(Bloomberg) — The world economy is approaching the northern hemisphere winter in disarray, unable to shake off the coronavirus crisis amid persisting supply disruptions, soaring prices and resurgent outbreaks.
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Global surveys of purchasing managers this week are likely to point that way. Among the outcomes anticipated by economists are slowing manufacturing and services activity throughout the euro zone and the U.K., and only modest improvement in the U.S.
With parts of Europe confronting renewed restrictions to contain another wave of the virus, China’s rebound fading and rising infections taking hold in America too, much of the global economy is now staring at the threat of a second northern winter of woe, compounded by a cost-of-living squeeze amid surging gas prices and supply bottlenecks.
Europe is at the sharper end of the advanced-world wedge. Record infections in Germany might push authorities to announce new lockdowns, and Austria has already done just that. The continent as a whole is enduring a painful peak in consumer prices.
In the U.S., meanwhile, former Treasury Secretary Lawrence Summers said he sees no more than a 15% chance that “it’s all going to work out well,” with the probabilities much greater for either stubbornly high inflation or a slump in growth.
The extent to which such outcomes play out will inform monetary policy deliberations on the speed of stimulus withdrawal across the Group of Seven, culminating in a grand finale of decisions in mid-December. That’s when central banks, including the U.S. Federal Reserve, hold their final meetings of the year.
What Bloomberg Economics Says:
“Much of Europe is retreating again in the face of a fourth wave of Covid-19, and survey data next week should give some early clues about the economic impact of rising infection rates.”
–For full analysis, click here
Elsewhere this week, monetary officials in New Zealand and South Korea may raise interest rates, and minutes of the most recent meetings of the Fed and the European Central Bank will be released.
Click here for what happened last week and below is our wrap of what’s coming up in the global economy.
A pre-holiday feast of economic data and a possible announcement on President Joe Biden’s choice to lead the Federal Reserve will be laid out for investors over the coming week.
The government’s report on personal income and spending, which includes an inflation measure tracked by the Fed, will be the main course on data-heavy Wednesday before markets close the following day for Thanksgiving.
Other releases on Wednesday include durable goods orders, revised third-quarter economic growth, new-home sales, merchandise trade, and a final read on consumer sentiment. Existing home purchase data and surveys on November manufacturing and services will surface earlier in the week.
Also on Wednesday, the Fed will release minutes of its early-November policy meeting in which the U.S. central bank announced it would start reducing asset purchases.
Meantime, the White House says Biden will announce whether he’ll renominate Jerome Powell to a second term as chair of the central bank, or opt for Fed Governor Lael Brainard instead.
The Reserve Bank of New Zealand and the Bank of Korea are both expected to raise interest rates for the second time since the pandemic as they lead the pack in Asia taking action to step back from full-throttle stimulus and get ahead of the curve in stemming any inflation risks.
Preliminary South Korean trade figures should back up the case for a hike even if they show signs of stabilizing from stellar year-on-year gains.
Reserve Bank of Australia officials will be speaking on panels and may shed some light on how strongly the central bank will stick with its back-of-the-rate-hike-pack stance.
Tokyo inflation figures at the end of the week will show if Japan is seeing more signs of a pickup in prices as energy costs soar. China sets its loan prime rate on Monday and Sri Lanka sets rates on Thursday.
Europe, Middle East, Africa
With more than two weeks left before ECB officials enter the quiet period before their all-important decision on the future of stimulus, comments from several of them may rivet investors. President Christine Lagarde will be among the policy makers speaking.
The ECB will also release an account of its previous meeting in October, when Lagarde and colleagues struggled to convince financial markets that bets on an interest-rate hike in 2022 to tame inflation were probably misplaced.
Aside from the monthly purchasing manager survey results due across the continent, Germany’s Ifo index on Wednesday will provide another snapshot of Europe’s biggest economy — just as it reels from ongoing supply interruptions, new infections, and a political system in flux amid continued coalition negotiations.
The Bank of England’s decision in December looks laden with suspense on whether policy makers will raise interest rates. Public remarks in the coming week by Governor Andrew Bailey and a couple of colleagues might therefore attract attention.
Sweden’s central bank will make its final monetary decision of the year on Thursday. With the Riksbank expected to keep its interest rate unchanged at zero for some time, the focus is likely to be on whether it will signal a hike by the end of 2024.
Further afield, Israel is expected to keep borrowing costs on hold on Monday due to strong growth and slowing inflation, driven in large part by the shekel.
In Russia, weekly inflation on Wednesday will be watched closely for any clues on whether price pressures are beginning to ease, as many economists have forecast.
Policy makers in Ghana are expected to leave interest rates on hold on Monday, after inflation accelerated to a 15-month high in October. Nigeria’s central bank is also expected to stand pat on Tuesday, as inflation moderates and after economic growth slowed in the third quarter.
Argentina’s budget balance data due Monday should underscore the challenge of putting its debt back on a path to sustainability. Falling case numbers in Mexico have seen same-store sales rebound, a likely harbinger of stronger September retail sales readings out Tuesday.
Economic activity in Argentina has been surprising analysts to the upside since mid-year, and has returned to its pre-pandemic level. Analysts see additional growth in the September figures.
Look for Brazil’s mid-month consumer price data out Thursday to push higher from mid-October’s 10.34% print. Yet after a sustained rise since May 2020, some deceleration is seen ahead: Economists surveyed by the central bank see year-end inflation at 9.77%, while the central bank puts it at 9.5%.
