TOKYO (Reuters) – Japan’s economy expanded more than expected in the fourth quarter, extending the recovery from its worst postwar recession thanks to a rebound in overseas demand that boosted exports and capital spending.
But the recovery slowed from the third quarter’s brisk pace and new state of emergency curbs cloud the outlook, underscoring the challenge policymakers face in preventing the spread of COVID-19 without choking off a fragile recovery, especially in the battered consumer sector.
“Conditions are such that Japan will not be able to avoid negative growth in the first quarter,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.
“There is a high possibility that there will be a repeating cycle of coronavirus infections spreading and being contained this year, which means that consumption is not likely to recover at the expected pace.”
The world’s third-largest economy grew an annualised 12.7% in October-December, government data showed on Monday, exceeding a median market forecast for a 9.5% gain.
It was slower than the revised 22.7% surge in the previous quarter, when the economy got a lift from pent-up demand after a previous state of emergency was lifted in May.
For the full coronavirus-stricken year, Japan’s economy contracted 4.8%, the first annual fall since 2009.
But Japan’s October-December performance was stronger than U.S. growth of 4% and a 2.8% slump in the euro zone. With two straight quarters of solid growth, Japan’s economy likely recouped 90% of pandemic-induced losses, analysts say.
“Japan’s recovery proceeded at a much faster pace than initially expected,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“There’s still some distance toward a full normalisation, but economic activity is recovering toward pre-pandemic levels.”
OUTLOOK MURKY
Japan’s stronger-than-expected GDP data comes amid signs the pandemic’s hit to other Asian economies toward the end of last year was not as severe as first feared.
Figures released on Monday showed Thailand’s GDP shrank less than expected in the fourth quarter while the contraction in Singapore’s economy was smaller than initial estimates.
A global rebound in manufacturing gave Japan’s exports and capital expenditure a much-needed boost on strong shipments to a rapidly recovering Chinese economy.
External demand, or exports minus imports, added 1.0% point to fourth-quarter GDP growth thanks to a 11.1% surge in exports.
Capital expenditure also grew 4.5%, marking the first increase in three quarters, as companies proceeded with spending that had been put off last year due to the pandemic.
Private consumption, which makes up more than half of the economy, rose 2.2%, slowing from the 5.1% increase in the previous quarter but exceeding market forecasts for a 1.8% gain.
The outlook, however, remains highly uncertain as Japan lags western countries in rolling out vaccines.
A resurgence in infections forced the government to terminate a controversial travel discount campaign that had supported service spending in October and November.
Analysts expect the economy to contract in the current quarter, as retailers take a hit from renewed state of emergency curbs rolled out in January and set to last until early March.
“If state of emergency measures are lifted in March, Japan’s economy will probably rebound in April-June,” said Yusuke Shimoda, senior economist at Japan Research Institute.
“But we can’t count on a big expansion as it’s likely to take time for vaccine shots to reach the wider population.”
(Reporting by Leika Kihara and Tetsushi Kajimoto; Additional reporting by Kaori Kaneko and Daniel Leussink; Editing by Chris Gallagher and Sam Holmes)
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.
