Mexico’s economy in the second quarter declined the most since the Great Depression, despite partly recovering from the depths in June, as the coronavirus pandemic shuttered factories, kept shoppers and tourists at home and upended trade.
Gross domestic product fell 17.1 per cent in seasonally adjusted terms in the April-June period from the prior quarter, data from the national statistics agency showed Wednesday. Compared with the same quarter last year, GDP contracted 18.7 per cent.
“Data for the second quarter confirms the Mexican economy had its worst quarterly decline of the last eight decades, after the crash in 1932 caused by the Great Depression,” said Alfredo Coutino, an economist at Moody’s Analytics.
Fiscally conservative President Andres Manuel Lopez Obrador has resisted pressure to borrow to support the economy, while picking fights with businesses that have chilled the investment climate. But he insists Mexico is on the right track.
“We’re already recovering, workers are already being rehired and we’re going to get out of this without getting overindebted,” Mr. Lopez Obrador told a regular news conference.
The pandemic, which has infected 568,621 people and killed 61,450 in Mexico, has hit the Mexican economy harder than those of its Latin American peers “due to the health care system’s lack of preparation and the absence of stimulus measures to mitigate the effects on companies and families,” Mr. Coutino said.
By contrast, in Latin America’s largest economy, Brazil, GDP is forecast to have decreased by 9.4 per cent in the second quarter as President Jair Bolsonaro launched a fiscal spending program to deal with the impact of COVID-19.
In a positive sign, Mexican economic activity advanced 8.9 per cent in June from May, apparently confirming Mr. Lopez Obrador’s estimates the economy “hit bottom” in April and May. But the economy still contracted 13.2 per cent from June, 2019.
A breakdown of the adjusted quarterly GDP data showed primary activities slipped 2 per cent, secondary activities plummeted 23.4 per cent and tertiary activities contracted 15.1 per cent.
Primary activities include farming and fishing, secondary activities comprise manufacturing, mining and construction, and tertiary activities cover retail and the services sector.
Mexico’s economy is forecast to shrink by up to 10 per cent or more this year, in what the Finance Ministry and the central bank have said would be the worst recession since the 1930s.
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4 million more Americans turn to Medicaid as coronavirus roils the economy – CNN
Canada's economy to take a hit from the second wave, economist says — and some sectors may never recover – Toronto Star
The Canadian economy faces a long, slow recovery from COVID-19, and some industries are never bouncing back to where they were, according to a new forecast from a business think tank.
The prediction, from the Conference Board of Canada, says things won’t get back to anywhere close to normal until there’s a vaccine to battle COVID-19, likely sometime next June.
“Until we’re seeing COVID fully behind us, it’s going to be a rough ride. We won’t see a complete recovery until there’s a vaccine and this has been brought under control. The biggest risk is if a vaccine ultimately isn’t found,” said Conference Board chief economist Pedro Antunes in an interview.
The Conference Board’s argument was bolstered by a report from Statistics Canada on Wednesday showing the size of the Canadian economy is still six per cent smaller than in February, and that just a quarter of industries have hit their pre-pandemic size.
Statistics Canada showed Canadian Gross Domestic Product grew by three per cent in July, after having grown by 6.5 per cent in June. The StatsCan report also said data is expected to show that the economy grew by just one per cent in August.
While the economy started to bounce back in May and June as COVID-related restrictions eased up, the start of the second wave spells more trouble, said Antunes.
“Before, we were trying to flatten the curve of new COVID cases. Now, it’s a case of COVID flattening the recovery,” Antunes said.
Consumer spending picked up as restrictions started to loosen, Antunes said, partly because of pent-up demand, and partly because of government support programs including the Canada Emergency Response Benefit and the Canadian Emergency Wage Subsidy.
“It was consumers to the rescue with a lot of borrowed government money,” said Antunes, who predicted the CEWS will eventually be extended until next June.
Some sectors will struggle more than others as the second wave continues, Antunes said, singling out the hospitality, travel and cultural industries.
Other industries are seeing disruptions which are likely permanent, he added. Among the most heavily-affected sectors in the long term, Antunes predicted, will be bricks and mortar retailers, and commercial real estate, particularly office buildings. Simply put, companies are realizing that having employees doing their jobs from home works just fine.
“I think telecommuting will become permanent in a lot of cases. And that also means there will be a lot of office space on the market,” said Antunes.
