BENGALURU (Reuters) – The resurgence in coronavirus cases is the biggest threat to the recovering euro zone economy, according to a Reuters poll of economists, who say growth and inflation are more likely to create negative surprises over the coming year than positive ones.
Around 30 million people have been infected by the virus globally, and more than 900,000 have died, triggering some of the deepest recessions on record and breaking up supply chains around the world. COVID-19 global tracker https://www.reutersagency.com/en/coverage/covid-19-global-tracker
While a strong euro zone rebound is underway as lockdown restrictions have been eased and businesses reopened, France and Spain among others in the 19-member bloc are grappling with a virus resurgence.
That is raising the possibility of renewed restrictions and lockdowns.
“A flaring in the number of COVID-19 infections over the summer months has made it very clear that if there is no effective vaccine, growth will be handicapped,” said Peter Vanden Houte, chief economist at ING.
“There is also the fear of negative second-round effects once the current recession starts to be reflected in a swelling number of unemployed…(and) we cannot exclude higher precautionary savings dampening consumption.”
A return to where the economy was before the outbreak earlier this year is not expected until at least end-2022.
That comes despite the European Central Bank’s planned 1.35 trillion euros of pandemic-related additional asset purchases and an historic 750 billion euro recovery fund from the European Union due to kick in next year.
But the concern is that no new stimulus is on the horizon, other than national governments extending worker furloughs put in place early this year as they struggle with soaring debt.
Euro zone unemployment, which finally declined just before the coronavirus struck to where it was before the last financial crisis more than a decade ago, is already rising.
Ninety percent of economists, or 37 of 41 who responded to an additional question in the Sept. 15-17 Reuters poll, said a further surge in infections was the biggest risk to the euro zone economy over the coming year.
The remaining handful of respondents cited a strong euro, and no trade deal reached between the EU and United Kingdom when the Brexit transition period expires at the end of the year.
For a graphic on Reuters Poll: Euro zone economic outlook:
The Reuters poll of over 80 economists pointed to 8.1% quarterly growth this quarter, by far the strongest on record, following an historic 11.8% contraction in Q2. That forecast was unchanged from the August poll.
Quarter-on-quarter growth is then set to slow sharply to a still-strong 2.5% in Q4, but down from 3.0% predicted last month.
In a worst-case scenario, the economy was forecast to grow 4.5% in Q3, compared to 4.0% in the last poll. The worst-case for Q4 is now just a 0.4% contraction versus a 2.0% fall in the August poll.
But over 80% of respondents said the risks to both their euro zone growth and inflation forecasts were skewed more to the downside over the coming year.
“The virus is making new waves and the economy is still far from operating at pre-COVID levels in most sectors,” said Elwin de Groot, head of macro strategy at Rabobank, who expects no growth in the final three months of this year.
“But as governments are likely to shift towards more targeted measures – rather than blanket ones – the ‘true’ economic damage may only reveal itself in the next quarters.”
Most economists have remained pessimistic about the bloc’s growth outlook since the pandemic struck, and some have lowered their inflation views even further from last month.
The consensus for this quarter was 0.1% versus 0.3% predicted a month ago, followed by stagnation the next quarter. On a full-year basis, results were broadly in line with the ECB’s staff projections, at 0.4% for 2020, 1.0% for 2021 and 1.3% for 2022.
For a graphic on Reuters Poll: Euro zone economic growth and inflation outlook:
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 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.
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.
