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Economy

How is Delta affecting the economy? The jury is out – 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)The Delta variant of Covid-19, which has caused a sharp rise in coronavirus cases in countries around the world, is a major risk to the recovery from the pandemic. And in some places, clear signs of damage are cropping up.

What’s happening: IHS Markit released preliminary readings from its closely-watched surveys of purchasing managers on Monday. The data showed that in many advanced economies, the more contagious Delta strain is having a real impact.
In Australia, business activity in the private sector fell for the second straight month, with the pace of contraction increasing since July.
“Survey respondents signaled that the increase in Covid-19 cases, underpinned by the Delta variant, and the corresponding lockdowns across various Australian states in August continued to dampen demand and output,” IHS Markit said.
Japan is also experiencing worsening business conditions, with companies reporting dwindling optimism following a recent surge in Covid-19 cases.
Ongoing supply chain issues are part of the problem, stoking fears ahead of the important holiday shopping period.
Coronavirus is a factor here, too; the latest obstacle is in China, where a terminal at the Ningbo-Zhoushan Port has been shut since Aug. 11 after a dock worker tested positive for Covid-19. Major international shipping lines have adjusted schedules to avoid the port and are warning customers of delays.
“The pressures on global supply chains have not eased, and we do not expect them to any time soon,” Bob Biesterfeld, CEO of logistics firm C.H. Robinson, told my CNN Business colleague Hanna Ziady.
In the United Kingdom, private sector output is still growing, but the recovery appears to be sharply losing momentum.
“Despite Covid-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers,” said Chris Williamson, chief business economist at IHS Markit.
In addition to supply chain concerns, businesses also pointed to staff shortages as a major headwind.
Holding up better: Supply chain woes are also affecting Europe, which logged a slight decline in its Purchasing Managers’ Index.
But business output among the 19 countries that use the euro “continued to grow at one of the strongest rates seen over the past two decades in August,” according to IHS Markit.
“Although the spread of the Delta variant caused widespread problems across the region, curbing demand and causing further supply issues, firms benefited from virus containment measures easing to the lowest since the pandemic began,” Williamson said.
On the radar: Which camp will the United States fall in? We’ll find out when IHS Markit’s data for the country posts later Monday.
The Back-to-Normal Index from CNN Business and Moody’s Analytics indicates that the US economy is operating at 92% of its pre-pandemic level. But expectations for third quarter economic growth are softening thanks to Delta’s effect on spending.

Bitcoin passes $50,000 for the first time since May

Bitcoin has surged above the $50,000 mark as the digital currency continues to climb out of a months-long slump, my CNN Business colleague Diksha Madhok reports.
It’s the first time bitcoin has reached that milestone since May 15. Bitcoin’s peers also advanced. Ethereum was up more than 3%, while dogecoin rose nearly 2%.
Bitcoin had been inching near $50,000 all weekend before finally crossing the threshold Sunday evening, according to data from CoinDesk.
Driving the gains: The cryptocurrency is getting a lift after PayPal announced that it will allow people to buy, hold and sell four types of cryptocurrencies — bitcoin, ethereum, litecoin and bitcoin cash — in the United Kingdom.
This announcement marks the first international expansion of the company’s cryptocurrency offering outside of the United States, where it launched the service in October last year.
Remember: It’s been a turbulent few months for cryptocurrencies. Bitcoin, which hit an all-time high of nearly $65,000 in April, plummeted as low as $28,800 in June after China escalated its crackdown on digital currencies.
Bitcoin, which had been hovering between $30,000 and $40,000 for many weeks, began to break out of its slump earlier this summer. One catalyst has been Amazon, rumored to be considered an entrance into the crypto market after posting a job opening for a digital currency and blockchain product lead.

What forced changes at OnlyFans?

Last week’s decision by the creator platform OnlyFans to soon stop hosting a wide swath of sexually explicit content has sent shockwaves through the internet.
OnlyFans, a website with 130 million users and more than 2 million content creators, has become synonymous with pornography. For many, performing on the app is a lifeline: Some who lost their jobs during the pandemic turned to sharing explicit videos of themselves on OnlyFans to help pay the bills. Many of these sex workers are now expressing outrage at what they view as OnlyFans’ betrayal of a community that enabled the platform’s massive success.
One explanation: Venture capital firms are often wary of investing in platforms that host adult content. According to internal documents obtained by Axios, OnlyFans’ popularity and revenue both exploded during the pandemic, yet it has struggled to secure outside investment.
The pivot at OnlyFans is also tied to a much wider crackdown by payment processors who handle credit card swipes behind the scenes, my CNN Business colleague Brian Fung reports.
OnlyFans said its decision was driven with a view toward building a sustainable platform for the long term. “These changes are to comply with the requests of our banking partners and payout providers,” the company said.
Seth Eisen, a spokesman for Mastercard (MA), told CNN Business it was not involved in OnlyFans’ decision to restrict the content it would allow on the platform. “It’s a decision they came to themselves,” Eisen said.