For retailers, a gradual move to e-commerce turned into a tidal wave because of COVID-19, and many customers won’t be going back once COVID ends.
“I think a lot of those changes are permanent. We had more of an increase in e-commerce in a few months than we did in six years,” said Antunes.
That assessment is backed up by retail analyst Lisa Hutcheson.
“The longer people shop online, the less likely they are to go back,” said Hutcheson, managing director of retail consultancy J.C. Williams Group.
The speedy rise in e-commerce, which Hutcheson said was equivalent to a decade’s worth of increases, has already knocked some companies out of business entirely.
“The retailers who weren’t making these changes are likely the ones who’ve gone out of business,” said Hutcheson.
In a recent survey, J.C. Williams Group found that 39 per cent of Canadians say they’ll stick with their current shopping habits even once an effective treatment for COVID-19 is found, Hutcheson said.
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Economic rebound slows as Statistics Canada says economy grew 3.0 per cent in July – Toronto Star
OTTAWA – The pace of Canada’s economic rebound from the COVID-19 pandemic slowed in July, and maybe even more in August, Statistics Canada says, suggesting the country is in what experts described as a long, choppy path to recovery.
Statistics Canada says real gross domestic product grew by three per cent in July, matching the agency’s preliminary estimate and economists’ expectations, but below the 6.5 per cent recorded in June, and May’s 4.8 per cent bump.
Gains have been linked to the loosening of restrictions that forced non-essential businesses to close in March and April, but they haven’t been enough to haul the economy back to pre-pandemic levels.
Overall, Statistics Canada said the economy in July was about six per cent below its pre-pandemic level in February, even if some sectors like retail and real estate have recouped their losses and then some.
Looking at August, the statistics agency said growth likely continued albeit at a slower pace as it provided a preliminary estimate of a one per cent climb in GDP for the month.
“That’s suggesting the steam in the recovery is going away and so, this for me is suggesting that we might be moving from a quick rebound phase of the recovery to a more challenging phase,” said TD senior economist Sri Thanabalasingam.
The August figure will be finalized late next month.
The path of the recovery over the coming months will be tied to the path the pandemic takes, which could lead to rollbacks of reopening measures.
Rising case counts have prompted such calls as the country heads into what several public health officials say is a second wave of the novel coronavirus pandemic.
The increase in COVID-19 infections, coupled with the August figure suggests the sharp rebound in the third quarter won’t carry over to the final three months of the year, said CIBC chief economist Avery Shenfeld.
“Easing up on COVID-19 restraints fed into solid Canadian GDP gains in July and August, but the concerns now are whether we will pay for some of that greater openness,” Shenfeld wrote in a note.
The Conference Board of Canada said health measures and testing should prevent another full shutdown of economic activity earlier this year, but warned of localized lockdowns as one hurdle.
The pandemic is going to flatten the recovery curve for the next year at least, said Pedro Antunes, the organization’s chief economist.
“We’re going to be creating fewer jobs on a monthly basis going forward, we’re going to see the increases in economic activity or GDP being much more subdued in terms of their increases overall,” he said.
The Conference Board’s outlook expected the unemployment rate won’t fall back to its pre-pandemic levels until 2025.
Thanabalasingam said it could be early 2022 before before the economy gets back to where it was prior to COVID-19.
July’s GDP report from Statistics Canada noted that all 20 industrial sectors it tracks posted increases in July, with agriculture, utilities, finance, insurance and real estate sectors recouping losses suffered since the start the pandemic.
Manufacturing grew 5.9 per cent in July, following a 15.1 per cent expansion in June as more operations ramped up production, but still remained about six per cent below where it was pre-pandemic.
The hard-hit accommodations and food services sector posted a third consecutive month of double-digit increases, jumping 20.1 per cent in July.
Thanabalasingam said despite the bump, the amount of activity in the industry was about two-thirds of where it was in February, as more people went shopping and case numbers dropped.
“There’s still a very, very long way to go, even though they’re posting these strong growth rates,” he said.
“My worry is that as caseloads continue to rise and some of these provinces think about rolling back some of those reopening measures . . . then is this as good as it could get for these sectors?”
The health care and social assistance sector rose by 3.7 per cent in July, as more doctors, dentists and diagnostic laboratories reopened in line with the rollback of restrictions.
This report by The Canadian Press was first published Sept. 30, 2020.
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