MEXICO CITY (Reuters) – Mexico’s economy last year suffered its biggest annual contraction since the 1930s, although it recovered better than expected from the ravages of the COVID-19 pandemic during the final quarter, preliminary data showed on Friday.
Gross domestic product in Latin America’s second-biggest economy tumbled by 8.5% last year in seasonally adjusted terms, according to the estimate issued by national statistics agency INEGI. The fall was slightly shallower than the consensus forecast in a Reuters poll for an 8.8% decline.
Still, the contraction was the sharpest since 1932 during the Great Depression, data published by the National Autonomous University of Mexico (UNAM) show. And the economy has recently faced fresh headwinds due to a resurgence in COVID-19 cases.
During the second half of 2020, the economy made up much of the ground lost to the pandemic, and an unexpectedly robust performance in the October-December period helped lift the peso against the dollar early on Friday.
But the economy remains a major challenge for President Andres Manuel Lopez Obrador, whose efforts to strengthen the state’s hand in the energy market have led to disputes with businesses and upset Mexico’s allies, chilling investment.
The second quarter bore the brunt of economic disruptions caused by the pandemic, before a sharp increase in infections towards the end of 2020 led to renewed commercial restrictions in the Mexico City metropolitan area before Christmas.
That is expected to dent the recovery in early 2021, which has seen deaths from coronavirus hitting record levels. Lopez Obrador himself contracted COVID-19 this month.
On Friday, Deputy Finance Minister Gabriel Yorio said a target of 4.6% economic growth in 2021 looked attainable, depending on the speed of the rollout of coronavirus vaccines. [L1N2K42W0]
During the final three months of 2020, GDP advanced by 3.1% from the previous quarter in adjusted terms, beating the prediction for 2.8% growth seen in a Reuters poll.
Nikhil Sanghani, an economist at Capital Economics, said the figures for the fourth quarter meant that Mexico had recouped more than 70% of its losses from the first half of 2020.
“However, the recent surge in new COVID-19 cases will cause the recovery to grind to a halt in Q1,” he said.
A breakdown of the unadjusted 2020 GDP figures showed manufacturing took the biggest hit last year. Secondary activities, which encompass factory output, fell by 10%, while tertiary activities, which include services, declined by 7.7%.
By contrast, primary activities such as farming, fishing and forestry, rose by 2.0% from 2019, the data showed.
The latest data also showed that 2020 was the second year running in which the economy went backwards. In 2019, the economy shrank by 0.1% in unadjusted terms, INEGI said.
Manufacturing activity has bounced back quickly from the depths of the slump, but companies are still wary about investing in new factories, buildings and machinery.
In the ten months through October, which is the latest data available, gross fixed investment was down by 19.5% compared with the same period in 2019, INEGI data show.
Goldman Sachs economist Alberto Ramos said in a client note that the outlook remained challenging for Mexico, though the rollout of a vaccination program would help the recovery.
“Firmer U.S. growth, stronger terms of trade, and additional moderate monetary policy easing should leverage the recovery,” Ramos said. “With the better than expected fourth quarter 2020 print we now expect real GDP growth to firm to 4.0% in 2021.”
(Reporting by Dave Graham; additional reporting by Abraham Gonzalez; editing by Nick Macfie and Alistair Bell)
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.