Up next

JD.com (JD) and MSG Entertainment (MSG) report earnings before US markets open.
Also today →
  • The IHS Markit Purchasing Managers’ Index for the United States posts at 9:45 a.m. ET.
  • Existing US home sales for July arrive at 10 a.m. ET.
Coming tomorrow: Best Buy (BBY), Nordstrom (JWN) and Urban Outfitters (URBN) earnings.

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Economy

Opinion: The future economy will suffer if Canada axes the carbon tax – The Globe and Mail

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Open this photo in gallery:

Poilievre holds a press conference regarding his “Axe the Tax” message from the roof a parking garage in St. John’s on Oct.27, 2023.Paul Daly/The Canadian Press

Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.

The carbon tax is the single most effective climate policy that Canada has. But the tax is also an important industrial strategy, one that bets correctly on the growing need for greener energy globally and the fact that upstart Canadian companies must rise to meet these needs.

That is why it is such a shame our leaders are sacrificing it for political gains.

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The fact that carbon taxes address a key market failure in the energy industry – polluters are not incentivized to consider the broader societal costs of their pollution – is so well understood by economists that an undergraduate could explain its merits. Experts agree on the effectiveness of the policy for reducing emissions almost as much as they agree on climate change itself.

It is not just that pollution is bad for us. That a patchwork of policies supporting clean industries is proliferating across the United States, China and the European Union means that Canada needs its own hospitable ecosystem for clean-energy companies to set up shop and eventually compete abroad. The earlier we nurture such industries, the more benefits our energy and adjacent sectors can reap down the line.

But with high fixed costs of entry and non-negligible technological hurdles, domestic clean energy is still at a significant disadvantage relative to fossil fuels.

A nuclear energy company considering a reactor project in Canada, for example, must contend with the fact that the upfront investments are enormous, and they may not pay off for years, while incumbent oil and gas firms benefit from low fixed costs, faster economies of scale and established technology.

The carbon tax cannot address these problems on its own, but it does help level the playing field by encouraging demand and capital to flow toward where we need it most. Comparable policies like green subsidies are also useful, but second-best; they weaken the government’s balance sheet and in certain cases can even make emissions worse.

Unfortunately, these arguments hold little sway for Pierre Poilievre’s Conservatives, who called for a vote of no-confidence on the dubious basis that the carbon tax is driving the cost-of-living crisis. Nor is it of much consequence to provincial leaders, who have fought the federal government hard on implementing the tax.

Not only is this attack a misleading characterization of the tax’s impact, it is also a deeply political gambit. Most expected the vote to fail. Yet by centering the next election on the carbon tax debate, Mr. Poilievre is hedging against the possibility of a new Liberal candidate, one who lacks the Trudeau baggage but still holds the line on the tax.

With the reality of inflation, a housing crisis and a general atmosphere of Trudeau-exhaustion, Mr. Poilievre has plenty of ammunition for an election campaign that does not leave our climate and our clean industries at risk. The temptation to do what is popular is ever-present in politics. Leadership is knowing when not to.

Nor are the Liberals innocent on this front. The Trudeau government deserves credit for pushing the tax through in the first place, and for structuring it as revenue-neutral. But the government’s attempt to woo Atlantic voters with the heating oil exemption has eroded its credibility and opened a vulnerable flank for Conservative attacks.

Thus, Canadian businesses are faced with the possibility of a Conservative government which has promised to eliminate the tax altogether. This kind of uncertainty is a treacherous environment for nascent companies and existing companies on the precipice of investing billions of dollars in clean tech and processes, under the expectation that demand for their fossil fuel counterparts are being kept at bay.

The tax alone is not enough; the government and opposition need to show the private sector that it can be consistent about this new policy regime long enough for these green investments to pay off. Otherwise, innovation in these much-needed technologies will remain stagnant in Canada, and markets for clean energy will be dominated by our more forward-thinking competitors.

A carbon tax is not a panacea for our climate woes, but it is central to any attempt to protect a rapidly warming planet and to develop the right businesses for that future. We can only hope that the next generation of Canadian leaders will have a little more vision.

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Business leaders say housing biggest risk to economy: KPMG survey – BNN Bloomberg

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Business leaders see the housing crisis as the biggest risk to the economy, a new survey from KPMG Canada shows.

It found 94 per cent of respondents agreed that high housing costs and a lack of supply are the top risk, and that housing should be a main focus in the upcoming federal budget. The survey questioned 534 businesses.

Housing issues are forcing businesses to boost pay to better attract talent and budget for higher labour costs, agreed 87 per cent of respondents. 

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“What we’re seeing in the survey is that the businesses are needing to pay more to enable their workers to absorb these higher costs of living,” said Caroline Charest, an economist and Montreal-based partner at KPMG.

The need to pay more not only directly affects business finances, but is also making it harder to tamp down the inflation that is keeping interest rates high, said Charest.

High housing costs and interest rates are straining households that are already struggling under high debt, she said.

“It leaves household balance sheets more vulnerable, in particular, in a period of economic slowdown. So it creates areas of vulnerability in the economy.”

Higher housing costs are themselves a big contributor to inflation, also making it harder to get the measure down to allow for lower rates ahead, she said. 

