A woman wearing a protective mask speaks on the phone in front of a closed down store, as the spread of the coronavirus disease (COVID-19) continues, in London, Britain on July 16, 2020.
HANNAH MCKAY/Reuters
Euro zone economic activity slipped back into decline this month as a second wave of the coronavirus sweeps across the continent, heightening expectations for a double-dip recession, surveys showed on Friday.
Renewed restrictions to control the pandemic forced many businesses in the bloc’s dominant service industry to limit operations, and nearly 90% of economists polled by Reuters this week said there was a high risk the coronavirus resurgence would halt the nascent euro zone economic recovery.
“The euro zone PMI confirms that the second wave of the coronavirus is weighing more and more on the economy. A double-dip in the fourth quarter is becoming more likely at this rate,” said Bert Colijn at ING.
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IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good gauge of economic health, fell to 49.4 from September’s final reading of 50.4.
That was below the 50-mark separating growth from contraction and only fractionally better than the 49.3 predicted in a Reuters poll.
That headline PMI was dragged down by the service industry’s PMI, which sank more than expected to 46.2 from 48.0.
“The further decline in the euro zone Composite PMI in October adds to the evidence that the second wave of infections, and the new wave of containment measures, is taking a heavy toll on the economy,” said Jack Allen-Reynolds at Capital Economics.
Friday’s surveys showed the bloc’s economy is running at two speeds, with manufacturing benefiting from strong global demand but services – which make up the bulk of the economy – struggling to remain active as lockdowns force consumers to stay home and businesses to close.
In contrast, in China – where the economy relies much more heavily on manufacturing and where the pandemic is largely under control – the recovery accelerated last quarter as consumers shook off their caution.
Echoing the divide between services and manufacturing, German factories powered ahead this month, while in France activity contracted as a resurgence of the virus hit the euro zone’s second-biggest economy.
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Outside the currency bloc and now outside the European Union, Britain’s economic recovery also lost more momentum as restrictions hit businesses in the hospitality and transport sectors.
European stocks pushed 0.8% higher for their best day in five trading sessions as strong third-quarter results offset the survey data.
WINTER IS COMING
It will likely be a chilling winter for the job market which until now has been shielded by government furlough schemes as the uncertain outlook meant firms reduced headcount for an eighth month.
The composite employment subindex nudged up slightly, but remained in negative territory, while the Reuters poll concluded that the bloc’s jobless rate would not peak for at least six months.
With infection rates and the death toll rising, optimism fell. The services business expectations index dropped to 54.6 from 59.2, its lowest since May when the initial lockdowns were being eased.
A 750 billion euro stimulus plan agreed by the European Union in July to support its suffering economies will be delayed, a senior diplomat said on Thursday, which is also likely to have a negative impact on sentiment.
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Still, factories fared much better than expected. The flash manufacturing PMI climbed to a 26-month high of 54.4 and was far above the median forecast in a Reuters poll.
An index measuring output, which feeds into the composite PMI, rose to its highest since early 2018.
Strong demand for manufactured goods meant factories were also able to increase their prices for the first time since mid-2019, albeit only slightly.
That will provide some relief to policymakers at the European Central Bank as inflation, which they want close to 2%, has been negative for two months.
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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.
