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Euro zone economic recovery loses momentum in August – PMI – TheChronicleHerald.ca

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By Jonathan Cable

LONDON (Reuters) – The euro zone’s rebound from its deepest economic downturn on record faltered in August, surveys showed on Thursday, with some countries in the bloc suffering more than others from restrictions imposed to limit the spread of the coronavirus.

Overall growth in the dominant service industry – which has been harder hit than manufacturing from lockdown measures – almost ground to a halt, suggesting the long road to recovery will be bumpy.

Last quarter the bloc’s economy contracted 12.1% as lockdowns led to businesses being shuttered and citizens staying home, official data showed.

A Reuters poll last month predicted a bounceback this quarter with growth of 8.1% but said a full recovery would take two years or more. [ECILT/EU]

But as infection numbers have risen some restrictions have been re-imposed, and IHS Markit’s final Composite Purchasing Managers’ Index, seen as a good gauge of economic health, suggested the economy was still floundering.

It sank to 51.9 last month from July’s 54.9 – close to the 50 mark separating growth from contraction, albeit slightly better than an initial flash reading of 51.6. The services PMI fell to 50.5 from 54.7, better than its flash reading of 50.1.

“The recovery is already cooling down a little bit and it is very uneven among countries. Some countries like Germany have performed relatively well and other countries like Spain and to a lesser extent France are sending more worrying signs,” said Daniela Ordonez at Oxford Economics.

While Germany’s services PMI fell, it nevertheless remained relatively healthy. French business activity growth also eased, with new orders stagnating as the euro zone’s second-biggest economy battled the disruption to trade caused by the pandemic.

On Thursday, the French government detailed its 100 billion euro stimulus plan to erase the economic impact of the coronavirus crisis over two years, lining up billions of euros in public investments, subsidies and tax cuts.

Meanwhile the services PMIs for Italy and Spain, both of which rely heavily on tourism, dropped back below the breakeven mark as travel restrictions put in place by many European countries have hit the summer season.

Greece’s economy, also largely reliant on tourism, contracted 14% last quarter, official data showed on Thursday.

In Britain, outside the currency union, the composite PMI was at a six-year high but job losses accelerated in a bleak sign ahead of the closure of the UK government’s coronavirus furlough scheme at the end of next month. [GB/PMIS]

WEAK DEMAND

Demand stuttered across the currency union, despite firms cutting prices, and headcount was reduced for a sixth month.

Inflation turned negative last month for the first time since May 2016, official data showed on Tuesday, and the composite output price index remained below the 50 line at 48.5. That was below a flash reading of 49.0 but above July’s 48.1.

The European Central Bank would like inflation just below 2% and has already bought record amounts of debt to keep borrowing costs down and support the economy.

ECB Chief Economist Philip Lane recently warned complacency risked entrenching low inflation and reducing price growth expectations, making it even more difficult for the ECB to deliver on its target. Some economists took his words as a hint the bank is preparing to expand stimulus even further.

“It depends on how inflation goes but it is reassuring the ECB is ready to act … and the pressure is increasing on the ECB to act,” Ordonez said.

That extra support may be needed as the new business index for the service sector fell below 50 to 49.8 from July’s 51.4.

(Reporting by Jonathan Cable; Editing by Hugh Lawson)

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Euro zone firms continue to load up on credit as economy reopens: ECB data – TheChronicleHerald.ca

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FRANKFURT (Reuters) – Euro zone companies continued to load up on bank credit in August, European Central Bank data showed on Friday, two months after most economies had eased restrictions on economic activity aimed at controlling the coronavirus pandemic.

Bank loans to firms rose by 7.1% year on year, extending a borrowing boom that started in March when large parts of the euro zone’s economy came to a standstill and entrepreneurs were forced to draw from their credit lines to pay their bills.

(Reporting By Francesco Canepa; Editing by Toby Chopra)

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Pandemic's impact to influence economy, social order for long time, forum told – Assiniboia Times

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BANFF, Alta. — The COVID-19 pandemic is fundamentally changing the way the world’s economic and social orders function and some of those effects will be permanent, speakers at the Global Business Forum in Banff said on Thursday.

