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Europe’s Economy Slows to a Crawl as War and Inflation Take a Toll – The New York Times

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Rising prices, fallout from the war in Ukraine and continuing supply chain chokeholds slowed growth around the world in the first months of the year and hobbled efforts by major economies to recover from the pandemic.

The latest evidence came on Friday, when the European Union said that the 19 countries that use the euro grew only 0.2 percent overall during January, February and March compared with the previous three months.

That figures came just one day after the United States announced that its economy shrank 0.4 percent over the same period. Earlier this month, China, the world’s second largest economy behind the United States, reported signs of significant weakness as another wave of Covid-19 prompted widespread lockdowns.

“The overarching message is that the global growth outlook is souring and it is deteriorating at a faster rate and in a more serious way than most analysts have anticipated,” said Neil Shearing, chief group economist at Capital Economics.

There is significant variation in the causes, as well as the forecasts, among the three major economic blocs.

Although total output in the United States contracted, analysts tended to be more sanguine about the American economy’s prospects, noting that consumer spending was strong despite high inflation and that the labor market remained tight. The downturn during the first quarter was most likely the result of one-time measuring quirks.

By contrast, China’s report of 4.8 growth percent in the first quarter masks just how much that economy is suffering from a slump in the real estate industry, overinvestment and pandemic-related shutdowns.

As for Europe, it is much more affected by the war in Ukraine.

James Hill for The New York Times

The common problem they all face, though, is inflation.

“Growth around the world is evolving at different speeds,” said Gregory Daco, chief economist of EY-Parthenon, but “inflation is present almost everywhere in most sectors.”

Those divergent economic backdrops may cause governments and central banks to choose different, or even conflicting, policies as countries try to slow inflation without tipping into recession.

In the United States, the Federal Reserve is set on raising interest rates to bring down inflation, Mr. Daco said, while governments in Europe may end up funneling more money to their citizens to blunt the impact of rising energy prices. And China, he said, is caught in a bind: “They do not want to let go of their Covid-zero policy, but they realize the drag on economic activity from that policy is massive.”

Even though the current slate of risk factors — like the coronavirus and tensions between Russia and Ukraine — were all present when the year began, the economic outlook then was much brighter. Restrictions related to the Omicron variant of the coronavirus were beginning to ease in Europe and elsewhere, and there were hopes that the movement of goods and supplies around the world were about to pick up.

But Russia’s invasion of Ukraine injected a jarring level of uncertainty and undermined economic confidence. The war and resulting sanctions imposed by the United States, Europe and their allies have aggravated shortages of food, energy and crucially important minerals, disrupting trade and driving inflation to wince-inducing levels.

China’s economy expanded in the first quarter but at a pace that was barely faster than the final three months of last year, underlining more trouble ahead. The government has responded to renewed outbreaks of Covid with severe lockdowns and mass quarantines, which have kept millions of workers and consumers in several cities at home. Shanghai, the country’s biggest city, has been closed for more than a month, while further shutdowns of businesses and residential complexes were announced in Beijing on Friday.

Agence France-Presse — Getty Images

Patrick P. Gelsinger, the chief executive of Intel, the Silicon Valley giant, cited the Shanghai lockdown and the war in Ukraine in warning on Friday that the shortage of computer chips that has bedeviled technology, automotive and electronics companies worldwide for more than a year would continue “until at least 2024.” He made his remarks on a call with industry analysts.

Risks, especially those related to a possible energy embargo and other disruptions caused by Russia’s invasion of Ukraine, have intensified. This week, Russia cut off gas supplies to Poland and Bulgaria. At the same time, the European Union has been inching closer to an agreement to stop the flow of Russian oil.

The impact of an abrupt halt in gas and oil supplies has generated sharp debate. In Germany, which has the largest economy in Europe, the central bank recently warned that a gas embargo would cause the country’s economic output to decline as much as 5 percent this year.

Some economists have offered more optimistic estimates, but Melanie Debono, senior Europe economist for Pantheon Macroeconomics, said a gas embargo would almost certainly throw Germany into recession and would probably “drag the rest of Europe down with it.”

During the first three months of this year, Germany’s gross domestic product — the broadest measure of economic output — grew 0.2 percent.

“The economic consequences of the war in Ukraine have had a growing impact on the short-term economic development since late February,” the Federal Statistics Office in Germany said on Friday.

Lena Mucha for The New York Times

Across the eurozone, growth varied. The economy in Spain performed slightly better than other European countries’, growing 0.3 percent over the same period. Still, the improvement was much smaller than the 2.2 percent recorded in the last quarter of 2021.

In France, where Covid restrictions remained in place for much of the first quarter, growth came to a dead stop. In Italy, G.D.P fell 0.2 percent from the previous three months.

“Clearly the picture for the first quarter is one of pretty weak growth,” said Ángel Talavera, head of European economics at Oxford Economics. “Consumer confidence has tanked everywhere pretty sharply,” he noted, adding that household spending weakened as wages failed to keep pace with inflation.

Average growth among the 27 countries that make up the European Union was 0.4 percent in the first three months of 2022, Eurostat, the European Union’s statistical office, stated, twice the figure reported for the eurozone.

Inflation has been a persistent thorn, rising to an annual rate of 7.5 percent across the eurozone in April from 7.4 percent in March, Eurostat said.

Food and other prices rose sharply. Although energy prices fell 3.7 percent this month, they are still more than a third higher than last year. “There is a squeeze in real incomes for households,” Ms. Debono of Pantheon said.

Rising inflation could test the American economy’s resilience as well. During the first quarter of this year, consumer prices rose at a 7 percent annual rate, the fastest in four decades. Taking inflation into account, after-tax incomes dropped for the fourth quarter in a row.

Roberto Salomone for The New York Times

Even before this latest round of measurements, intense uncertainty had dimmed forecasts. Last week, the International Monetary Fund revised its estimate of global growth to 3.6 percent from the 4.4 percent it predicted in January. Its estimate for the eurozone declined 1.1 percent to 2.9 percent for the year.

Russia’s invasion of Ukraine “will have severe economic consequences for Europe, having struck when the recovery from the pandemic was still incomplete,” the I.M.F. said in its most recent regional outlook. “The war has led to large increases in commodity prices and compounded supply-side disruptions, which will further fuel inflation and cut into households’ incomes and firms’ profits.”

The outlook for the rest of the year may darken further.

“Overall, 2022 is going to be a year where growth is going to be significantly weaker than most analysts expect,” said Mr. Shearing of Capital Economics.

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A timeline of events in the bread price-fixing scandal

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September 19, 2024

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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September 19, 2024

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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1 day ago

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September 18, 2024

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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