BENGALURU (REUTERS) – The global economy is already in a recession as the hit to economic activity from the coronavirus pandemic has become more widespread, according to economists polled by Reuters amid a raft of central bank stimulus actions this week.
The spread of the disease caused by the virus, Covid-19, has sent financial markets into a tailspin despite some of the biggest emergency stimulus measures since the global financial crisis announced by dozens of central banks across Europe, the Americas, Asia and Australia.
The panic was clear in stocks, bonds, gold and commodity prices, underlining expectations of severe economic damage from the outbreak.
More than three-quarters of economists based in the Americas and Europe polled this week, 31 of 41, said the current global economic expansion had already ended, in response to a question about whether the global economy was already in recession.
“Last week we concluded that the Covid-19 shock would produce a global recession as nearly all of the world contracts over the three months between February and April,” noted Bruce Kasman, head of global economic research at JP Morgan.
“There is no longer doubt that the longest global expansion on record will end this quarter. The key outlook issue now is gauging the depth and the duration of the 2020 recession.”
Economists have repeatedly cut their growth outlook over the past month and have increased their forecast probabilities for recession in most major economies.
The worst-case views on growth taken just weeks ago in some cases have already into the central scenario for private sector economists in Reuters polls.
“The evolving news on Covid-19 has triggered ‘forecast leap frogging,’ with economists and strategists repeatedly lowering their forecasts. Among the big three economies, the US and the euro area will see negative growth, while Chinese growth is expected to come in at a paltry 1.5 per cent,” said Ethan Harris, head of global economics at BofA.
“Our first piece on the virus shock was titled ‘bad or worse’; now we amend that to ‘really bad or much worse.’ We now expect Covid-19 to cause a global recession in 2020, of similar magnitude to the recessions of 1982 and 2009.”
The global economy was forecast to expand 1.6 per cent this year, about half the 3.1 per cent predicted in the January poll, and the weakest since the global financial crisis of 2007-09. Forecasts for 2020 global GDP ranged from -2.0 per cent to +2.7 per cent.
“As cases of coronavirus spiral upward, disruptions to the global economy are increasing. We have cut our global GDP growth forecast to 1.25 per cent for the year – less severe than the deep recessions of 1981-82 and 2008-09, but worse than the mild recessions of 1991 and 2001,” noted Goldman Sachs’ economics research team.
“Consistent with this, our economists now expect recessions in Europe, Japan, Canada and possibly the United States.”
The US economy was almost certain to enter a recession this year, if it is not in one already, according to a poll published on Thursday and taken after the Federal Reserve’s emergency move on Sunday.
“The US economy is going to have a shock from this coronavirus and I think that there’s still a lot of uncertainty around the size and the depth and the prolonged period of the shock,” said Tiffany Wilding, North American economist at Pacific Investment Management Co (Pimco).
“We’re still getting our heads wrapped around that. We think it’s quite likely that the US has a small technical recession this year.”
As for the world’s second largest economy, China, where the virus outbreak originated, a Reuters poll published on March 6 showed the outlook was once again cut significantly for this quarter, next quarter, and for 2020.
Since then, economists have been slashing their forecasts even more.
The economic damage from the outbreak was predicted to reverberate through other major economies in Asia too, with most forecast to slow significantly, halt or shrink outright in the current quarter according to a Feb. 26 Reuters poll.
Japan’s economy, which already contracted sharply toward the end of 2019, was expected to grow only 0.1 per cent in the new fiscal year that begins in April, a March 6 Reuters survey found, revised down from 0.5 per cent projected in February.
Following the rapid spread of virus infections from China to other countries, including Europe, the risk of a euro zone recession doubled in a poll taken earlier this month.
It was not very different for the UK, where the Bank of England cut rates to near-zero on Thursday and re-started its asset purchases.
The British economy was expected to expand 0.1 per cent this quarter and then contract 0.3 per cent next quarter, a sharp revision from the 0.3 per cent expansion they had expected before for both the quarters in the previous poll.
In a worst case scenario, the economy was forecast to contract 1.0 per cent next quarter and by 0.7 per cent in 2020. Forecasts were as low as -5.0 per cent and -3.0 per cent, respectively, with no economist expecting growth in either period in the worst case.
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 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.
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.