In a series of online sessions broadcast to a ballroom at the Banff Springs Hotel with just three people per table to prevent spread of the disease, subject experts from around the world said the virus has accelerated and amplified trends they were already seeing, as well as taking a few surprising turns.

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The pandemic has drawn attention to food security and that stands to boost a technological revolution in agriculture in Canada, said Murad Al-Katib, CEO of Saskatchewan food processing giant AGT Food and Ingredients Inc.

The expansion of plant protein crops such as peas, lentils, and other legumes in Prairie fields has boosted productivity of the industry, and processing those crops into value-added products will continue to grow, he said, while calling on government to help that process.

“Governments are paying attention now. COVID has everyone spooked,” he said.

“COVID wasn’t a slap in the face, it was a punch in the nose for governments to recognize that they can’t just leave food and food systems entirely to fragmented private sector imports and distribution.”

South of the border, meanwhile, recent civil unrest and violence has been escalated by a pandemic that has disproportionately hurt poorer families and Black people, while adding greatly to the fortunes of the richest Americans, said Trevor Noren, executive director of New York analytics firm 13D.

He said COVID-19 is “gasoline for a fire that had already been lit” that could accelerate generational change in ways that historically have been caused by wars.

“We believe COVID could prove to be that catalyst today, the event that forces a reckoning with the inefficiencies and vulnerabilities of excessively concentrated wealth and power,” he said.

“It will mean a backlash against the three primary forces that have driven consolidation: globalization, digitization and financialization.”

World oil demand has recovered to about 90 million barrels per day and that’s less than the 100 million bpd that existed before the COVID-19 slump, but it doesn’t mean the world has reached “peak oil,” said Michael Tran, managing director and energy strategist for RBC in New York.

“With COVID comes the idea of slower mobility, the demise of travel, we’re all working from home, this has really altered how we think about oil demand, but in my experience, acute events that impact oil demand have a shorter term impact than (government) policy shifts do,” he said.

He said events like the 9-11 attacks sharply affected oil demand, but it was short-term, while former president Barack Obama’s fuel efficiency standards had a more lasting affect.

Demand in the developed world peaked long ago, he added, but oil demand in the developing world is expected to continue to grow.

Cross-border trade between Canada and the United States has remained strong despite restrictions on in-person travel, said Kirsten Hillman, Canada’s ambassador to the U.S., adding she expects the partners’ traditional ties to recover fully when those restrictions are lifted.

She said the recent decision by the U.S. to withdraw threatened tariffs on aluminum shows that the new U.S.-Canada-Mexico trade agreement is working as a defence against protectionism.

The pandemic first erupted in China and that’s where it is expected to begin to meet its end, said Jeongmin Seong, a partner with McKinsey Global Institute in Shanghai, in a presentation.

Dealing with the pandemic forced the country, already an earlier adopter of digitization, to take it in new directions such as using remote communication in health care, real estate and education, and many of those applications will continue, he said.

He added Chinese business leaders have become more focused on its domestic customers and less interested in developing markets with the rest of the world, while Chinese consumers have become more financially prudent and more debt averse.

This report by The Canadian Press was first published Sept. 24, 2020.

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If Donald Trump drags the U.S. economy down, Canada's economy is going along for the ride – Toronto Star

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From economy to psychology, from environment to diplomacy, what happens in the U.S. election will have a profound impact on Canada. Northern Exposure is a series of stories looking at what’s at stake for us as America decides its future.

WASHINGTON—“Over the years I have learned,” a reader in British Columbia wrote to me this week, “that when the U.S. coughs, Canada gets a very bad cold, perhaps the flu,” The saying has a particular resonance during a pandemic, but in few areas is the analogy more apt than when it comes to the economy.

Roughly a fifth of Canada’s gross national product comes from exports to the U.S., which accounts for roughly 75 per cent of Canada’ foreign trade. The U.S. is also Canada’s largest source of foreign investment. As of 2011, U.S. subsidiaries in Canada employed more than 546,000 people.

