CHINA’S economy is not yet on secure footing, as recent green shoots have been offset by lingering fears about the property crisis and a stubborn inability to revive confidence.
Data due Wednesday (Oct 18) will likely show a modest pickup in quarter-on-quarter gross domestic product growth, though year-on-year comparisons may be less favourable.
The pace of expansion for July-September compared with a year ago probably slowed to 4.5 per cent, below Beijing’s annual growth target of about 5 per cent.
Earlier data for the quarter contained some promising figures that supported a steadying of economic activity, with factory activity improving and a drop in exports moderating as authorities rolled out stimulus and eased restrictive real estate policies. Releases in the coming week on industrial output, retail sales and unemployment are expected to show how widespread that stabilisation is.
The recovery remains uneven, though. Consumer prices returned to the brink of deflation in September, data on Friday showed. Home sales have also failed to mount a turnaround, which may weigh on investment and counter any support from stronger government-led infrastructure spending.
“The upcoming September activity data will be important to watch,” said Xiaojia Zhi, head of research at Credit Agricole CIB. While the figures “may also send the message that the Chinese economy could be showing more signs of stabilising, uncertainty remains related to the continued property drag”.
Questions also remain about how much additional stimulus China will roll out to support the economy. The People’s Bank of China on Monday will set the rate on its one-year medium-term lending facility, a key policy rate. Economists broadly expect that to remain unchanged for now, though several expect a cut before the end of 2023.
There may be other measures on the horizon as well. China is considering raising its budget deficit for the year by issuing more debt to spent on infrastructure, Bloomberg reported. Authorities are also mulling the formation of a state-backed stabilisation fund to shore up stock market confidence, while the nation’s sovereign wealth fund recently purchased the equivalent of about US$65 million worth of shares in the nation’s biggest banks.
Some economists still point to the need to address the biggest albatross of all: the real estate market.
“The Chinese government will still need to do more policy easing, especially related to property,” Zhi said. “There is still room to further relax or remove various policy restrictions in major cities.”
Elsewhere, a speech by the Federal Reserve chief and UK inflation and wage data will draw attention, while central banks in Indonesia and South Korea may keep interest rates unchanged.
US and Canada
Following data showing still-brisk inflation, investors will parse comments by Jerome Powell on whether the Fed is leaning towards another rate hike before year-end. The Fed chairman addresses the Economic Club of New York on Thursday – the headline event in a hectic week of speeches.
Regional Fed bank presidents Patrick Harker, Thomas Barkin, Neel Kashkari, Lorie Logan, Loretta Mester and Austan Goolsbee are slated to appear at various events. Fed governors Lisa Cook and Christopher Waller will also speak.
Among upcoming economic data, retail sales are expected to reveal subdued consumer demand as the third quarter drew to a close. The September value of purchases, unadjusted for price changes, is seen rising about half as much as in the previous month.
Tuesday’s release may also show a decline in so-called control group sales, the first such decrease in six months. These sales, which exclude receipts at food service establishments, auto dealers, building materials stores and gas stations, are used to calculate spending on most goods in the GDP report.
Another report in the coming week is expected to show the weakest annual rate of existing home sales since 2010 as the real estate market continues to suffer from high borrowing costs and limited inventory.
Housing starts, meanwhile, probably snapped back after plunging in August on a slump in multifamily home construction.
In Canada, among several reports due, a highlight will be inflation on Tuesday, which will show whether price gains of about 4 per cent on key measures have slowed further.
Asia
Away from China, the week starts with voters in New Zealand having opted for a new conservative government in Saturday’s general election.
Inflation figures out Tuesday will likely show that the cost-of-living crunch continues to weigh on households there, even as food-price growth is slowing.
Three Reserve Bank of Australia officials will speak in the coming week, with governor Michele Bullock continuing to flesh out the vision of her fledgling leadership on Wednesday. Jobs figures come out the following day.
Bank Indonesia is expected to hold rates steady on Thursday, as it is done since raising them in January. That is also likely the case for the Bank of Korea, even as inflation there heats up again.
