(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.
U.S.
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.
Asia
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.
Latin America
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%.
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.
