Saskatoon’s economy still needs to make up 20 per cent to be fully recovered from the COVID-19 pandemic, a new study shows.
Saskatoon’s economy still needs to make up 20 per cent to be fully recovered from the COVID-19 pandemic, a new study shows.
Alex Fallon, president and CEO of the Saskatoon Regional Economic Development Authority, said that represents better news than he expected at this point of the pandemic.
An online SREDA tracker of key metrics measuring economic recovery shows that the region’s economy is now considered 79.3 per cent recovered, based on measuring 15 key economic sectors. Nine of the 15 sectors are now considered recovered, Fallon said.
The overall recovery has improved from 67.1 per cent at the end of this year’s second quarter in June.
“I think overall I would take that, if you’d asked me at the start of COVID where we’d be in about a year and a half,” Fallon said. “So it’s creeping up, which is good.”
Despite the positive economic news, employment remains a challenge with 3,900 fewer people working in August — 170,800 — than were working in February 2020. Job numbers cratered in June 2020 to 153,600 before bouncing back to 172,400 in May.
Fallon described the decline in jobs over the summer as “a little bit curious.” The unemployment rate in the Saskatoon region at the end of last month was 8.1 per cent.
The region’s gross domestic product has bounced back to an adjusted 95.8 per cent of pre-pandemic output, to $22.3 billion.
Some sectors, like retail sales and manufacturing shipments, are considered completely recovered, although neither experienced a huge drop during the pandemic. The number of active businesses also bounced back to 7,905 in June from more than 800 fewer in June 2020.
Fallon said there’s a connection between the drop in jobs and the new businesses.
“It’s an interesting thing because when the economy slows down, actually, entrepreneurship goes up because people are worried about their job security,” he said.
The SREDA study projects Saskatoon’s economy will grow by 5.4 per cent this year, behind the 6.8 per cent growth rate for Saskatchewan and 6.3 per cent for Canada. Fallon attributed the lower Saskatoon numbers to the city’s larger hospitality sector, which is taking longer to recover.
Airport passenger traffic rose in August to its highest level during the pandemic (nearly 76,000), but remained well below the 127,387 in February 2020.
Hotel occupancy also hit its highest point during the pandemic in August, at 59.8 per cent, up substantially from a low of 11.5 per cent in April 2020. This sector is deemed 58.3 per cent recovered.
Investment in building construction soared in the first quarter of this year to peak at $196.7 million in March before dropping to $103.4 million in July.
The Saskatoon zone continues to experience the highest COVID-19 rates of any urban area in Canada. As of Thursday, the zone led the province with 1,036 active cases.
Here are the the key recovery statistics as of Sept. 30 from a report by the Saskatoon Regional Economic Development Authority, with the most recent data and the low points listed in parentheses:
— Economy 79.3 per cent recovered (combining 15 sectors)
— GDP 95.8 per cent ($22 billion, up from $19.6 billion in the second quarter of 2020)
— Employment 81.5 per cent (170,800 in August, up from 153,600 in June 2020)
— Unemployment 80 per cent (8.1 per cent unemployment rate)
— Participation rate 41.2 per cent (67.9 per cent in August, up from 66.5 per cent in June 2020)
— Retail sales 100 per cent ($8.3 billion, up from $6.7 billion in the second quarter of 2020)
— Building construction investment 65.1 per cent ($103.43 million in July, up from $100.8 million in April 2020)
— Airport passenger traffic 38.3 per cent (75,857 in August, up from 2,925 in April 2020)
— Hotel occupancy 58.2 per cent (59.8 per cent in August, up from 11.5 per cent in April 2020)
— Active businesses 100 per cent (7,905 in June, up from 7,068 in May 2020)
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The dollar edged higher against safe-haven currencies such as the yen and Swiss franc after reassuring news on the Omicron COVID-19 variant, while units like the Australian dollar that had weakened in recent weeks on growth worries also advanced.
U.S. Treasury yields rose and stocks gained after news that initial observations suggested Omicron patients had only mild symptoms, reversing some of Friday’s heavy selloff.
While Omicron has spread to about one-third of U.S. states as of Sunday, Dr. Anthony Fauci, the top U.S. infectious disease official, told CNN that “thus far it does not look like there’s a great degree of severity to it”.
“The absence of negative developments surrounding Omicron over the weekend appears to be helping markets stabilize today after the dramatic moves at the end of last week,” Marc Chandler, chief market strategist at Bannockburn Global Forex, said in a note.
The dollar climbed 0.5% against the Japanese yen and rose 0.9% against the Swiss franc. The yen and the franc typically draw investors looking for safety when economic or geopolitical tensions rise.
The dollar fell 0.3% against the Japanese currency on Friday..
The greenback’s losses on Friday had also followed a below-forecast jobs report, though the data did little to shake market expectations the Federal Reserve will accelerate the pace of unwinding stimulus and raise interest rates, starting next year.
The U.S. Dollar Currency Index, which measures the greenback against six rivals, was 0.1% higher at 96.309, not far from the 16-month high of 96.938 touched late last month.
Investors have grown more bullish on the dollar in recent weeks, with net long bets on the greenback climbing to the highest level since June 2019, data from the U.S. CFTC showed on Friday.
