled by Flexport Inc. shows 299 vessels with a combined capacity to carry 4.3 million containers have either changed course or plan to. That’s about double the number from a week ago and equates to about 18% of global capacity. Diverted voyages are more costly and may lead to higher prices for consumers on everything from sneakers to food to oil if the longer journeys persist.

The theme for the African continent in 2024 appears to be all about who’s in charge. From South Africa to Algeria, a third of the continent’s nations will choose new governments, including coup-hit Mali, Chad and Burkina Faso — if their junta leaders keep their word. Credible elections and improved governance will form the bedrock for some of the world’s poorest — and youngest — nations to reduce conflict, spur economic growth and boost employment. The prevailing environment makes that difficult.

 

Asia

Vietnam’s economy fared better than expected in 2023, indicating it will keep improving as consumer demand returns, exports recover and investments surge. GDP rose 5.05% from a year earlier after increasing an initial 8.02% in the previous year. The economy is expected to return to 6% growth next year, and vie for the best-in-Asia growth tag by 2025, a Bloomberg survey shows.

South Korea’s semiconductor industry recorded the largest gains in years in both production and shipments, underscoring a revival of technology momentum that bodes well for the nation’s economic outlook next year and for the global tech sector.

Investors who bought into the idea two years ago that China’s consumer and green energy stocks stand to win big from President Xi Jinping’s renewed economic agenda would have seen their holdings pummeled in 2023.

Europe

Spanish inflation remained steady at the end of 2023, tempering a likely euro-zone pickup that may embolden policymakers to keep pushing against bets on imminent interest-rate cuts. Even though inflation may remain elevated in the near term, central banks in Spain, France and Italy all project it will slow to 2% or even lower in 2025. Germany’s Bundesbank isn’t so optimistic, seeing Europe’s largest economy stuck above the target into 2026, kept higher by wages.

Britain’s economy probably will avoid a recession in 2024 and strengthen in the second half of the year as consumers benefit from falling inflation and the easing of a lengthy cost-of-living crisis. In aggregate, the 52 economists surveyed by Bloomberg believe the Treasury and the Bank of England will engineer a soft landing for the economy next year, with growth of 0.3%.

Russia’s oil-product exports dropped on a weekly basis, led by a slump in shipments of diesel, naphtha and fuel oil. However, the four-week average climbed to the highest in more than seven months amid a ramp-up in oil processing at Russian refineries.

US

Initial applications for US unemployment benefits increased in the week leading up to Christmas, while remaining at a level that is consistent with a resilient labor market.

Employers expect to hire less in 2024, according to several regional Federal Reserve bank surveys, a trend that’s set to limit wage gains and cool inflation pressures. At the same time, the results don’t indicate an outright contraction in payrolls.

Emerging Markets

Kenyan consumer prices rose at the slowest pace in almost two years in December, while economic growth accelerated more than expected in the third quarter, delivering some respite for the battered East African economy.

Brazil’s annual inflation slowed less than expected in mid-December, highlighting the difficulties facing central bankers as they cut interest rates while attempting to haul prices to the tolerance range by year’s end.

—With assistance from Philip Aldrick, Maria Eloisa Capurro, Nguyen Dieu Tu Uyen, Arijit Ghosh, Sam Kim, Alex Longley, Ishika Mookerjee, Macarena Muñoz, Brendan Murray, Helen Nyambura, Rodrigo Orihuela, Prejula Prem, Augusta Saraiva and Zoe Schneeweiss.

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

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