Trade data from Indonesia, Malaysia and Japan is also released during the week.
Tokyo’s main event is likely to be Thursday’s unveiling of union pay demands for next year. Bank of Japan officials citing the need for strong wage gains will likely watch that announcement closely, alongside nationwide CPI figures on Friday.
Europe, Middle East, Africa
The UK will take centre stage for Europe. After numbers on Thursday showed that growth stayed weak in August, further releases will signal to Bank of England officials whether their recent pause in rate hiking is justified.
On Tuesday, wage data may point to weakening pressures in August, with accompanying labour-market numbers also probably showing a loss of momentum.
The following day, core inflation, which strips out volatile elements such as energy, as well as headline CPI, are anticipated to have fallen in September.
It is a quieter week in the eurozone. Germany’s ZEW gauge of investor confidence is released on Tuesday, while euro-area inflation data on Wednesday may confirm initial readings that showed weakening pressures.
For the European Central Bank, the first three days of the week will mark the end of a pre-decision window to speak out on monetary policy before officials meet on Oct 26. Central bank governors from France, Spain, the Netherlands and Germany are among those scheduled to deliver remarks.
ECB president Christine Lagarde will be in Luxembourg on Monday for a meeting of eurozone finance ministers that US Treasury Secretary Janet Yellen is also scheduled to attend.
Italian Finance Minister Giancarlo Giorgetti will be there as well, but only after he presents his budget law that incorporates the looser fiscal plans of Prime Minister Giorgia Meloni’s coalition. A sovereign rating assessment for Italy is due from Standard and Poor’s on Friday.
Turning north, several Riksbank officials are due to speak, including governor Erik Thedeen – remarks that may be closely watched after evidence of stubborn core inflation added to the case for another rate hike next month.
In the Middle East, Israel publishes data on Sunday that will probably show price increases did not accelerate last month after an upside surprise in August took inflation above 4 per cent.
The outlook is now in flux as the shock of Hamas attacks on Israel leads to a military escalation that is likely to scar the economy by hurting consumption, investment and tourism. The market no longer expects a rate hike from the Bank of Israel and is positioning instead for its first monetary easing since the pandemic. A decision is currently scheduled for Oct 23.
In Africa, data on Monday will likely show Nigeria’s inflation quickened for a ninth straight month, to over 27 per cent. That may see the central bank, under new leadership, raise borrowing costs at its next meeting.
On Tuesday, South Africa’s monetary officials will issue a review on domestic and international developments that affect their policy. Data the next day may show September’s inflation quickened from the 4.8 per cent reading seen in August, buoyed by transport.
A weaker rand, higher oil costs and an outbreak of avian flu could keep price gains elevated for some time. Forward-rate agreements starting in two months – used to speculate on borrowing costs – show traders are pricing in a 70 per cent chance of a quarter-point increase on Nov 23.
Latin America
Brazil GDP-proxy data published on Thursday are likely to show Latin America’s biggest economy expanded for a 22nd straight month in August, its longest run since President Luiz Inacio Lula da Silva’s second administration more than a decade ago.
Economists surveyed by the central bank have almost tripled their 2023 GDP forecast to 2.92 per cent since early May.
Data on Sunday showed that Peru’s economy shrank in August for a fourth month in a row, extending its recession as analysts begin to grapple with the possibility the economy may contract in full year 2023.
In Colombia, August’s GDP-proxy print should show an economy that is barely expanding. Economists surveyed by Bloomberg have trimmed their third-quarter output forecast to 0.7 per cent from 1 per cent.
Elsewhere, the central banks of Brazil and Colombia post surveys of economists, while Citibanamex publishes its bi-weekly survey of Mexican analysts.
The region’s two biggest economies report retail sales figures for August. In the two decades starting in 2000 Brazil’s results easily outpaced Mexico’s. But since the height of the pandemic that relationship has flipped: since January 2021, Mexico’s retail sales have been humming along at a year-on-year average of 9.6 per cent to Brazil’s sluggish 1.8 per cent pace. BLOOMBERG
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.
