As governments ease lockdowns of businesses and allow consumers to travel and shop again, measures of high-frequency data and confidence increasingly suggest a bottom has been reached in the worst global recession since the Great Depression. A new set of daily activity gauges from Bloomberg Economics finds almost all of the economies it monitors witnessed a pick-up in activity since late March and early April, although no country is yet approaching its pre-virus levels. Germany, Japan and France are among those rebounding the fastest, while Spain and the U.K. remain relatively weak.
A legacy of higher unemployment, bankruptcies and health fears also means recoveries are likely to be slow and sluggish after an initial bounce, with a full rebound unlikely before the discovery of a vaccine. The risk remains that the deadly virus could spike again, forcing constraints to be slapped back on.
“The picture is generally getting better, but it is a slow crawl out,” Deutsche Bank Securities Chief Economist Torsten Slok told Bloomberg Television. “We are standing at the bottom of the canyon and looking up.”
Policy makers are working to add momentum to the climb back with yet more economic stimulus. Japan on Wednesday announced more than $1 trillion of extra help for households and businesses, while the European Commission unveiled a package worth as much 750 billion euros ($823 billion) to help the continent’s worst-hit economies.Investors, for their part, are showing signs of confidence. Asian stocks mostly climbed with U.S. and European futures Thursday as investors weighed continued signs of economies reopening against the increase in Sino-American tensions over Hong Kong.
In China, which was the original epicenter of the virus, the earliest indicators for May suggest its recovery is continuing. Official purchasing managers’ indexes should show the recovery making more headway, with the services sector probably continuing to rebound at a robust pace, according to Bloomberg Economics.
China Manufacturing and Non-Manufacturing PMIs
Asia’s policy makers continue to add stimulus to counter concerns in export-oriented economies that the blow to global demand will weigh on their outlooks. The Bank of Korea cut its key interest rate to a record low on Thursday.
Among the trade engines in Asia, signs that manufacturing is improving haven’t yet been accompanied by a pickup in services. South Korea’s first 20-day export orders showed mild improvement in May, while still in double-digit decline, while export orders for Taiwan in April grew for a second month.
Those figures from Korea and Taiwan are favorite early indicators for Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings in Singapore. He says “global demand for tech is proving quite robust,” while services data “are still weak almost everywhere.”
U.S. High Frequency Data Dashboard
In the U.S., some green shoots are evident with most indicators on Bloomberg Economics latest weekly dashboard of high-frequency, alternative and market-based data showing slight but steady improvement from distressing levels. Those include filings for unemployment benefits, mortgage applications and travel by air and public transit. Air travel and table booking in restaurants are also picking up, albeit they are still far below their peaks.
Some monthly data are also exhibiting signs of steadying or edging up. New-home sales in the U.S. unexpectedly increased in April, while consumer confidence as measured by the Conference Board stabilized in May after a sharp decline the previous month.
“The U.S. economy appears set to turn the corner on the Covid-19 recession as businesses quickly reopen across the country,” said Mark Zandi, chief economist for Moody’s Analytics.
At the end of last week, 575 counties, accounting for about 13% of the U.S. gross domestic product, were still locked down, according to Zandi. That’s down from a peak of 2,600 counties — with nearly 30% of GDP — at the end of April.
“Maybe we’re near the bottom in terms of the economic downturn and hopefully we’ll start seeing improvement in coming months,” Federal Reserve Bank of New York President John Williams said in a May 27 Bloomberg Television interview. “I expect to see a pretty significant rebound in the second half of this year.”
If the recovery does take hold in June, it would mark the U.S. downturn as perhaps the shortest recession in records going back to 1854, but among the most severe. The unemployment rate more than tripled in April to 14.7%, the highest since the Great Depression, as employers cut an unprecedented 20.5 million jobs. A further rise in joblessness is expected this month.”While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads,” said Lynn Franco, senior director of economic indicators at The Conference Board.
As for Europe, an easing of restrictions has also allowed a pickup in economies. Stores are reopening, as are restaurants in many countries, and high-frequency data measuring peoples’ movement to restaurant bookings show the start of a revival.
Some measures of confidence and activity have also stabilized after plunging in the previous two months, helping to embed the idea that the euro-area economy is at the trough of the slump. German business expectations improved in May, and a measure of manufacturing and services activity jumped from a record low.
In the U.K., the country is moving into a key month in June. Schools will be allowed to restart, and there’s a timetable for stores to open their doors again after two brutal months. But it’s going to be cautious progress. The U.K. has overtaken Italy and Spain in terms of virus cases, and has the highest number of deaths in Europe.
While Germany has already reopened restaurants, the U.K. may not do so until at least July. That’s captured in data from booking website OpenTable, which shows a bounce in German dining versus the U.K.
Despite the emergence of activity, most economists have discarded the idea of a V-shaped recovery. Social distancing rules are still going to impinge on everything from how factories operate to consumers’ willingness to visit stores, car showrooms and bars. Many temporary job losses will prove permanent and debt-ridden companies will be forced to close for good.That leaves economists warning 2022 may be the earliest before economies recover the ground they have lost despite the euphoria in stocks.”There is divergence between Wall Street and Main Street,” Nouriel Roubini, a professor at NYU Stern School of Business, told Bloomberg Television. “The recovery is going to be anemic. Something like a U.”
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.
