PARIS (Reuters) – The French economy is still on course to rebound 5% this year despite the uncertainty created by the coronavirus pandemic, the head of the central bank said on Tuesday, reiterating its December forecast.
The euro zone’s second-biggest economy suffered its deepest post-war recession last year, with gross domestic product contracting 8.3% due to the coronavirus outbreak and measures to contain it, including two national lockdowns.
“I can confirm our forecast for 5% growth for the whole of 2021. It’s robust and rather cautious while reflecting of course the great uncertainty around the health situation,” Bank of France Governor Francois Villeroy de Galhau said in an interview with the Ebra regional newspapers group.
Finance Minister Bruno Le Maire has built the 2021 budget on a forecast for 6% growth this year, although he has in recent weeks indicated that that might be a stretch.
The central bank estimated on Tuesday that the economy was likely operating this month down 5% from pre-crisis levels, unchanged from the previous two months.
Companies consulted by the central bank in its monthly business climate survey reported stable expectations for business activity despite high uncertainty over the health outlook, the Bank of France said in a monthly report.
The French government has for now held off on imposing a new, third national coronavirus lockdown although it has also not ruled such action out if the outbreak risks spiralling further out of control.
Last month the government tightened restrictions by moving an 8:00 pm curfew to 6:00 pm and required large shopping centres to close as well as the hospitality and entertainment sectors, which have already been largely closed for months.
Reflecting such restrictions, the central bank’s survey showed that the service sector continued to be harder hit than the industry, where production capacity reached 74% in January compared with a pre-crisis average of 79%.
(Reporting by Leigh Thomas; Editing by Hugh Lawson)
Pandemic Binge Helped Turkish Economy Outperform Most Peers – BNN
(Bloomberg) — Turkey’s economy outperformed all but one major competitor in the final quarter, as rate cuts and a spending-and-credit binge beat back pandemic restrictions even as the lira collapsed.
Gross domestic product rose 5.9% from a year earlier, more than all G-20 nations except China. The median of 20 forecasts in a Bloomberg survey was for 6.9% growth. The seasonally and working day-adjusted figures showed an expansion of 1.7% in the last quarter from the previous three months. The economy grew 1.8% in 2020.
The growth push weakened the currency by 20% in 2020 and kept headline inflation in double digits for the entire year. The data expose the challenge facing central bank Governor Naci Agbal as he looks to cool growth and restore price stability without triggering a steep slowdown in activity and a jump in unemployment.
The government had pushed banks to ramp up lending to help businesses and consumers ride out the Covid emergency. The credit boom was coupled with a front-loaded easing cycle that helped prime the economy.
Agbal raised the benchmark interest rate by a cumulative 675 basis points to 17% following his appointment in November, signaling a return to more market-friendly monetary policy. The lira has strengthened 15% since his appointment.
The International Monetary Fund raised its growth forecast for Turkey’s economy to 6% in 2021 amid the coronavirus vaccine rollout, while warning the pandemic response worsened pre-existing financial risks despite leading to a strong rebound in economic activity.
“With some stability in the currency market, Turkish exporters can finally enjoy the price competitiveness accumulated over recent years,” said JPMorgan Chase & Co.’s London-based analyst Yarkin Cebeci. “Depending on the pace of vaccinations, tourism will most probably be stronger than last year as well.”
©2021 Bloomberg L.P.
Canadian dollar rallies as bond yields hold below recent highs
TORONTO (Reuters) – The Canadian dollar rose against the greenback on Monday as pressure on stocks due to the recent jump in bond yields faded and data showed narrowing in Canada‘s current account deficit, with the loonie rebounding from a two-week low on Friday.
World shares jumped as bond yields stayed below their recent spikes and optimism over a swift economic recovery was fueled by Johnson & Johnson’s newly approved COVID-19 vaccine and progress in a new U.S. $1.9 trillion coronavirus relief package.
Canada sends about 75% of its exports to the United States, including oil. U.S. crude prices were up 0.9% at $62.03 a barrel, helped by growing factory activity in Europe.
Canada‘s current account deficit narrowed to C$7.3 billion in the fourth quarter from a revised C$10.5 billion deficit in the third quarter, Statistics Canada said.
The Canadian dollar was trading 0.6% higher at 1.2668 to the greenback, or 78.94 U.S. cents, having traded in a range of 1.2665 to 1.2738.
On Friday, the loonie fell 1%, its biggest decline since last June, while it touched its weakest since Feb. 12 at 1.2748.
Speculators have raised their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Feb. 23, net long positions had increased to 9,132 contracts from 8,164 in the prior week.
Canada‘s C$100 billion stimulus plan is justified by the economic hole caused by the COVID-19 pandemic, government sources said, as analysts warned Ottawa against racking up too much debt and making investments that fail to boost growth.
Canada‘s fourth quarter GDP data is due on Tuesday.
Canadian government bond yields were higher across much of the curve, with the 10-year up 4.4 basis points at 1.401%. On Friday, it touched its highest intraday since January last year at 1.501%.
(Reporting by Fergal Smith; Editing by Alistair Bell)
One year into pandemic, sky begins to clear over U.S. economy – The Guardian
By Ann Saphir and Howard Schneider
SAN FRANCISCO/WASHINGTON (Reuters) – Despite the U.S. economy’s near miss with a depression last year and an ongoing coronavirus pandemic that has brought travel to a virtual halt, Jeff Hurst, the chief executive of vacation rental firm VRBO, sees a boom on the horizon.
