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COVID-19 shook, rattled and rolled the global economy in 2020 – The Journal Pioneer

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By Dan Burns and Mark John

(Reuters) – When 2020 dawned, the global economy had just notched its 10th straight year of uninterrupted growth, a streak most economists and government finance officials expected to persist for years ahead in a 21st Century version of the “Roaring ’20s.”

But within two months, a mysterious new virus first detected in China in December 2019 – the novel coronavirus – was spreading rapidly worldwide, shattering those expectations and triggering the steepest global recession in generations. The International Monetary Fund estimates the global economy to have shrunk by 4.4% this year compared with a contraction of just 0.1% in 2009, when the world last faced a financial crisis.

Graphic: The global coronavirus recession https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/xklvyjlxkpg/chart.png

Government-mandated shutdowns of businesses and any non-essential activities in much of the world unleashed a wave of joblessness not seen since the Great Depression. Still, unemployment levels varied dramatically across the globe.

In some countries, like China, COVID-19 infection levels were effectively suppressed through strict but relatively brief lockdowns, allowing unemployment rates to remain low. Others, such as Germany, deployed government-backed schemes to keep workers on company payrolls even as work dried up.

Elsewhere, including in Brazil and the United States, the uncontrolled spread of the virus and patch-work government health and economic responses fueled rampant job losses. Some 22 million people in the United States were thrown out of work in March and April alone and the unemployment rate jumped to near 15%.

Most economists expect it to take a year or more for labor markets to return to something resembling the pre-pandemic era.

Graphic: Global unemployment in the pandemic https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/azgvoyljgvd/chart.png

The pandemic delivered a body blow to global trade, with export volumes dropping abruptly to their lowest in nearly a decade in March and April.

The recovery since then has been led largely by China, which stands alone among major economies in seeing year-over-year growth in exports.

Graphic: Global exports have cratered almost everywhere https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/xegvbbeqyvq/chart.png

Unprecedented levels of government stimulus prevented even larger damage to many economies but also added to a global mountain of sovereign debt amassed by governments, raising questions about whether a financial crunch is the next crisis the world must deal with.

Graphic: Pandemic stimulus adds to the global debt mountain https://graphics.reuters.com/HEALTH-CORONAVIRUS/GLOBAL-ECONOMY/qzjvqdqdlpx/chart.png

However, historically low interest rates hovering around – and sometimes below – zero percent mean that debt servicing costs for the Group of Seven (G7) economies are at their lowest since the 1970s, when the debt burden was only a fraction of what it is now.

“Debt today is sustainable and it will remain so for a few years because as long as economic activity and employment have not recovered momentum, central banks are unlikely to do anything with their interest rates. That allows governments to keep up the fiscal support in the form of retention schemes and support to firms,” said Laurence Boone, the OECD’s chief economist.

Graphic: The cost of countries’ debt burdens has fallen https://graphics.reuters.com/GLOBAL-DEBT/qzjvqorbyvx/chart.png

One offshoot of that largesse has been that consumer spending has held up better than many had expected. While spending on services plunged and remains depressed – at restaurants and for travel and leisure in particular – consumers did lay out for goods, especially big-ticket items such as cars and home improvements that benefited from rock-bottom interest rates.

As a result, retail sales in many economies are up on a year-over-year basis, in some instances by more than they were at the end of 2019.

Graphic: Retail sales have been a mixed bag https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/azgpoylzgpd/chart.png

Another direct effect of all that government spending has been a surge in savings among consumers in many parts of the world. Government support payouts in developed economies padded household bank accounts and, with consumers hunkered down in the pandemic’s early days in particular, savings rates soared.

They began returning to earth in the latter part of 2020 but remain well above pre-pandemic levels. Some economists see this as the dry tinder to help fuel an economic rebound in 2021 and beyond when COVID-19 vaccines allow a wider recovery to take hold and consumers to begin moving about – and spending – more freely.

Graphic: Personal savings rates soared during the pandemic https://graphics.reuters.com/GLOBAL-ECONOMY/YEAREND/nmovabodbpa/chart.png

(Reporting by Dan Burns in Newtown, Connecticut, and Mark John in London; Additional reporting by Leigh Thomas in Paris; Editing by Paul Simao)

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Economy

Canadian retail sales slide in April, May as COVID-19 shutdown bites

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december retail sales

Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

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Economy

Canadian dollar notches a 6-day high

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Canadian dollar

The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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Economy

Toronto Stock Exchange higher at open as energy stocks gain

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Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

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