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Mexico's Economy Rebounds Less Than Expected After Stalling – BNN

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(Bloomberg) — Mexico’s economy returned to growth in the first three months of the year after stalling in the last part of 2021, expanding slightly less than expected amid strong U.S. demand for manufactured goods.

Gross domestic product grew 0.9% in the first quarter from the previous three-month period, compared to the 1.1% median estimate of analysts surveyed by Bloomberg, according to preliminary data released by Mexico’s statistics institute Friday. The economy had narrowly avoided recession in the second part of last year.

On an annual basis, Latin America’s second-largest economy grew 1.6% between January and March, matching the forecasts. Manufacturing and services growth led the rebound, while agriculture shrank.

Mexico’s result comes after the U.S. economy shrank for the first time since 2020 in the same period, with gross domestic product falling at a 1.4% annualized rate, according to data released Thursday. The Latin American country managed to grow while its northern neighbor fell because the U.S. contraction was partly due to its negative trade balance, said Gabriela Siller, director of economic analysis at Grupo Financiero BASE.

The U.S. “imported more than it exported and where does it import from? A good part of it from Mexico,” Siller said.

What Bloomberg Economics Says 

“The recovery is uneven and incomplete. Services and manufacturing have outperformed, bolstered by waning headwinds from the pandemic and robust external demand. Construction and mining have lagged due to tighter monetary conditions and government policies. Activity remains below its pre-pandemic level.”

— Felipe Hernandez, Latin America 

— Click here for the full report 

Still, the Mexican economy is not out of the woods and activity remains sluggish, facing intractable security problems, some uncertainty over President Andres Manuel Lopez Obrador’s constitutional reform agenda and continued risks from Covid-19 and Russia’s invasion of Ukraine.

“There’s nothing to cheer about in these GDP numbers. Mexico could have easily been the star in Latin America, given its geopolitical proximity to the U.S., and its huge potential for nearshoring,” Andres Abadia of Pantheon Macroeconomics wrote in a research note. “Some silver linings, including the further reopening of the economy, a solid U.S. economy, and a modest downturn in inflation, however, will prevent a collapse.”

Growth is likely to slow to 0.5% to 0.8% over the coming quarters, according to Gabriel Casillas, chief Latin America economist at Barclays Plc. It was boosted in the first quarter from “once and for all things” like sectors reopening after December’s wave of the omicron variant and heavy government spending to open a new Mexico City airport by March, he said.

Overall growth for 2022 is seen at a modest 1.8%, according to economists polled by Citibanamex earlier this month.

The economy will likely return to pre-pandemic levels in the third quarter, Casillas said, adding that it may not hit its 2018 point until the end of next year or even 2024. After recovering fairly fast from the pandemic in late 2020, activity lost steam in the second half of last year, as supply chains snarled, virus variants proliferated and Lopez Obrador declined to step up spending to support the recovery.

Meanwhile, inflation has surged to two-decade highs, forcing the central bank to partially remove its monetary stimulus. The bank’s board has hiked its key interest rate 250 basis points over seven meetings since June to 6.5%.

Read More: Mexican Government’s Nationalist Rhetoric Limits Outlook

(Updates with detail and economist comment from paragraph 3)

©2022 Bloomberg L.P.

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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 Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

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