Businesses have been raising the alarm for some time. 

A report out last year from the Ontario Chamber of Commerce also emphasized how much the housing crisis is affecting how well businesses can attract talent. 

Almost 90 per cent of businesses want to see more public-private collaboration to help solve the crisis, the KPMG survey found.

“How can we work bringing all stakeholders, that being governments, not-for-profit organizations and the community and the private sector together, to find solutions to develop new models to deliver housing,” said Charest.

“That came out pretty strong from our survey of businesses.”

The federal government has been working to roll out more funding supports for other levels of government, and introduced measures like a GST rebate for rental housing construction, but it only has limited direct control on the file. 

Part of the federal funding has been to link funding to measures provinces and municipalities adopt that could help boost supply. 

The vast majority of respondents to the KPMG survey supported tax measures to make housing payments more affordable, such as making mortgage interest tax deductible, but also want to maintain the capital gains tax exemption for a primary residence.

The survey of companies was conducted in February using Sago’s Methodify online research platform. Respondents were business owners or executive-level decision makers.

About a third of the leaders are at companies with revenue over $500 million, about half have revenue between $100 million and $500 million, with the rest below. 

This report by The Canadian Press was first published March 27, 2024.

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China’s Xi meets foreign business leaders amid jitters over economy

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Taipei, Taiwan – Chinese President Xi Jinping met with American business leaders and academics at Beijing’s Great Hall of the People, state media has reported, as he tries to woo foreign investment back to China after a challenging few years for the world’s second-largest economy.

The meeting on Wednesday included Evan Greenberg, the chief executive of the US insurance company Chubb, as well as Stephen Orlins, the president of the National Committee on US-China Relations, and Craig Allen, the president of the US-China Business Council.

Like many Chinese state functions, the event was highly choreographed, with footage showing attendees arranged in a square formation offset by elaborate floral installations.

Xi last met with US executives in San Francisco following the APEC summit there in November.

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The meeting offers an opportunity for Beijing to shore up ties with US companies amid tensions with Washington and signal that their investment is welcome.

Many of the world’s top executives are already in Beijing this week for the China Development Forum, which took place on Sunday and Monday.

The forum’s guest list includes World Bank President Ajay Banga, International Monetary Fund (IMF) Managing Director Kristalina Georgieva  and representatives of more than 100 multinational firms.

While business leaders have been able to meet with many senior Chinese leaders in recent days, the invitation to meet Xi signals a concerted effort by Beijing to address negative perceptions about the current business environment.

“It’s possible that investors and executives will air some grievances at the meeting and it’s possible that lobbying might make some impact, but I don’t think that’s what this meeting is really about,” Chris Beddor, the deputy China research director at Gavekal Dragonomics, told Al Jazeera.

“This is primarily about Xi sending a message. The message is that the Chinese government is attuned to the concerns of global companies and investors, and still wants their presence in the country, at a time when global businesses are very wary of China.”

Last year, foreign direct investment in China fell by 8 percent as companies scaled back operations and sought to “de-risk” their businesses amid continuing geopolitical tensions and a tougher regulatory environment.

Tightened espionage and state secret laws have also made some firms question whether they are truly welcome, while the COVID-19 pandemic drew attention to their over-reliance on Chinese supply chains.

Still, some foreign companies have stressed their eagerness to double down on their investment.

Cook on Sunday told Chinese media that he hoped to increase Apple’s investment in China, where the company’s flagship iPhone has lost ground to local Huawei models like the Mate 60 Pro Plus.

“I think China is really opening up, and I’m so happy to be here,” Cook was quoted as saying on the sidelines of the China Development Forum.

Others, including the IMF’s Georgieva, are more jittery over China’s future.

During a speech at the China Development Forum, Georgieva told policymakers that more pro-market reforms are needed to help China’s economy rebound from the pandemic.

Despite growing 5 percent last year, China’s economy is struggling with deflation and a protracted real-estate crisis.

“China is poised to face a fork in the road – rely on the policies that have worked in the past, or update its policies for a new era of high-quality growth,” Georgieva said, suggesting that reforms could add $3.5 trillion to the economy over the next 15 years.

Shifting to consumption-focused growth, however, may be easier said than done in an economy marked by weakened domestic demand and sagging business confidence.

Chinese officials have long relied on mega infrastructure projects to boost gross domestic product (GDP), necessitating a mind shift among policymakers to move towards consumption-led growth.

Despite these concerns, China has set this year’s GDP target at 5 percent and pledged to continue its support for strategic sectors, among other goals outlined to attendees of the China Development Forum.

This year’s China Development Forum got off to a less rocky start than last year’s event, which was overshadowed by the aftermath of Beijing’s tough pandemic curbs and controversy over a Chinese spy balloon in US airspace.

“US-China tensions are a bit more stable this year, so the political pressure on American attendees has lessened somewhat,” Beddor said.

“There simply weren’t that many foreign visitors in China in March 2023. So it’s not surprising that attendance is up this year, because foreign travel of all sorts to the country is a bit more normal compared to last year,” he said.

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