The European Union’s executive body raised its economic growth forecast, saying Europe had dodged a winter recession that was feared amid an energy crisis but warning that stubbornly high inflation is likely to keep hurting the economy by sapping people’s ability to spend.
The outlook for the 20 countries using the euro currency improved to growth of 1.1% this year from 0.9% in February’s predictions, the European Commission said in its spring forecast Monday.
Europe had faced expectations of a winter energy catastrophe after Russia cut off most of its supply of natural gas to the continent amid the war in Ukraine. Prices surged to record highs for gas needed to heat homes, generate electricity and power factories – fuelling painful spikes in consumer prices.
A mad scramble to line up new sources of natural gas – through more expensive supplies of liquefied gas coming by ship – along with mild weather and reduced use helped Europe get through the winter without a major energy crisis.
“The European economy continues to show resilience in a challenging global context,” European Commissioner for Economy Paolo Gentiloni said at a news conference. “Declining energy prices, diversification of energy supply and reduced consumption have contained the adverse economic impact of Russia’s war of aggression against Ukraine.”
“As lower energy prices continue to provide relief to households and firms budgets, the economic expansion is expected to continue in 2023 and pick up some pace in 2024,” he added.
The growth forecast for next year was raised to 1.6% from 1.5% in the earlier projection.
Officials cautioned, however, that inflation is persistently high, which erodes people’s purchasing power and weighs on growth. Consumer prices rose 7% in April from a year earlier, while the economy barely scraped out a 0.1% expansion in the first three months of the year.
There are also challenges from rising interest rates that the European Central Bank is using to try to return inflation to the bank’s target of 2%.
Higher borrowing costs for consumers and businesses have been reducing the availability of loans for home purchases or business investment and shrinking demand for loans.
An additional challenge comes from recent turmoil mostly affecting banks in the U.S., where three financial institutions have collapsed in recent months.
While European officials say their banks are not directly exposed to the U.S. troubles, increased scrutiny of bank finances from regulators and shareholders may make banks even more reluctant to lend.
Banks are the chief sources of financing for companies in Europe, in contrast to the U.S. where financial markets supply the bulk of credit.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
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