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Real-economy stirrings show U.S. leaves Europe in the dust – TheChronicleHerald.ca

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By Leigh Thomas and Howard Schneider

PARIS/WASHINGTON (Reuters) – Real-time data on everything from sit-down restaurant meals to job hirings shows American business and consumers leaping to take advantage of a fast vaccine rollout even as their European counterparts languish in extended lockdowns.

And while some U.S. health experts express concern at the loosening or outright dropping of COVID-19 restrictions by many states, the outcome for now is that it is widening the U.S. head start in the post-pandemic recovery.

Even after an uptick this month for the first time since January, new U.S. infections at 131 per 100,000 over seven days are lower than those in Germany, France and Italy, the top three euro economies, the Reuters COVID-19 Global Tracker shows.

(https://graphics.reuters.com/world-coronavirus-tracker-and-maps)

Coupled with a faster vaccine rollout than any in Europe aside from Britain’s, that has prompted a tangible return of activity across a U.S. economy already forecast by the International Monetary Fund to return to pre-pandemic health months before the euro area can.

Take restaurants and retail. Diner visits recorded on the OpenTable State of the Industry site show, unsurprisingly, that numbers have continued to flat-line in Germany since late 2020 when lockdown measures were introduced.

In the United States, meanwhile, the chart has regained its habitual pattern of weekend spikes as the overall curve inches closer to its pre-pandemic level. (Graphic: Restaurants still closed in Europe as US recovers Restaurants still closed in Europe as US recovers, https://graphics.reuters.com/EUROPE-US/ECONOMY/xlbpgxymyvq/chart.png)

Google Mobility read-outs on movement trends confirm the same picture for retail as a whole. U.S. mobility levels leapt in January and broke further away from European comparisons in mid-February as Italy and then Germany and France saw declines. (Graphic: Google mobility trends for retail outlet, https://graphics.reuters.com/EUROZONE-USA/DIVERGENCE/dgkvleexkpb/chart.png) (Graphic: U.S. air travel is resuming, https://graphics.reuters.com/USA-ECONOMY/TRAVEL/dgkvlezdopb/chart.png)

While many European countries still have stringent travel restrictions in place – and some are considering additional ones – the number of U.S. air passengers screened topped 1.5 million this month for the first time in a year.

With some states open for leisure travel despite federal guidance to the contrary, U.S. airline executives see concrete signs of a domestic leisure travel recovery and are optimistic about the summer season.

The buoyant mood is reflected in job postings recorded on the Indeed website, with the U.S. tally having now since January pushed strongly past its February 2020 level while those in France and Germany remain below it.

Finally, a similar disconnect is seen in the composite weekly tracker compiled by the OECD think tank from Google search behaviour in areas such as consumption, labour markets, housing, trade, industrial activity and economic uncertainty. (Graphic: OECD weekly economic activity tracker, https://graphics.reuters.com/EUROZONE-USA/DIVERGENCE/jznpnggeavl/chart.png)

Such snapshots of economic behaviour must be interpreted carefully. OECD economist Nicolas Woloszko noted for example that drops in mobility over the past two to three months were having smaller effects on activity as firms and households adapted to the new conditions.

Yet the overall picture, combined with faster U.S. vaccine rollout and new Biden administration stimulus of $1.9 trillion, is already enough for many forecasters to start pencilling in a widening of the growth gap between the United States and the euro zone in the first three months of this year. (Graphic: U.S. bank deposits have soared on stimulus payments, https://graphics.reuters.com/EUROZONE-USA/DIVERGENCE/xlbpgxxwrvq/chart.png)

Already, the Federal Reserve’s projection of a 6.5% growth rate for the United States in 2021 compares with a mere 3.7% forecast for the European economy.

Worse, economists such as Gilles Moec at AXA Group see the euro area battling with further restrictions in the second quarter too until vaccine campaigns start to accelerate and cap new infections as promised by European Union officials.

“What is in balance is the fate of the third quarter, since at the current pace of vaccination reaching collective immunity by the summer definitely is a challenge,” Moec noted.

(Reporting by Leigh Thomas in Paris and Howard Schneider in Washington; Additional reporting by Dan Burns; Writing by Mark John; Editing by Matthew Lewis)

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Economy

Canada to go big on budget spending as pandemic lingers, election looms

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By Julie Gordon

OTTAWA (Reuters) – Canada‘s Liberal government will deliver on its promise to spend big when it presents its first budget in two years next week amid a fast-rising third wave of COVID-19 infections and ahead of an election expected in coming months.

Finance Minister Chrystia Freeland has pledged to do “whatever it takes” to support Canadians, and in November promised up to C$100 billion ($79.8 billion) in stimulus over three years to “jump-start” an economic recovery in what is likely to be a crucial year for her party.

Prime Minister Justin Trudeau’s Liberals depend on the support of at least one opposition group to pass laws, and senior party members have said an election is likely within months as it seeks a clear majority and a free hand to legislate.

Furthermore, by September, all Canadians who want to be vaccinated will be, Trudeau has said.

Freeland has said the pandemic created a “window” of opportunity for a national childcare plan, and that will be reflected in next Monday’s budget along with spending to accelerate Canada‘s shift toward a more sustainable economy.

“It will be a green and innovative recovery plan aimed at creating jobs,” said a government source who declined to comment on specific measures. The budget will aim to help those “who have suffered most” the effects of the pandemic, the source said.

Critics say the government would be better to hold off on blockbuster spending because the economy has shown it is poised to bounce back, and to prevent the country from racking up too much debt.

“Clearly a garden-variety stimulus package is the last thing we need. This is pile-on debt,” said Don Drummond, an economist at Ontario’s Queen’s University.

“The risk is that at some point interest rates are going to go up and we’re going to be in trouble,” he said, pointing to the mid-1990s when Canada‘s debt-to-GDP ratio skyrocketed, leading to rating agency downgrades and years of austerity.

The Bank of Canada cut its benchmark interest rate to 0.25% to counter the economic fallout of the COVID-19 crisis and has said rates will not rise until labor market slack is absorbed, currently forecast for into 2023. That may change when it releases new projections on April 21.

EXPANDING ECONOMY

More than 3 million Canadians lost their jobs to the pandemic. As of March, before a third wave forced new lockdowns, only 296,000 remained unemployed because of COVID.

Despite still-high unemployment levels in hard-hit service sectors, the economy has expanded for nine straight months even as provinces have adjusted health restrictions to counter waves of infections.

“Once we see sustained reopening, we do think that the recovery will have quite a bit of momentum on its own,” said Josh Nye, a senior economist at RBC Economics.

“We think Canada‘s economy will be operating pretty close to full capacity by this time next year,” he said.

Economists surveyed by Reuters expect Freeland to project a deficit in the range of C$133 billion to C$175 billion for fiscal 2021/22, up from the C$121.2 billion ($96.7 billion)

deficit forecast in November. https://tmsnrt.rs/3wSJPcm

The deficit for fiscal 2020/21 ended in March is forecast by the government to top a historic C$381.6 billion ($304.5 billion).

Canada announced on Monday a C$5.9 billion ($4.7 billion) aid package for the country’s largest airline carrier, Air Canada, and said talks were ongoing with No. 2 carrier WestJet Airlines Ltd and others.

 

(Reporting by Julie Gordon in Ottawa; Additional reporting by Fergal Smith in Toronto; Editing by Steve Scherer and Peter Cooney)

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Economy

CANADA STOCKS – TSX ends flat at 19,228.03

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* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Economy

Canadian dollar outshines G10 peers, boosted by jobs surge

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.

 

(Reporting by Fergal Smith; Editing by Andrea Ricci)

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