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German economy hit hard as abrupt lockdown strikes fresh blow – BNN

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Anneliese Kleinschmidt was gearing up for a brisk Christmas season, but now stands in a sea of roses, lilies and chrysanthemums that will perish if she can’t sell them by the end of Tuesday.

Her Blumenparadies flower shop in Berlin has already lost at least 30 per cent in revenue this year because of the coronavirus pandemic. Now, Germany’s decision to shutter most retailers from Wednesday as part of a hard lockdown means her store is one of thousands in Europe’s biggest economy that will be deprived of the lucrative holiday shopping period — which in Germany traditionally includes pots of clover for good luck.

Germany’s latest curbs are set to hit output hard just as it started to recover from the first lockdown in the spring. Economists are already slashing forecasts, with Commerzbank now seeing a fourth-quarter drop of 1 per cent compared with the third quarter and Berenberg Bank predicting a contraction of 1.8 per cent.“Having to close over Christmas and New Year’s is very tough,” said Kleinschmidt, who has been running the store in the Kreuzberg district since the 1970s. “This lockdown comes as a total shock after an already difficult year.”

Germany is shuttering non-essential retailers until at least Jan. 10 and encouraging schools to extend holiday breaks. Companies from engineering giant Siemens AG to carmaker Volkswagen AG were asked to check whether they can close sites or have employees work from home.

Chancellor Angela Merkel hammered out the tighter curbs with state leaders on Sunday after a looser shutdown failed to halt a surge in infections and deaths. The decision gave affected business little opportunity to prepare.

The abrupt lockdown may hurt sectors beyond retail, such as automobile sales — a key part of the German economy — because customers won’t be able to benefit from a tax incentive that expires at the end of the year, said Claus Michelsen, an economist at the DIW thinktank.

“A lot of areas where we would have expected a strong year-end sales push will now be a lot weaker,” he said. “The economic impact is likely to persist well into the first quarter.”

The first lockdown, which hit second-quarter activity, caused the biggest contraction in the German economy in at least half a century. At the time, companies from BMW AG to Thyssenkrupp AG shuttered factories, and hundreds of thousands of workers were sent home on state-funded wage support. Deutsche Lufthansa AG avoided bankruptcy only thanks to a 9 billion-euro bailout — among the largest in Europe.

Even so, the country is likely to suffer less than other European neighbors such as France, Italy and Spain, who have a greater reliance on services and tourism. Germany has benefited from its strong industrial focus during the crisis as factories adapted to health and safety rules.

In a bid to soften the blow to its economy, Germany is providing about 30 billion euros (US$36 billion) in emergency relief for businesses in November and December. A less-generous program that compensates for fixed expenses such as heating and rent has been expanded and extended until the end of June. The federal government estimates the hard lockdown will cost it around 11 billion euros a month.

Despite those safety nets, the curbs could knock consumer and business confidence at a critical time of the year, especially for Germany’s 620 billion-euro retail, hospitality and personal-services sector.

Amid the latest lockdown, more than half of inner-city shop owners — which risk losing out to online retailers like Amazon.com Inc. and Zalando SE — fear for the existence of their businesses, according to German retail lobby HDE. As many as 250,000 jobs are under threat if retailers don’t get additional financial aid, the group said.

After comfortably handling the initial wave of the pandemic, Germany is now lagging behind many of its neighbors. New cases and fatalities rose by record amounts in recent days, and more than 22,000 have died from the disease, which has infected a total of 1.35 million people in the country.

The latest numbers show that imposing a painful lockdown early is better than a series of softer stop-and-go measures, said Christian Odendahl, the Berlin-based chief economist of the Center for European Reform.

“Containing the virus effectively and in a timely fashion is what’s best for the economy in the medium run,” he said.

Riccardo Re, who runs an Italian restaurant in Kelsterbach near Frankfurt, said the government should have implementd a lockdown earlier to protect the key Christmas period and go after those businesses who caused outbreaks by breaking the rules.

In the past months, Re has reduced the number of tables and invested more than 3,000 euros in disinfectant dispensers, to-go boxes and takeout porcelain. Still, this year has been the most difficult in his 27 years as a restaurateur, he said.

“The government must also think about what’s next,” he said. “We need a perspective.”

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Economy

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.

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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.

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