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Pulp closure will ripple through Prince George economy

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Canfor’s plan to permanently the pulp division of Prince George Pulp and Paper will have a ripple effect through the Prince George economy, said Prince George Chamber of Commerce CEO Todd Corrigall.

“If you look at the general economic rule, you could anticipate there are up to 900 jobs attached to the maximum 300 jobs they’re projecting,” Corrigall said.

Skilled labour shortages in other industries will result in some mill workers finding jobs but Corrigall said the provincial and federal governments need to do more.

“I do think there is a high degree of possibility for the individuals and families and businesses affected by this to find common or similar work,” said Corrigall, “but we need a government that is willing to approve major projects so that there are new projects coming online that these people can migrate to as well. We haven’t seen enough projects getting approved over the last six years and had they been approved we would see much more capacity for the impacted individuals to move to new employment and a much more seamless rate than we may see.”

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Long-term sustainability is essential, he stressed.

“We need to be working much more constructively on these industries and how they remain viable and how they remain top employers and not adding hundreds of thousands of bureaucratic jobs,” he said.

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IMF raises growth outlook for first time in a year, expects inflation has peaked – Financial Post

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Outlook for global economy has become rosier amid China’s reopening, economic resilience in other parts of world

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The International Monetary Fund says the outlook for the global economy has become rosier for the first time in a year amid positive signs from China’s reopening and economic resilience in other parts of the world.

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The IMF is now projecting that world economic growth will fall from 3.4 per cent in 2022 to 2.9 per cent in 2023, which stands at least 0.2 percentage points higher than the forecast the organization made in October 2022. Growth is then expected to rebound to a pace of 3.1 per cent in 2024.

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“The rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity,” the Jan. 31 report read. “The rapid spread of COVID-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery.”

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The IMF also expects the tide to turn on inflation, arguing that it peaked in 2022 at 8.8 per cent. The Washington-based organization forecasts it will come down to 6.6 per cent this year before falling further to 4.3 per cent in 2024.

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Authors of the report warned that the balance of risks still pointed to the downside, due to factors such as Russia’s invasion of Ukraine and the impact of aggressive central bank rate hikes. However, the authors further noted that these risks weren’t as severe as they had been when the IMF made its predictions in October 2022.

Then, IMF analysts had slashed the 2023 outlook growth from 2.9 per cent to 2.7 per cent, warning that high inflation and rising interest rates could plunge some countries into a recession. At the time, authors called the reading the weakest growth profile since 2001, outside the global financial crisis.

Major chief executives and economists shared the same foreboding view, expecting that the mix of high rates and rampant inflation, on top of continued supply chain snarls and China’s zero-COVID policy, would bring economies to heel.

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But that hasn’t happened yet, and economies in North America and the eurozone have been surprisingly resilient.

The Bank of Canada hiked its policy rate a total of 4.25 percentage points to 4.5 per cent, but that didn’t stop the economy from eking out 0.1 per cent growth in November. However, the economy is slowing under the weight of aggressive rate hikes, growing at half the pace of the previous quarter. The labour market also remained robust with 104,000 new positions added in December. The next jobs reading is expected on Feb. 10.

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Similarly in the U.S., the economy managed to grow by 2.1 per cent in 2022 even after the U.S. Federal Reserve raised the federal funds rate a cumulative 425 basis points to a range of 4.25 per cent to 4.50 per cent. The Fed will hold its next rate decision on Feb. 1, when many economists are expecting another hike.

The data brought an optimistic shift in tone among market watchers, with the potential of a “soft landing” back on the table.

The IMF report noted that the eurozone also has managed to avoid a worst-case scenario with stronger-than-expected 1.2 per cent GDP growth in 2022. Economic reopenings and a warmer-than-expected winter amid energy insecurity concerns contributed to the stronger results.

Despite the positive signs, the IMF noted that interest rate increases have yet to fully work their way through the global economy. It argued that countries should keep their fire trained on fighting inflation and any fiscal support deployed should be focused on aiding those who are more vulnerable to rising food and energy prices.

• Email: shughes@postmedia.com | Twitter:

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Smallest US Firms Are Shedding Workers Fast as Economy Cools – BNN Bloomberg

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(Bloomberg) — The smallest American businesses are cutting jobs and struggling to meet financial commitments like rent payments, a sign that they’re feeling the squeeze more than most as the economy cools down.

Payrolls at firms with less than 20 employees declined for a sixth straight month in January, according to data published Wednesday by the ADP Research Institute in collaboration with Stanford Digital Economy Lab.

The US has seen a surge in business formation in the years since Covid hit, with record numbers of new firms created. That’s helped drive overall payrolls at small businesses — unlike employment in the wider economy — back up to pre-pandemic trend levels. But with consumer demand now waning, smaller firms that typically have tighter budget constraints may be more vulnerable to a downturn, along with the workers they employ.

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The ADP findings are supported by a January survey by Alignable, a referral network for small businesses with more than 7.7 million members across North America. That study found that 30% of small businesses were unable to pay their full rent in January, up from 26% in January 2022.

Minority-owned businesses are having an especially tough time, according to the Alignable data. More than half said they could not afford to pay January rent in full and on time, up six percentage points from December and the highest delinquency rate since May 2022.

Firms in Michigan, Georgia and Illinois reported the steepest increases in rent delinquencies compared with a year earlier.

©2023 Bloomberg L.P.

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COVID-zero is gone. Can China get its economy back on track in 2023? – The Globe and Mail

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A Chinese flag flutters on a ship in front of a globe in Shanghai, China on Aug. 2, 2022.ALY SONG/Reuters

Masks aside, the crowds in train stations and airports across China this month, as tens of millions criss-crossed the country for the Lunar New Year, were almost indistinguishable from those before the pandemic.

