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News in brief: Survey shows inflation is a challenge to the economy – CPA Canada

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A woman looks at a colourful graph displayed on a large screenThe rise in inflation was listed as a challenge to Canada’s economy by respondents to CPA Canada’s Business Monitor survey (Getty Images/Oscar Wong)

NEW SURVEY RESULTS: BUSINESS LEADERS LESS OPTIMISTIC ABOUT CANADA’S ECONOMY

The CPA Canada Business Monitor (Q2 2022) shows that optimism about Canada’s economic outlook has dropped to 16 per cent, down from 40 per cent in Q1.

The CPA Canada survey—which draws insights from business leaders in senior financial roles—also asked respondents about the top challenges to the growth of the Canadian economy. Twenty-nine per cent of respondents listed the rise in inflation, with supply chain issues (14 per cent) and employee recruitment, retention and development (eight per cent) also ranking as challenges to the economy.

When asked about the economic prospects of their own organizations, 46 per cent said they were optimistic (down from 64 per cent last quarter) and 45 per cent of respondents said they expect profits to increase over the next 12 months (a decrease from 63 per cent in Q1).

“Canadian business leaders are now clearly concerned about economic issues whereas, several months ago, the pandemic was top of mind.” said David-Alexandre Brassard, CPA Canada’s chief economist. “Our results show that 70 per cent of these business leaders say inflation is currently hurting their businesses and 44 per cent expect that to continue for a year or more.”

For further details, view the full results of the CPA Canada Business Monitor (Q2 2022).

STUDY RELEASED: CANADIANS SHARE MONEY HABITS AND CONCERNS

CPA Canada recently released its Thriving or Surviving Study*, which sheds light on how Canadians feel about their finances as well as their ability to save.

Key highlights:

  • Only 34 per cent are optimistic they will be better off financially in a year from now.
  • When asked about stressful aspects of managing money, saving was mentioned most as a stressor for 47 per cent of respondents.
  • Just 54 per cent of respondents said they had an emergency fund.
  • Less than half (47 per cent) said they could come up with $2,500 in an emergency without having to borrow or sell something.
  • 64 per cent agree that a significant rise in interest rates would make it challenging to keep up with mortgage and/or debt payments.
  • When asked to grade their overall skills in personal finance, 16 per cent of respondents gave themselves an ‘A’ and 31 per cent gave themselves a ‘B.’

“There appears to be a disconnect between Canadians’ financial behaviours and how confident they feel about their financial skills and knowledge,” said Doretta Thompson, CPA Canada’s financial literacy leader. “Most believe they have the knowledge to make the right decisions when it comes to personal finances, but some key indicators around the state of debt and savings point in a different direction.”

Read the full study for more insights.

*The CPA Canada Thriving or Surviving Study 2022 was conducted by Ipsos via their online omnibus from March 24 to April 2, 2022. Two thousand randomly selected Canadian adults participated in the survey.

IN CASE YOU MISSED IT: NEW LUXURY TAX TO GO INTO EFFECT SOON

The Select Luxury Items Tax that was first announced in Budget 2021 will go into effect as of September 1, 2022. The tax will impact those who are a manufacturer, wholesaler, retailer or importer of certain vehicles and aircraft over $100,000 as well as certain vessels over $250,000. Those subject to the new tax must register with the Canada Revenue Agency.

Looking for other tax updates? Subscribe to the Tax Blog by checking the related box under My Subscriptions in your profile.

MORE WAYS TO KEEP UP

Tap into CPA Canada’s extensive business and accounting resources as well as the Practitioner’s Portal. Plus, get the latest audit and assurance updates from the audit quality blog; and catch up on season two of the Foresight podcast before season three is released next month.

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Energy, inflation crises risk pushing big economies into recession, OECD says – Reuters

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PARIS, Sept 26 (Reuters) – Global economic growth is slowing more than was forecast a few months ago in the wake of Russia’s invasion of Ukraine, as energy and inflation crises risk snowballing into recessions in major economies, the OECD said on Monday.

While global growth this year was still expected at 3.0%, it is now projected to slow to 2.2% in 2023, revised down from a forecast in June of 2.8%, the Organisation for Economic Cooperation and Development said.

