FRANKFURT — The European economy shrank 0.7% in the last three months of 2020 as businesses were hit by a new round of lockdowns aimed at containing a resurgence of the coronavirus pandemic.
The drop from the previous quarter was not as sharp as experts had feared. But the official figures released Tuesday couldn’t erase a gloomier outlook for this year: the 19 countries that use the euro are forecast to lag China and the U.S. in bouncing back from the worst of the pandemic.
Tuesday’s figures from statistics agency Eurostat underscored a rollercoaster year of freakish economic data, with a plunge of 11.7% in the second quarter, the biggest since statistics started in 1995, followed by a rebound of 12.4% in the third quarter in late summer.
The winter wave of coronavirus infections has meant new restrictions on travel and business activity, although companies in some sectors such as manufacturing have been better able to adjust than services businesses such as hotels and restaurants.
The German economy, Europe’s biggest, grew by a scant 0.1% in the fourth quarter while France saw a smaller than expected drop of 1.3%. Overall, economists had expected a drop in the eurozone of as much as 2.5%. For the year, the eurozone shrank 6.8%.
The figures arrive amid disenchantment and finger-pointing over the slow pace of vaccine rollouts in the European Union, while the U.K., which has left the EU, started earlier and has vaccinated people at a faster pace.
“While the eurozone GDP data were better than what we were expecting only a week ago, the short-term prospects for the European economy remain clouded by a challenging health situation in several countries and an underwhelming start of the vaccination roll-out,” said Nicola Nobile, lead eurozone economist at Oxford Economics.
The restrictions on everything from hair salons to pubs has not improved the mood either, despite the resulting dip in infections. Leaders like German Chancellor Angela Merkel warn it’s too early to ease up given the newer, more contagious variants.
Meanwhile, pressure is growing on people like Renee Gorgoglione, a restaurant owner who was among about 1,000 people protesting against lockdown restrictions in Spanish vacation destination Palma de Mallorca over the weekend.
“We shouldn’t be paying taxes when we are closed,” she said. “We can’t pay if we don’t have any income. I can’t pay the social security for my employees if I don’t have any income and from our government I have no help.”
The eurozone is expected to reach 2019 levels of economic output only in 2022, say officials from the European Central Bank. That contrasts with China, which has already regained the pre-pandemic level of output, and with the U.S., where Congressional budget experts foresee a rebound to 2019 levels by the middle of this year. The International Monetary Fund last month cut its forecast for eurozone growth this year to 4.2% from 5.2%
IMF chief economist Gita Gopinath said there were multiple factors explaining why Europe lags. European governments restricted activity more sharply to save lives; several European countries such as Greece, Spain and Italy are heavily dependent on tourism, which has been ravaged by the pandemic, and Europe has a large share of small and medium size businesses that have had tougher going than larger firms.
Pointing to the fiscal stimulus package in the U.S., Erik Nielsen, the chief economist for the UniCredit Group bank, called for “an acceleration of fiscal effort” in Europe. He said that could include more government borrowing and spending, taking advantage of very low interest rates. The current data leave no doubt that “the eurozone will be the last major economy to return to pre-pandemic levels,” he said.
“Beyond the potential health consequences, slow vaccination progress can force countries to maintain tight lockdowns for longer, thus delaying the start of the economic rebound,” said Holger Schmieding, chief economist at Berenberg bank. “In addition, we have to watch the potential political consequences. ”
Schmieding said a perception that the EU is not handling the crisis well could undermine national governments and “nourish EU-sceptic sentiment in parts of the EU electorate.”
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.
