The guardians of the global economy will gather this week, one year into the pandemic, to assess the damage and chart a path forward.
The International Monetary Fund and World Bank spring meetings will take place virtually for a second year starting on Monday. The IMF will release its updated World Economic Outlook on Tuesday, with Managing Director Kristalina Georgieva already indicating that it will include an upgrade to January’s forecast for 5.5% global economic growth for 2021.
What Bloomberg Economics Says:
“A shrinking virus threat, expanding U.S. stimulus boost, and trillions of dollars in pent-up savings ready to be spent mean the world economy is poised for the fastest expansion on record back to the 1960s.”
–Tom Orlik, chief economist. For full analysis, click here
Beyond the much-watched economic report, attention will focus on a Group of 20 finance ministers’ meeting on Wednesday, where officials may decide to extend the Debt Service Suspension Initiative, set to expire in June, through the end of this year. The program has provided $5 billion in debt relief for low-income nations since it began last May, according to World Bank data.
Another focus of conversation will be the IMF’s proposed $650 billion issuance of reserve assets known as special drawing rights. While the official proposal won’t come until June, Georgieva last month touted broad support for the idea among IMF members.
Reserves Infusion
IMF members are set to receive $650 billion in special drawing rights
Source: International Monetary Fund
Note: Dollar estimates are based on IMF quota share
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The plan would help send more than $20 billion to poor countries. U.S. Treasury Secretary Janet Yellen last week told U.S. Congress that President Joe Biden’s administration intends to support the idea, starting a countdown of at least 90 days before a formal vote in favor at the IMF.
Elsewhere, minutes of the latest Federal Reserve and European Central Bank meetings will shed insight on policy makers’ thinking and central banks in India, Australia and Poland are predicted to keep policy unchanged.
Click here for what happened last week and below is our wrap of what is coming up in the global economy.
U.S. and Canada
Investors will be watching out for the latest data on services activity, job openings and producer prices for signs of the economy’s progress and developing inflationary pressures.
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On Wednesday, Fed watchers will also have minutes of the central bank’s last meeting to pour through and Fed Chair Jerome Powell is scheduled to speak at an event Thursday in time with the IMF’s meeting.
Asia
Japan releases household and wage data on Tuesday that will offer more insight into the hit to the economy from a second state of emergency amid signs it was less brutal than first feared.
Central Bank Rate Decisions This Week
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Australia has an interest rate meeting on Tuesday and India on Wednesday. With neither central bank expected to move their main policy tools, the focus will be on their outlooks.
China releases data on Friday that’s likely to show consumer price inflation climbed back into positive territory while factory costs are starting to swell.
Europe, Middle East, Africa
The health of Europe’s manufacturing base as it weathers the coronavirus crisis will focus economists’ attention in the coming week as they gauge the underlying strength of growth drivers during the quarter that just finished.
German factory orders and industrial production data for February are among the more significant reports, and both are anticipated to show output increases during the month.
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A shorter week than usual in much of the region because of the Easter holiday on Monday features fewer scheduled remarks by ECB officials to guide investors on the state of policy.
But the institution’s account of its decision on March 11 will pique interest, perhaps signaling a spectrum of opinion among governors on the risks to economic growth at a meeting when they ratified new quarterly forecasts.
Poland may announce a new fiscal stimulus program, largely paid for by EU funds. Meanwhile, the country’s central bank is set to keep policy unchanged.
Turkey may report that inflation rose to above 16% in March, when the firing of Naci Agbal and appointment of Sahap Kavcioglu as central bank governor sent the lira plunging by more than 10% as foreign investors sold Turkish assets at the fastest pace in 15 years.
Russia is expected to report that inflation accelerated to the highest since 2016 at 5.8% in March, when the central bank raised interest rates to try and combat the effects of ruble weakness and rising food prices.
Latin America
Reports on Mexico’s industrial output and manufacturing this week should point to the negative output gap of early 2021. On Thursday, the consumer price reports and the central bank minutes may boil down to this: Inflation’s above target, but the data-dependent Banxico is ready to wait, expecting it to slow in line with their forecasts. Bear in mind that the most recent GDP forecasts from Banxico and the Finance Ministry are quite upbeat too.
Bullish on Mexico
Best case forecasts see 2021 GDP growth as fastest in decades
Sources: Banco de Mexico, informes trimestrales; Secretaría de Hacienda y Crédito Público, Communiqué No. 023; Bloomberg.
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In contrast, gloom pervades the region’s biggest economy. One of the country’s largest hedge fund managers says Brazil may be nearing a “perfect inflationary storm.” Data out Friday may show consumer prices are well over the 5.25% target range ceiling and consistent with the more dire central bank scenarios.
Topping Out
Brazil’s central bank sees inflation peaking in 2Q 2021 under all scenarios
Source: Instituto Brasileiro de Geografia e Estatística; Banco Central do Brasil, Relatório de Inflação.
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Among the Andean nations, inflation in Chile should come in right around 3% whereas analysts see Colombia’s setting a record-low of 1.45%. Rounding out the week, look for Peru’s central bank to keep the key rate at a record-low 0.25% for a 12th straight meeting.
— With assistance by Peggy Collins, Benjamin Harvey, Robert Jameson, Malcolm Scott, and Michael Winfrey
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.
