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Goldman Sachs gets even gloomier on the US economy – CNN

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

London (CNN Business)Goldman Sachs (GS) is becoming increasingly pessimistic about the US economy as coronavirus support from the government phases out and consumer spending remains on an uncertain path.

What’s happening: Over the weekend, the Wall Street bank downgraded its forecast for America’s economic growth, which is closely monitored by the investment community. Goldman Sachs now expects the economy to expand by 5.6% this year, compared to a previous estimate of 5.7%. In 2022, growth is projected to expand by 4%, down from 4.4%.
It’s the second time Goldman Sachs has revised its 2021 forecast lower in two months.
Breaking it down: The bank’s team of economists said two main factors drove the change in its outlook. One is that Covid-19 relief programs are set to wind down “significantly” through the end of the year, eliminating a source of income for some households.
The other concern is that consumers are not doling out enough money on services to compensate for a drop in spending on goods.
“Consumers’ service spending will need to recover quickly to offset a decline in goods spending as the latter normalizes from its current elevated level,” Goldman Sachs told clients. “This will likely prove challenging while Covid cases remain elevated, since many people still feel at least somewhat uncomfortable engaging in many activities that were routine prior to the pandemic.”
It pointed to movie theater attendance as one sticking point. (James Bond film “No Time to Die” brought in $56 million at the North American box office over the weekend. That was a muted performance for the Bond brand, my CNN Business colleague Frank Pallotta reports.)
Goldman Sachs also thinks spending could decline as people continue to work from home, encouraging them to prepare their own lunches instead of popping into local restaurants.
Another view: Bank of America, for its part, has been encouraged by spending trends gleaned from US credit and debit card data. “We think the recent drop in cases has helped ease Covid concerns,” said Candace Browning, head of BofA Global Research.
The bank found that spending at daycare centers in September was 52% above last year’s levels and only 13% below the same period in 2019, which it called “an encouraging sign.” It also observed that spending on travel and entertainment is “improving,” though gains haven’t been felt evenly across the country. People have been significantly more willing to splurge on entertainment in Florida than in states like New York and Pennsylvania.
Bottom line: The big picture for Covid-19 in the United States is looking a little brighter as new infections and hospitalizations decline.
“Hopefully it’s going to continue to go in that trajectory downward,” Dr. Anthony Fauci, the nation’s top infectious disease expert, said Sunday.
But the country is still reporting about 95,000 new infections daily, which Fauci said is “way too high.” That’s making it difficult for economists to map out the way forward for America’s economy.
Watch this space: US banks have strong insight on the health of US shoppers since they track money flows. Investors will closely monitor their commentary on the subject when they report earnings later this week.

Netflix supercharges its retail push with Walmart deal

Netflix (NFLX) doesn’t just want you to binge its movies and shows anymore.
It also wants you to buy shirts, dolls and other novelty items inspired by its original programs — generating a new source of income for the company as it sheds subscribers in North America.
The latest: Walmart (WMT) announced Monday that it struck a deal with Netflix to sell merchandise from popular shows on its website, including a “CoComelon” bed set, “Squid Game” t-shirts and baking kits inspired by the reality show “Nailed It!”
“Walmart is now the official one-stop shop to bring your favorite Netflix stories home,” Walmart executive Jeff Evans said in a blog post.
The backstory: Netflix launched an online shop in June — a sign it was interested in adopting the model perfected by competitor Disney, which makes tons of money off its intellectual property with theme parks and clothing sales.
The Walmart agreement indicates it’s doubling down on its efforts. That makes sense.
While Netflix is quickly growing its international subscriber base, especially in Asia, it lost 433,000 subscribers in the United States and Canada between April and June. Partnering with Walmart opens up a new way to generate revenue — and could spur greater interest in its shows among shoppers.
Investor insight: Netflix shares had been struggling to break out this year. But they’ve recently staged a comeback, hitting an all-time high last week as investors got excited about the success of Korean thriller “Squid Game” (which I devoured, though I’m here to tell you about markets, not TV).
“Squid Game can help further open up the [Asia-Pacific] region,” JPMorgan analyst Doug Anmuth said in a recent note to clients. “[And] it is another example of local content traveling well globally.”

Does Russia stand to benefit from the energy crunch?

A global scramble for natural gas has put Russia in a position of power. At least, that’s what investors believe.
See here: President Vladimir Putin’s indication last week that Russia could step in to alleviate pressure on European energy markets eased the massive run-up in natural gas prices. Meanwhile, the Russian ruble hit a four-month high against the US dollar Monday, and the country’s main stock index reached a record.
Rising energy prices could be a boon for Russia’s economy.
“As the world’s largest pipeline gas exporter and an emerging significant [liquefied natural gas] exporter, Russia seems to be a winning beneficiary of the market tightening,” Vitaly Yermakov, a researcher at the Oxford Institute for Energy Studies, said in a report published last month.
But there are questions about how much the country can realistically boost output. In a recent note to clients, Bank of America said Russian gas giant Gazprom may have “limited” ability to supply additional volumes since it’s still working to meet domestic needs. Plus, it’s “already producing close to a 10-year high.”

Up next

Bond markets are closed in the United States for Columbus Day. Stocks will trade as usual.
Coming tomorrow: The latest data on US job openings as employers in industries like hospitality struggle to fill vacant spots.

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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.

The Canadian Press. All rights reserved.

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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.

The Canadian Press. All rights reserved.

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September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

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OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

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