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Euro zone economy rebounds in first quarter from mild recession as inflation steadies

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A woman shops at a market in Rome, Italy, on June 15, 2022.GUGLIELMO MANGIAPANE/Reuters

The euro zone economy rebounded in the first quarter from a mild recession as Germany returned to growth and expansion accelerated elsewhere, while inflation steadied to reinforce the case for the European Central Bank to cut interest rates.

Gross domestic product in the 20-country bloc increased by 0.3 per cent quarter-on-quarter in January-March for a 0.5 per cent year-on-year rise, official data showed on Tuesday, compared with market expectations that both would expand by 0.2 per cent.

The fourth quarter GDP figure was also revised down to a negative 0.1 per cent from a previous 0.0 per cent, meaning that the euro zone was in a technical recession in the second half of 2023. GDP shrank by 0.1 per cent in the third quarter.

The figures reflect general expectations of a slow recovery in the euro zone. The IMF forecast earlier this month that the bloc’s GDP would rise by 0.8 per cent this year, double the rate of 2023, and by a healthier 1.5 per cent in 2025

Euro zone inflation steadied at 2.4 per cent in April, data showed. However, a crucial indicator of underlying price pressures slowed, solidifying the case for the European Central Bank to cut interest rates at its meeting on June 6, just as the EU public starts voting in the European Parliament election.

Bank of France governor and ECB policy-maker Francois Villeroy de Galhau said the data boosted confidence that inflation would return to the ECB’s 2 per cent target by next year and so the bank should be able to start cutting rates in June.

“The speed of cuts should afterwards be set pragmatically depending on the inflation outlook beyond the month-to-month results, which could show a certain volatility,” he said on social network Linkedin.

Figures from EU statistics agency Eurostat showed growth in all 10 countries from which it compiles data for a flash estimate for the bloc. Growth rates were at least equal to those of the fourth quarter.

Germany, the euro zone’s largest economy, returned to growth in the first quarter with a bigger than expected 0.2 per cent expansion from the previous quarter due to exports and construction investment, which were boosted by unusually mild winter weather. However, fourth quarter numbers were revised to show a deeper dip at the end of 2023.

“The worst is finally behind us,” was UniCredit’s assessment, saying rising trade and lower inflation would likely lead to moderate German growth in the coming quarters.

Spain’s economy grew by 0.7 per cent quarter on quarter, beating analysts’ forecasts for 0.4 per cent growth, due to a boost in investment and private consumption. Investment growth had been weak in previous quarters despite the deployment of European recovery funds. Industry and construction expanded in the quarter.

The French economy also gained momentum in January-March, growing slightly faster than expected thanks to a pickup in consumer spending and business investment.

The growth is good news for the French government which drew fierce opposition criticism for its handling of the economy after it revised down its 2024 growth forecast in February.

“To all of those who were wanting to think our economy has stalled out, the facts are stubborn, French growth is improving,” Finance Minister Bruno Le Maire said.

 

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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 Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

The Canadian Press. All rights reserved.

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