“Our proximity to the U.S. is a huge source of our prosperity. We live next to such a massive market that is that is willing to do business with us, right?” said Peter Loewen from the University of Toronto’s Munk School of Global Affairs and Public Policy. “People shouldn’t underestimate that. These levels of wealth are all recent, and they come from our capacity to trade.”

And when it comes to trade, the presidency of Donald Trump induced some coughing fits among Canadians — or at least some gagging sounds — when he imposed import tariffs and forced the renegotiation of the North American Free Trade Agreement by threatening to tear it up. It’s been a turbulent time.

Considering the upcoming election, veteran trade lawyer Daniel Ucjzo of Dickinson Wright in Ohio would expect that volatility to change if the administration did. “I mean, it wouldn’t be trade policy by tweet,” he said in a recent phone interview.

“This relationship revolves around the relationship between the leaders, whether we like it or not,” Ujczo said. If Trump is reelected and Trudeau remains prime minister, “I think we’ll see pretty much more of the same — and there will need to be a focus on a more constructive relationship between those two.”

If Trump’s Democratic opponent, Joe Biden, were to be elected, however, Ujczo foresees a stronger relationship, between both the leaders and their cabinet-level officials.

He’s not the only one who thinks so. Kathryn Friedman, an expert on North American relations at the University at Buffalo, points out that when Biden was the U.S. vice-president, his last official visit was to Ottawa, where he praised Canada as an ally and a friend; by contrast, Trump and his administration often portray Canada as a national security threat and a predatory trader. Under a Biden administration, Friedman said, “I do think that Canada would be elevated back to its rightful place as one of our closest allies.”

But that relationship, paradoxically, might not make much difference to actual trade policy. The experts I’ve spoken with more or less agree that despite its adversarial and sometimes tortured negotiation, the new USMCA trade deal is a good update on the old NAFTA. No prominent American politicians — and few Canadians — are itching to change it.

Ujczo says he’d expect a less “disruptive” second term from Trump on continental trade, since he’s already laid the groundwork for a new playing field in his first term. But more than that, the Democrats’ trade policy ideas, especially among the congressional delegation, aren’t substantially different from Trump’s protectionist impulses.

“Canadians always think that Democrats are more favourable because they’re aligned on socio-cultural ideology, but Democrats have really not been great for Canada on trade issues,” he said. “I do think we would see more predictability from the White House, but I anticipate less predictability from Congress.”

A Biden administration, meanwhile, would likely cancel the Keystone XL pipeline, a project to which Canada’s oil industry and governments are deeply committed.

Biden would also bring the United States back into the Trans Pacific Trade Partnership “within the first week or so” of his administration, according to Chris Sands, who leads the Canada Institute at the Wilson Center in Washington. “What does that mean for Canada, which is already a member? Well, good news, bad news,” said Sands. “Suddenly you’ve got another competitor in that family and you lose one of the little advantages you had over the U.S.”

Aside from direct trade issues, the Canadian economy generally feels the strength or weakness of the American economy through investment, jobs at American corporations and tourism, among other things. That means Canada will be watching its neighbour’s recovery from the COVID-19-induced recession very closely.

In managing the virus itself, probably a precondition of a full recovery, Trump has graded his response this year an “A+” while pinning virtually all hope for a quick economic recovery on the quick development of a vaccine.

Biden has announced a more aggressive response to the spread of the virus, in line with what many epidemiologists have recommended, which may include locking down some areas of the country again or implementing national rules on masks. Biden has also staked part of his economic platform on stimulus, sometimes invoking Franklin Roosevelt’s Great Depression-era New Deal as a parallel.

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Polls show many American voters see the economy, and the prospects for dealing with it, as an area of strength for Trump. By contrast, 13 Nobel Prize-winning economists issued a statement this week supporting Biden, saying his economic policies “will result in economic growth that is faster, more robust, and more equitable.”

That said, predicting the trajectory of the American economy under any president is a very difficult job.

What isn’t difficult to see is that whatever direction it goes, it is likely to take Canada’s economy at least some of the way with it.

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Conversations are opinions of our readers and are subject to the Code of Conduct. The Star does not endorse these opinions.

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