In Mexico, final third-quarter output data is expected, with all indications still pointing to a solid 2021 rebound. Economists see mid-month inflation rising sharply, consistent with Banxico Deputy Governor Jonathan Heath’s view that it may hit 7.3% by year-end.
Lastly, Banxico posts the minutes of its Nov. 11 meeting where it hiked the key rate a quarter-point for a fourth straight time to 5%.
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Economy expected to show continued strength, flood recovery poses challenges | BC Gov News – BC Gov News
British Columbia’s economic growth is expected to outpace Canada’s in 2021 and 2022, according to projections from the Economic Forecast Council (EFC).
However, yet-to-be-determined economic impacts from recent flooding and extreme weather may affect future forecasts.
Each year, B.C.’s finance minister meets with the 13-member council of private-sector forecasters as part of preparation for the next year’s budget. This year an additional set of discussions was added, providing an opportunity to consult with a new Environmental, Social, Governance (ESG) Advisory Council to further explore how the provincial government can continue to build resilience and support well-being in British Columbia.
Private-sector forecasters anticipate that, despite the pandemic, the province’s economy will grow by 5.3% in 2021 and 4.2% in 2022, which is above the respective national GDP estimates of 4.9% and 4.1%. Although B.C.’s economy contracted in 2020 due to impacts from the COVID-19 pandemic, B.C. was among provincial leaders last year and the economy’s 3.4% decline was smaller than originally projected.
“Momentum from our strong recovery and increasing vaccination rates over the last few months has helped put B.C. on a good path for future economic growth,” said Selina Robinson, Minister of Finance. “There are more challenges ahead, but forecasts signal the work we have done so far has put us on the right track and provided us with a solid foundation to continue responding to the pandemic and recent flooding and support a strong recovery for British Columbians.”
Discussions with the EFC and the ESG Advisory Council focused on current events, issues affecting B.C.’s economy and the environmental, social and governance opportunities and challenges facing the province. Key topics at the meetings:
- climate change risks and impacts on people,
- housing affordability,
- reconciliation with Indigenous Peoples,
- trade tensions and supply chain disruptions,
- standard of living, poverty and inequality,
- diversity and inclusion,
- economic resilience and sustainability,
- natural resource development, and
- policies and measures that build shared prosperity.
“As we look to our recovery, we are aligning our investments with our priorities to ensure that while we grow our economic resilience, we are also making progress on addressing climate change, reducing poverty and inequality, and advancing reconciliation with Indigenous Peoples,” Robinson said. “Following the incredible hardship our province has faced with this year’s floods and fires during a pandemic, it’s never been more important for us to share ideas about building resilience and sustainability.”
Several forecasters noted that the provincial government’s commitments to addressing climate change, its 10-year housing plan, record levels of capital investment and continued work to diversify the economy, have helped to insulate the province from some economic impacts and position the province well for longer-term sustainable growth.
Forecasts and feedback from the two councils will be used to inform the next provincial budget, which will be released on Feb. 22, 2022. EFC members will also have an opportunity to submit revised forecasts in early January.
- In the Province’s Second Quarterly Report, which does not yet incorporate impacts from the recent extreme weather and flooding, B.C. projected a revised deficit of $1.7 billion for the 2021-22 fiscal year, which is a significant improvement from the deficits previously estimated in Budget 2021 and the First Quarterly Report.
- Environmental, social and governance are three main categories often discussed when evaluating sustainability performance, risk mitigation planning and societal well-being.
Canadian dollar hits a 10-week low on rising risk aversion
The Canadian dollar weakened against its U.S. counterpart on Friday as investors took advantage of a jump in the currency after stronger-than-expected domestic jobs data to add to bearish bets, with the loonie extending this week’s decline.
The loonie was trading 0.2% lower at 1.2829 to the greenback, or 77.95 U.S. cents, after touching its weakest level since Sept. 21 at 1.2846. For the week, the loonie was down 0.3%.
“We have seen a swift move lower in risk appetite ever since the stock market opened,” said Erik Bregar, an independent FX analyst. “The spike higher (in the loonie) this morning, it was a nice move to fade and keep riding the trend down.”
Wall Street‘s major indexes fell as investors grappled with a disappointing U.S. jobs gain and uncertainty around the potential impact of the Omicron coronavirus variant, while the price of oil, one of Canada‘s major exports, settled 0.4% lower at $66.26 a barrel.
Canada‘s economy posted a job gain of 154,000 in November, eclipsing estimates for an increase of 35,000, while the jobless rate dropped to a new pandemic low.
Economists say the data is unlikely to change the Bank of Canada‘s guidance at a policy announcement next week amid worries over the new variant and after massive recent flooding in British Columbia that has hampered trade through Vancouver.
Still, analysts are sticking with bullish forecasts on the Canadian dollar, expecting oil prices to rebound and the Bank of Canada to hike interest rates before the U.S. Federal Reserve, a Reuters poll showed.
Canadian government bond yields were mixed across a flatter curve.
The 2-year rate rose 3.6 basis points to 1.009%, while the 10-year touched its lowest level since Sept. 27 at 1.425% before recovering slightly to 1.433%, down 7.3 basis points on the day.
(Reporting by Fergal Smith; editing by Barbara Lewis and Sandra Maler)
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