The Chinese economy returned to growth in the second quarter, marking an important milestone in the global struggle to climb out of the slump brought about by the coronavirus.
Gross domestic product expanded 3.2 per cent in the three months to June from a year ago, reversing a 6.8 per cent decline in the first quarter and beating the median forecast of 2.4 per cent. However, the world’s second biggest economy remains 1.6 per cent smaller than a year ago.
Having shut its economy in the first quarter to arrest the virus spread and managed so far to largely defeat subsequent outbreaks, a conservative stimulus approach by policy makers has produced only a modest domestic recovery.
The rebound has been largely industry-driven, while consumer spending was weaker than expected. It also remains vulnerable to setbacks in foreign demand as lockdowns continue to hamper activity abroad.
The CSI 300 Index fell one per cent at 10:54 a.m. local time, heading for the first three-day loss since May, further evidence that the recent exhuberance in Chinese stocks is fading.
Further details from Thursday’s data release:
Industrial output rose 4.8 per cent from a year earlier, matching the median estimate
Retail sales shrank 1.8 per cent, weaker than a projected 0.5 per cent increase
Fixed-asset investment shrank 3.1 per cent in the first half of the year, versus a forecast drop of 3.3 per cent
In the first half of the year, industrial output was 1.3 per cent smaller, while retail sales shrank by 11.4 per cent
The surveyed urban jobless rate fell to 5.7 per cent
The recovery “was driven by credit stimulus as evident in the strong infrastructure and property investment, while the recovery in retail sales and private investment has continued to lag,” said Michelle Lam, greater China economist at Societe Generale SA in Hong Kong. “Policymakers will probably save bullets and hold back broad-based easing and find the current growth trajectory acceptable.”
A raft of measures have been rolled out since the pandemic to shore up the economy, including tax and fee cuts, cheaper loans, and increased fiscal spending. Stimulus has still fallen far short of the policies offered in developed economies, out of concern for debt buildup and financial stability.
The poor retail picture may be less negative than the headline data indicate. Sales of cosmetics, beverages, telecommunication equipment, daily use articles and alcohol and tobacco all posted double-digit increases. Autos and petroleum-products posted large declines though were likely influenced by one-off factors.
Policy makers are also signaling that monetary and fiscal policy won’t become much more supportive, as long as credit growth continues its upward trend.
Private companies were still cutting back on investment in the first half of the year, while spending by state-owned firms saw a big jump in June, rising 2.1 per cent per cent in the first six months after falling 1.9 per cent through May. Manufacturing investment was down almost 12 per cent.
“China’s economy has gradually overcome the negative impact brought by the virus in the first half, showing recovery momentum,” Liu Aihua, NBS spokesperson, said in Beijing after the data was released. “The recovery of the domestic economy still faces pressure amid rising external challenges.”
Debt levels in the real economy continued to rise in the second quarter albeit at a slower pace than in the first three months. The ratio stood at 265.4 per cent at the end of June, versus 258 per cent in March, according to Bloomberg calculations.
What Bloomberg’s Economists Say…
China’s economy bounced back strongly in 2Q – but now the challenge will be to sustain the recovery. “Continued momentum in June production bodes well for growth in 2H. But weak consumer spending remains a serious, persistent drag.”
— Chang Shu and David Qu
A major headwind to the recovery is the level of unemployment created by the collapse in manufacturing in the first quarter. The surveyed unemployment rate doesn’t capture the full impact, and tens of millions may still be out of work due to the pandemic.
Fighting unemployment and creating jobs are one of the main focuses of the government since the pandemic broke out. Premier Li Keqiang said earlier this week China needed to prepare for “tough challenges ahead, especially posed by the high employment pressure and other difficulties confronting the economy.”
Another headwind for the government is the increasing efforts of the U.S. to isolate China, banning its own firms from doing business with some Chinese companies and entities, and also pushing other nations to do the same. In a recent letter that was reported Thursday, President Xi Jinping appealed to global CEOs to continue doing business in China, promising to deepen reform and opening up.
Economists stressed the uneven nature of the recovery and the risks ahead.
“The message is clear here that China’s recovery is much stronger than the rest of world, largely benefiting from the effective epidemic control and the orderly normalization procedure,” said Zhu Haibin, Chief China Economist at JPMorgan Chase and Co. “In the second half, the momentum of further recovery will be softer.”
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.