Normalcy is finally returning to China, after years of some of the world’s toughest COVID-19 policies, which were finally, and surprisingly, relaxed in the final weeks of 2022. But as the sense of whiplash – and resulting infections – begins to fade, the question is whether the country can get its economy back on track.

Initial data for 2023 has been positive: On Tuesday, the National Bureau of Statistics said January saw a rebound in economic activity, with the official purchasing managers’ index (PMI) for the manufacturing sector hitting a four-month high of 50.1, up from 47 in December. Any score over 50 indicates growth.

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The non-manufacturing PMI, which measures activity in the construction and services sectors, reached 54.4 in January, up from 41.6 the month before and its highest level since June, 2022.

The Lunar New Year period saw a return to near-prepandemic levels of travel and spending. Revenue for the hospitality and tourism sectors was at 80 per cent of 2019 levels, up 130 per cent from 2021, according to official data, with the number of trips also nearly matching prepandemic figures.

Stock markets were closed for the holiday, but have seen a boost this week, with at least one board entering bull market territory as traders reacted to the end of China’s zero-COVID policy and early indications of an economic recovery.

“All indicators point to a relatively healthy recovery,” said Zhu Tian, a professor of economics at the Shanghai-based China Europe International Business School. “The government has put economic growth back at the centre of policy.”

An official GDP target will not be set until a meeting of the National People’s Congress in March, but most expect it to be around 5.5 per cent, similar to last year’s target. GDP fell well short in 2022, however, with the economy officially growing just 3 per cent, the second-lowest rate since the 1970s, and many analysts questioning if it even did that well.

While having the “annus horribilis” of 2022 as a base year will make a 5.5- or even 6.5-per-cent growth target easier to hit, China will continue to face a challenging global environment, with concerns about recession or lacklustre growth in Europe and North America, as well as ongoing geopolitical tensions.

For years, China has sought to build up its domestic markets in order to reduce its reliance on foreign demand. In 2020, President Xi Jinping promised that in the future domestic consumption would play a “dominant role,” and at a meeting of the State Council over the weekend, Premier Li Keqiang called for the restoration of “the structural role of consumption in the economy.”

“The greatest potential of the Chinese economy lies in the consumption by the 1.4 billion people,” Mr. Li said.

That is easier said than done, however, and has been said many times before. Household spending accounted for 38 per cent of Chinese GDP last year, almost half that of the United States. Even with the economic struggles of the pandemic, many Chinese boosted their savings, but they have so far declined to part with that money.

“There’s all this cash sitting in bank accounts,” said Paul Schulte, a Singapore-based analyst and founder of Schulte Research. He noted that there have been “powerful disincentives to spend,” not just the pandemic, but also the poor performance of Chinese stocks and the relative stalling of the real estate market in recent years.

The most obvious way to get that cash out of accounts is to lower interest rates and encourage people to invest their money, but that takes time, said Mr. Schulte, who worked for years as an investment banker in Hong Kong. A short-term solution would be introducing tax or spending incentives, such as vouchers.

According to Caixin, a Chinese financial publication, at least 25 of 31 provincial governments have listed increasing household consumption among their policy goals for 2023, part of their overall growth targets of 5 to 6.5 per cent. Guangdong, the southern province bordering Hong Kong that has long been a manufacturing powerhouse, has set particularly aggressive targets, promising its GDP will exceed three trillion yuan ($590-billion) in 2023, an increase of 6 per cent, with consumption as a major driver.

“It’s impossible to continue competing on land, price and labour,” Guangdong Communist Party chief Huang Kunming said in a speech. “The whole province needs to be aware of this issue.”

Wang Zhenzhong, a former senior economist at the Chinese Academy of Social Sciences, told The Globe and Mail he expected to see a renewed focus on boosting employment, which dropped over the pandemic and is a particularly acute problem for young people. As part of this, he said, there will likely be more policies geared toward entrepreneurs.

“The biggest concern for both families and individuals in China right now is employment, which will directly affect domestic demand and consumption,” he said.

Prof. Zhu agreed, saying that “if employment goes up and salaries go up, then people’s income will as well, and naturally consumption and domestic demand will increase.” He added that China’s high savings rate was not a negative, as it could help drive domestic investment in the long run, which will reduce dependence on foreign cash.

As well as boosting the domestic market, China’s leaders have sought to reassure foreign investors by tamping down some of the more Marxist rhetoric of recent years. A meeting of the Central Economic Work Conference in December repeatedly emphasized the need for “reform” and “openness,” a message that was echoed by Vice-Premier Liu He in Davos this month, where he promised that “China’s door to the outside will only open wider.”

“More focus will be placed on expanding domestic demand, keeping supply chains stable, supporting the private sector, reforming the state-owned enterprises, attracting foreign investment and preventing economic and financial risks,” Mr. Liu said.

According to an assessment by the New York-based Asia Society Policy Institute, such statements are designed “to assure the private sector that Xi Jinping is not ideologically hostile to its growing role in the Chinese economy and that the Party does not politically prefer state-owned enterprises.”

Even the tech sector, which has been battered by a years-long regulatory and political crackdown that has wiped billions off the valuations of several companies, appears to be exiting the storm. But whether this is enough to restore investor confidence, both domestic and foreign, remains to be seen.

“Do we believe this turn?” Mr. Schulte asked. “I think the answer is: We believe it for now.”

With files from Alexandra Li

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