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Even with $1 trillion stimulus, hit to economy and employment from virus will be big – CNBC

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A bar sits closed in the early evening in Brooklyn after a decree that all bars and restaurants shutdown by 8 pm in New York City as much of the nation slows and takes extra precautions due to the continued spreading of the coronavirus on March 16, 2020 in New York City, United States.

Spencer Platt | Getty Images

The double-barreled approach of a $1 trillion proposed fiscal stimulus program and Federal Reserve policy could help soften the blow of an economic recession and head off a potential financial crisis. 

The White House is seeking a stimulus package worth between $850 billion and $1 trillion that could result in emergency funds for individuals and assistance for small businesses and credit for industries hard hit by the reaction to the virus.

But even with proposed stimulus, the view of economic forecasters has become more dire in recent days as companies seeking cash strain credit markets and the shutdown of business activity sends shock waves across the economy.

Treasury Secretary Steven Mnuchin said the administration’s plan could put cash directly in the pockets of Americans. And administration sources told CNBC said there could be $500 billion to $550 billion in direct payments or tax cuts; $200 billion to $300 billion in small business assistance and $50 billion to $100 billion in airline and industry relief. 

As a big swath of the U.S. economy shuts down or retrenches to prevent spread of the virus through contact in large groups of people, economists have increasingly forecast a short recession instead of a short period of flat to negative growth. Many expect a rebound in the fourth quarter.

“Under any scenario, if we get a good stimulus package, I still think it’s a big hit. It’s hard to gauge but my guess is we’ll be down 2% to 3% in Q1 and around the same in Q2, assuming we get a lot of fiscal stimulus,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s one of those things we won’t know for a year down the road.”

Zandi expects a flat third quarter and a return to growth of 1.5% in the fourth quarter. 

New York and other states have shut down restaurants and bars, and San Francisco has told citizens to shelter in place, something New York is also considering.

“You see all these different measures being taken. That’s good to stop the virus, but it’s bad for economic activity,” said Shawn Snyder, head of investment strategy at Citi Private Wealth. 

Congress will have to approve the proposed stimulus package. The Fed has already cut interest rates to zero, boosted liquidity in the repo market and launched a new $700 billion quantitative easing program.

It also announced a new facility early Tuesday to help the commercial paper market, which had stalled out. After the market close Tuesday, it announced a program for primary dealers.

“We know that monetary policy operates with a lag,” said Snyder. “It’s not going to instantly solve the problem but what it does is help deteriorating financial conditions and hopefully stems that … Fiscal policy could react quicker. But there’s a lot of questions.”

 Snyder said it would help furloughed workers to receive $1,000 checks and other measures aimed at funding business would also help.

 “To me, the question is when it comes to recession, is it about the second quarter? The question is what happens to the third quarter? Are we able to stop this soon enough to only get one bad quarter,” he said.

Diane Swonk, chief economist at Grant Thornton said she expects the second quarter to be really weak with a contraction in the nation’s gross domestic product of 6%, even with a stimulus package she estimated at $700 billion. The big drop in the second quarter comes after an expected half percentage point increase in first quarter growth. For the third quarter, she expects a decline of 2.7% before a return to growth of 2.9% in the fourth quarter.

“Frankly, it [fiscal stimulus] would go a lot further towards preserving future revenues and keeping this from morphing into something much more disastrous,” Swonk said. “You can’t stop the recession from happening, but you can put a floor on losses and stop a vicious cycle of hemorrhaging and layoffs, and you’re keeping consumers solvent so once they return to work, they still have a balance sheet. This is a health crisis, it shouldn’t be a financial crisis.”

Swonk expects to see a big jump in the unemployment rate to 6.3% from February’s 3.5%, as 4.8 million jobs are lost.

Zandi said the proposed stimulus will help, but even more action is needed to prevent a financial crisis.

“It helps households and small business with cash. It keeps the economy together for at least a while,” said Zandi. “To address the financial crisis, the Treasury is going to have to do more work and provide a facility to provide funding to all businesses. That’s the only way to address the liquidity crisis that’s looming.”

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Business

A timeline of events in the bread price-fixing scandal

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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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Economy

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

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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)

The Canadian Press. All rights reserved.

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

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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.

The Canadian Press. All rights reserved.

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