Meanwhile, the Australian dollar rose as much as 0.64%, rebounding from the 13-month low hit last week.
Russia’s rouble slipped into the red in late trading on Monday after U.S. President Joe Biden warned his Russian counterpart Vladimir Putin of severe economic consequences in case of a Ukraine invasion ahead of a call between the two men on Tuesday.
The Canadian dollar strengthened against its U.S. counterpart on Monday as oil prices rose and attention turned to a Bank of Canada interest rate decision this week, with the currency recovering from its lowest level in more than two months.
Elsewhere, cryptocurrencies nursed big losses from a wild weekend that at one stage crushed bitcoin more than 20%. Bitcoin slipped 0.6% to around $49,166.35 on Monday.
(Reporting by Saqib Iqbal AhmedEditing by Paul Simao/Mark Heinrich)
China cut the amount of cash most banks must hold in reserve, acting to counter the economic slowdown in a move that puts the central bank on a different policy path than many of its peers.
The People’s Bank of China will reduce the reserve requirement ratio by 0.5 percentage point for most banks on Dec. 15, releasing 1.2 trillion yuan (US$188 billion) of liquidity, according to a statement published Monday.
The reduction was signaled by Premier Li Keqiang last week when he said that authorities would cut the RRR at an appropriate time to help smaller companies, and is the second reduction this year. The decision comes after recent data showed the economy and industry stabilizing, although Beijing’s tightening curbs on the property market have led to a slump in construction and worsened a liquidity crisis at developer China Evergrande Group and other real-estate firms.
The cut is a “regular monetary policy action,” the PBOC said, pre-empting expectations that the decision was the start of of an easing cycle. “Prudent monetary policy direction has not changed,” it said, adding that the bank “will continue with a normal monetary policy, maintaining the stability, consistency and sustainability of policy, and won’t flood the economy with stimulus.”
However, with the U.S. Federal Reserve and other global central banks looking to tighten policy, the move to add stimulus by the PBOC makes the divergence between China and much of the rest of the world even clearer.
What Bloomberg’s Economists Say
“We think the reduction would help offset the headwinds facing the economy, particularly in the first quarter of 2022. We maintain our view that an additional 50-100 basis points of RRR cut would come next year.”
– David Qu, economist
Separately, the Communist Party’s Politburo said China will continue to implement a proactive fiscal policy in 2022, and prudent monetary policy will be flexible and appropriate, and maintain reasonably ample liquidity, the official Xinhua News Agency. The Monday meeting of the Politburo will be followed by the Central Economic Work Conference sometime this month, which will flesh out economic policy plans for the next year.
The cut will be applied to all banks except those that are already on the lowest level of 5 per cent, which are mostly small rural banks, according to the statement. The weighted average ratio for financial institutions will be 8.4 per cent after the cut, down from 8.9 per cent previously, the PBOC said in a separate statement.
Some of the money released by the RRR cut will be used by banks to repay maturing loans from the PBOC’s medium-term lending facility, and some of it will be used to replenish financial institutions’ long-term capital, the central bank said. There are almost 1 trillion yuan worth of the 1-year loans maturing on Dec. 15, the day the cut takes effect.
Even with the deepening housing market slump, authorities had been restrained in adding new support policies, holding monetary policy steady and maintaining a measured pace of fiscal spending. However, the PBOC signaled an easing bias in the latest monetary policy report last month, while the State Council urged local governments to speed up spending.
“The aim of the RRR cut is to strengthen cross-cyclical adjustment, enhance the capital structure of financial institutions, raise financial services capabilities to better support the real economy,” the PBOC said. The cut will effectively increase long-term capital for banks to serve the real economy, and the PBOC will guide banks to step up their support for small businesses, it said.
A cut in the reserve ratio doesn’t directly lower borrowing costs, but quickly frees up cheap funds for banks to lend. The reduction will lower the capital cost for financial institutions by about 15 billion yuan each year, which will lower the overall financing cost of the economy, the PBOC said.
Advisers to Beijing will recommend a 2022 growth target that’s lower than the target that had been set for 2021.
Ongoing stress in China’s property sector is likely to slow down the country’s economic growth next year, a government think-tank has warned.
The world’s second-largest economy is expected to have expanded by about 8 percent this year, according to the annual blue book on the economy from the Chinese Academy of Social Sciences (CASS), a top government think-tank. It warned that the property downturn was likely to persist and weigh on the expenditures of local governments next year.
China’s economy is expected to grow about 5.3 percent in 2022, bringing the average annual growth rate forecast for 2020-2022 to 5.2 percent, CASS said on Monday.
Advisers to the government will recommend that authorities set a 2022 economic growth target lower than the target set for 2021 – or “above 6 percent” – Reuters reported, amid growing headwinds from a property downturn, weakening exports and strict COVID-19 curbs that have impeded consumption.
It urged the central government to proactively engineer a soft landing for the property sector, to avoid failed land auctions in big cities and to fend off risks of quickly falling property prices in smaller cities, the report said.
China’s move to wean property developers away from rampant borrowing has translated into loan losses for banks and pain in credit markets, as cash-strapped builders fall into distress, increasing risks across the economy.
Property behemoth China Evergrande is facing one of the country’s largest defaults, prompting the authorities to step in and oversee risk management at the company.
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