BEIJING (Reuters) – China’s economy is expected to recover steadily in the rest of the year, boosted by stimulus measures to reverse the damage from the coronavirus crisis, but weak global demand and rising Sino-U.S. tensions are key risks, a Reuters poll showed on Friday.
The world’s second-biggest economy is now expected to expand by 2.2% in 2020, according to the median of 42 analysts surveyed by Reuters, up from 1.8% projected in the last poll in April.
But that pace would still be the weakest since 1976 – the final year of Mao Zedong’s Cultural Revolution.
China’s economy expanded 3.2% in the second quarter from a year earlier, following a record 6.8% slump in the first three months of the year as the virus and strict measures to contain it paralysed much of the country.
But analysts warn that the rebound is heavily reliant on state-led investment, while consumption remains weak. National disposable income per capita fell 1.3% in the first half of the year, according to official data.
Manufacturing and construction have snapped back relatively quickly, thanks largely to a massive infrastructure push and a rebound in homebuilding. But the services sector has lagged, with the catering, hospitality and entertainment sectors struggling to get back to normal amid worries of a resurgence of coronavirus cases and cautious consumer sentiment.
Exports have improved somewhat, largely due to massive demand for medical gear as the rest of the world battles the pandemic, though the shock of the health crisis is expected to depress global demand for some time to come.
“We still see growth uncertainties ahead from a bumpy and uneven reopening in other countries, a less favourable policy environment, and the loss of strong growth driver in consumption/services amid elevated uncertainty in the labour market,” said analysts from Bank of America Merrill Lynch.
Deteriorating relations between Washington and Beijing are also clouding the outlook, though a Phase 1 trade deal signed earlier this year still appears to be intact.
In a dramatic worsening of ties this week, the United States demanded China shut its Houston consulate on accusations of “intellectual property theft”. China on Friday ordered the U.S. to close its consulate in the southwestern city of Chengdu.
“Heightened U.S.-China tension, supply chain decoupling pressures and a subdued profit outlook could hit corporate sentiment and depress trade and manufacturing activities,” UBS Economist Tao Wang said.
FISCAL STIMULUS TO SPUR GROWTH
With the economy on the mend, China’s central bank does not see an immediate need to ease monetary policy further, but will keep conditions accommodative to support the recovery, policy sources told Reuters.
Analysts expect China will lower its one-year loan prime rate (LPR) by another 10 basis points (bps) to 3.75% by the end of 2020. It has been cut by 46 bps since last August.
The poll also predicted no change to the current benchmark deposit rate. The PBOC has kept it untouched at 1.5% since October 2015.
“Economic activity continued to strengthen going into Q3, and fiscal policy is set to boost activity for the remainder of the year,” Martin Rasmussen, China Economist with Capital Economics said in a note.
“That should allow the PBOC to step back from easing and instead focus on the financial risks that have accumulated this year.”
China’s consumer price index (CPI) in 2020 will likely rise 2.7% from the previous year, slowing from a 2.9% rise in 2019, according to the poll.
Analysts with Nomura predicted higher food prices in coming weeks as much of the country is battered by torrential rain and floods, but said the impact will likely be short-lived.
(Polling by Shaloo Shrivastava in Bengaluru and Jing Wang in Shanghai; Reporting by Lusha Zhang and Kevin Yao; Editing by Kim Coghill)
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.