“Every house is going to be taken this summer,” Hurst said, as the expected protection from vaccines arrives in step with warmer weather, unleashing a cooped-up population with record savings stashed away. “There’s so much built-up demand for it.”
That sort of bullish sentiment has increasingly taken root among executives, analysts and consumers who see the past year of comparative hibernation – from the government-ordered business closings last spring to continued risk avoidance by the public – giving way to a cautious re-emergence and green shoots in the economy.
Graphic: Retail in real time – https://graphics.reuters.com/USA-ECONOMY/REOPEN/yxmvjxkdjvr/chart.png
Data from AirDNA, a short-term rental analytics firm, showed vacation bookings https://tmsnrt.rs/3uxQ1Wi for the end of March, which traditionally coincides with college spring breaks, are just 2% below their pre-pandemic level. Employment openings on job site Indeed are 4% above a pre-pandemic baseline. Data on retail foot traffic, air travel and seated diners at restaurants have all edged up.
And economists’ forecasts have risen en masse, with firms like Oxford Economics seeing a “juiced-up” economy hitting 7% growth this year, more typical of a developing country.
Graphic: A historic lifeline – https://graphics.reuters.com/USA-ECONOMY/FORECASTS/azgpoezwbpd/chart.png
In a symbolic milestone, Major League Baseball teams took to the field on Sunday, as scheduled, for the first games of the spring training season. Crowds were required to observe social distancing rules and limited to around 20% of capacity, but MLB has a full schedule penciled in following a truncated 2020 season that did not begin until July and saw teams playing in empty stadiums.
Graphic: Oxford Economics Recovery Index – https://graphics.reuters.com/USA-ECONOMY/OXFORDINDEX/yzdvxqzmkpx/chart.png
As of Feb. 25, about 46 million people in the United States had received at least their first dose of a COVID-19 vaccine – still less than 15% of the population and not enough to dampen the spread of a virus that has killed more than half a million people in the country, according to the U.S. Centers for Disease Control and Prevention.
The emergence of coronavirus variants poses risks, and a return to normal life before immunity is widespread could give the virus a fresh foothold.
Nor is optimism global. The European short-term rental market, for example, is suffering, with tens of thousands of Airbnb offerings pulled. Up to one-fifth of the supply has disappeared in cities like Lisbon and Berlin, as owners and managers adjust to a choppy vaccine rollout and doubts about the resumption of cross-border travel.
In the United States, the vaccine rollout and a sharp decline in new cases has produced an economic outlook unthinkable a year ago when the Federal Reserve opened its emergency playbook in a terse promise of action and Congress approved the first of several rescue efforts.
Graphic: The third wave breaks – https://graphics.reuters.com/USA-ECONOMY/REBOUND/xklpyojjepg/chart.png
The fear then was years of stunted output similar to the Great Depression of the 1930s, while some projections foresaw millions of deaths and an extended national quarantine. Instead, the first vaccines were distributed before the end of 2020, and a record fiscal and monetary intervention led to a rise in personal incomes, something unheard of in a recession.
“We are not living the downside case we were so concerned about the first half of the year,” Fed Chair Jerome Powell told lawmakers on Wednesday. “We have a prospect of getting back to a much better place in the second half of this year.”
U.S. gross domestic product, the broadest measure of economic output, may top its pre-pandemic level this summer, approaching the “V-shaped” rebound that seemed unrealistic a few weeks ago.
That would still mean more than a year of lost growth, but nevertheless represents a recovery twice as fast as the rebound from the 2007-2009 recession.
Jobs have not followed as fast. The economy remains about 10 million positions short of where it was in February 2020, and that hole remains a pressing problem for policymakers alongside getting schools and public services fully reopened.
It took six years after the last recession to reach the prior employment peak, a glacial process officials desperately want to shorten.
While recent months have seen little progress, the outlook may be improving. Treasury Secretary Janet Yellen said in mid-February the country had a fighting chance to reach full employment next year.
It may take more than vaccines, however. Officials are debating how fully and permanently to rewrite the rules of crisis response – and specifically how much and what elements of the Biden administration’s proposed $1.9 trillion rescue plan to approve.
Fiscal leaders last year cast aside many old totems, including fear of public debt and a preoccupation with “moral hazard” – the bad incentives that generous public benefits or corporate bailouts can create. For Republicans, that meant approving initial unemployment insurance benefits that often exceeded a laid-off worker’s salary; for Democrats, it meant aiding airlines and temporarily relaxing banking regulations.
It worked, and so well that an odd consortium of doubters has emerged to question how much more is necessary: Republicans arguing help should be aimed only at those in need, and some Democrats worrying that so much more government spending in an economy primed to accelerate may spark inflation or problems in financial markets.
If the outlook is improving, however, it’s in anticipation that government support will continue at levels adequate to finish the job.
“Rock on,” Bank of America analysts wrote in a Feb. 22 note boosting their full-year GDP growth forecast to 6.5%, an outcome premised on approval of $1.7 trillion in additional government relief, “unambiguously positive” health news, and stronger consumer data. Given all that, “we expect the economy to accelerate further in the spring and really come to life in the summer.”
And the view back at VRBO? In most prime vacation spots, Hurst said, “You won’t be able to find a home.”
Graphic: Business sales outlook improves – https://graphics.reuters.com/USA-ECONOMY/REBOUND/xklvyoonnvg/chart.png
(Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao)
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