(Bloomberg) — Slowly but not surely, the world economy is emerging from its coronavirus-enforced hibernation.
As governments ease lockdowns of businesses and allow consumers to travel and shop again, measures of high-frequency data and confidence increasingly suggest a bottom has been reached in the worst global recession since the Great Depression.A new set of daily activity gauges from Bloomberg Economics finds almost all of the economies it monitors witnessed a pick-up in activity since late March and early April, although no country is yet approaching its pre-virus levels. Germany, Japan and France are among those rebounding the fastest, while Spain and the U.K. remain relatively weak.
A legacy of higher unemployment, bankruptcies and health fears also means recoveries are likely to be slow and sluggish after an initial bounce, with a full rebound unlikely before the discovery of a vaccine. The risk remains that the deadly virus could spike again, forcing constraints to be slapped back on.
“The picture is generally getting better, but it is a slow crawl out,” Deutsche Bank Securities Chief Economist Torsten Slok told Bloomberg Television. “We are standing at the bottom of the canyon and looking up.”
Policy makers are working to add momentum to the climb back with yet more economic stimulus. Japan on Wednesday announced more than $1 trillion of extra help for households and businesses, while the European Commission unveiled a package worth as much 750 billion euros ($825 billion) to help the continent’s worst-hit economies.Investors, for their part, are showing signs of confidence. European stocks rose on Thursday, and shares climbed in most of Asia as continued signs of economies reopening were weighed against the increase in Sino-American tensions over Hong Kong.
In China, which was the original epicenter of the virus, the earliest indicators for May suggest its recovery is continuing. Official purchasing managers’ indexes should show the recovery making more headway, with the services sector probably continuing to rebound at a robust pace, according to Bloomberg Economics.
China Manufacturing and Non-Manufacturing PMIs
Asia’s policy makers continue to add stimulus to counter concerns in export-oriented economies that the blow to global demand will weigh on their outlooks. The Bank of Korea cut its key interest rate to a record low on Thursday.
Among the trade engines in Asia, signs that manufacturing is improving haven’t yet been accompanied by a pickup in services. South Korea’s first 20-day export orders showed mild improvement in May, while still in double-digit decline, while export orders for Taiwan in April grew for a second month.
Those figures from Korea and Taiwan are favorite early indicators for Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings in Singapore. He says “global demand for tech is proving quite robust,” while services data “are still weak almost everywhere.”
In India, where the world’s biggest lockdown threatens to push 12 million into extreme poverty, there may be glimmers of hope in high-frequency figures. A basket of such indicators, including traffic congestion, electricity demand, and employment, point to a “modest lift off lows,” Radhika Rao, an economist at DBS Group Holdings Ltd. in Singapore, said in a report Thursday.
U.S. High Frequency Data Dashboard
In the U.S., some green shoots are evident with most indicators on Bloomberg Economics latest weekly dashboard of high-frequency, alternative and market-based data showing slight but steady improvement from distressing levels. Those include filings for unemployment benefits, mortgage applications and travel by air and public transit. Air travel and table booking in restaurants are also picking up, albeit they are still far below their peaks.
Some monthly data are also exhibiting signs of steadying or edging up. New-home sales in the U.S. unexpectedly increased in April, while consumer confidence as measured by the Conference Board stabilized in May after a sharp decline the previous month.
“The U.S. economy appears set to turn the corner on the Covid-19 recession as businesses quickly reopen across the country,” said Mark Zandi, chief economist for Moody’s Analytics.
At the end of last week, 575 counties, accounting for about 13% of the U.S. gross domestic product, were still locked down, according to Zandi. That’s down from a peak of 2,600 counties — with nearly 30% of GDP — at the end of April.
“Maybe we’re near the bottom in terms of the economic downturn and hopefully we’ll start seeing improvement in coming months,” Federal Reserve Bank of New York President John Williams said in a May 27 Bloomberg Television interview. “I expect to see a pretty significant rebound in the second half of this year.”
If the recovery does take hold in June, it would mark the U.S. downturn as perhaps the shortest recession in records going back to 1854, but among the most severe. The unemployment rate more than tripled in April to 14.7%, the highest since the Great Depression, as employers cut an unprecedented 20.5 million jobs. A further rise in joblessness is expected this month.“While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads,” said Lynn Franco, senior director of economic indicators at The Conference Board.
READ MORE: U.S. Economy Starts to Rise From Abyss
As for Europe, an easing of restrictions has also allowed a pickup in economies. Stores are reopening, as are restaurants in many countries, and high-frequency data measuring peoples’ movement to restaurant bookings show the start of a revival.
Some measures of confidence and activity have also stabilized after plunging in the previous two months, helping to embed the idea that the euro-area economy is at the trough of the slump. German business expectations improved in May, and a regional measure of manufacturing and services activity jumped from a record low.
On Thursday, the European Commission’s euro-wide sentiment index showed a small pickup in May.
In the U.K., the country is moving into a key month in June. Schools will be allowed to restart, and there’s a timetable for stores to open their doors again after two brutal months. But it’s going to be cautious progress. The U.K. has overtaken Italy and Spain in terms of virus cases, and has the highest number of deaths in Europe.
While Germany has already reopened restaurants, the U.K. may not do so until at least July. That’s captured in data from booking website OpenTable, which shows a bounce in German dining versus the U.K.
Despite the emergence of activity, most economists have discarded the idea of a V-shaped recovery.Social distancing rules are still going to impinge on everything from how factories operate to consumers’ willingness to visit stores, car showrooms and bars. Many temporary job losses will prove permanent and debt-ridden companies will be forced to close for good.That leaves economists warning 2022 may be the earliest before economies recover the ground they have lost despite the euphoria in stocks.“There is divergence between Wall Street and Main Street,” Nouriel Roubini, a professor at NYU Stern School of Business, told Bloomberg Television. “The recovery is going to be anemic. Something like a U.”
(Updates with markets, euro-area economic sentiment starting in seventh paragraph)
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TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