The Paris-based policy forum was particularly pessimistic about the outlook in Europe – the most directly exposed economy to the fallout from Russia’s war in Ukraine.

Global output next year is now projected to be $2.8 trillion lower than the OECD forecast before Russia attacked Ukraine – a loss of income worldwide equivalent in size to the French economy.

“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to an extended slowdown,” OECD Secretary-General Mathias Cormann said in a statement.

The OECD projected euro zone economic growth would slow from 3.1% this year to only 0.3% in 2023, which implies the 19-nation shared currency bloc would spend at least part of the year in a recession, defined as two straight quarters of contraction.

That marked a dramatic downgrade from the OECD’s last economic outlook in June, when it had forecast the euro zone’s economy would grow 1.6% next year.

The OECD was particularly gloomy about Germany’s Russian-gas dependent economy, forecasting it would contract 0.7% next year, slashed from a June estimate for 1.7% growth.

The OECD warned that further disruptions to energy supplies would hit growth and boost inflation, especially in Europe where they could knock activity back another 1.25 percentage points and boost inflation by 1.5 percentage points, pushing many countries into recession for the full year of 2023.

“Monetary policy will need to continue to tighten in most major economies to tame inflation durably,” Cormann told a news conference, adding that targeted fiscal stimulus from governments was also key to restoring consumer and business confidence.

“It’s critical that monetary and fiscal policy work hand in hand”, he said.

Though far less dependent on imported energy than Europe, the United States was seen skidding into a downturn as the U.S. Federal Reserve jacks up interest rates to get a handle on inflation.

The OECD forecast that the world’s biggest economy would slow from 1.5% growth this year to only 0.5% next year, down from June forecasts for 2.5% in 2022 and 1.2% in 2023.

Meanwhile, China’s strict measures to control the spread of COVID-19 this year meant that its economy was set to grow only 3.2% this year and 4.7% next year, whereas the OECD had previously expected 4.4% in 2022 and 4.9% in 2023.

Despite the fast deteriorating outlook for major economies, the OECD said further rate hikes were needed to fight inflation, forecasting most major central banks’ policy rates would top 4% next year.

With many governments increasing support packages to help households and businesses cope with high inflation, the OECD said such measures should target those most in need and be temporary to keep down their cost and not further burden high post-COVID debts.

Reporting by Leigh Thomas, additional reporting by Tassilo Hummel; editing by Richard Lough, William Maclean

Our Standards: The Thomson Reuters Trust Principles.

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What's Happening in The World Economy: The Pound's Slump – Bloomberg

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What’s Happening in The World Economy: The Pound’s Slump  Bloomberg



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China’s Economy ‘Dismal,’ Will See No Growth, New Report – Forbes

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Communist China under premier Xi Jinping is wilting fast.

The economy, already under pressure so far this year, looks set to get even worse, according to a recent report from London-based consulting firm Capital Economics.

Capital kicks off with the following blistering assessment of the situation:

  • “The financial world’s focus on a generational surge in inflation in advanced economies is stealing attention from a generational slowdown in China that is arguably of much greater importance for the long-term global outlook.”

In other words, ignore China’s economic worsening quagmire at your peril.

Already we know that China’s steel production is falling, down 5.7% in the year through August, according to the World Steel Association. That country has long been the world’s largest producer of steel so the decline is meaningful on a global scale.

Worse still, only two of the top global producers performed worse over the same period: Russia and Turkey. Both are economic basket cases.

The hits keep on coming. Exports from Korea to China fell during the first three weeks on September, the Capital report says. At the same time, Korean exports to the U.S. grew.

  • This may be a sign that global demand for the consumer goods that China produces – and to which Korea provides inputs earlier in the production chain – is softening,” the Capital report states. My emphasis.

Put simply, retail customers globally are pulling back and thats already hurting China.

Monthly data for August show declining retail sales inside China as well and Capital expects further declines in September.

When the experts put all this together the outlook is bleak.

  • “We recently lowered our forecast for this year’s officially-reported GDP growth rate to 3% from 4% – the government’s 5.5% target set in March has been quietly abandoned – but in reality don’t expect the Chinese economy to grow at all.”

Put another way, China’s growth under Xi likely dropped to zero from regular double-digit gains.

It’s not the sort of achievement most leaders want.

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