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)
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.
