(Bloomberg) — Above all, it was the year of inflation.
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The cost of living soared all over the world in 2022. Pandemic price pressures, dismissed as transitory, turned out to be enduring with Russia’s war in Ukraine causing a fresh spike in food and energy costs.
In June alone, inflation was mentioned in more than 250,000 news stories on the Bloomberg Terminal.
Initially slow to react, the Federal Reserve and its fellow central banks were forced to play catch-up. They raised interest rates at the fastest pace in decades.
By the year’s end, inflation appeared to be past its peak — but economies were stalling, as tight money began to bite.
While, still-tight labor markets have provided some support, recession risks are mounting into 2023 for some of the world’s major economies, including the US and Europe.
The coming months are expected to see more rate increases — and a cooling in inflation, though perhaps not by as much as central banks would like. Next year is likely to turn tougher for workers, with unemployment forecast to rise.
The following charts highlight some of the key developments in the global economy over the past year.
Price Shock
The global surge in inflation led to double-digit price increases in some industrial economies. Economists reckon it was driven by a combination of pandemic disruptions to supply chains and labor markets, commodity spikes after Russia’s invasion of Ukraine, and government stimulus that shored up consumer spending.
Tight Money
Central banks responded to high inflation with rapid interest-rate hikes to cool their economies, ending an era of cheap money in the developed world. Most of the major banks say there’s more to come. “We are not at a sufficiently restrictive policy stance yet,” Federal Reserve Chair Jerome Powell said at his last press conference of the year. “We will stay the course until the job is done.”
Stalling Recovery
With household spending under pressure from the soaring cost of living, and higher interest rates starting to have an impact, pandemic recoveries lost momentum in 2022 — and next year will likely be even worse. The International Monetary Fund is forecasting an extended period of sub-par growth for the world economy.
War Impact
Russia’s invasion of Ukraine in February, and the sweeping sanctions against Moscow that followed, set off a surge in the prices of key commodities from oil to wheat. Poor countries dependent on food and energy imports — like Sri Lanka, which was forced to default on debt — were hit especially hard. Europe, which had relied on Russian pipelines before the war, saw the cost of natural gas and electricity spiral to record highs. By the year’s end, many of these prices had retreated.
Strong Dollar
As the Fed raised interest rates at a rapid clip, the US dollar posted its biggest advance in years — easing some of the inflationary pressures at home, but adding to them elsewhere. The greenback gave up some of the gains in the closing months of 2022.
Debt Distress
Some emerging economies were tipped into debt trouble by the combined effect of soaring import bills, higher borrowing costs, and a strong dollar. Global lenders estimated that more than half of the developing world is either already in debt distress, or close to it. As governments from Egypt to Pakistan sought help, the International Monetary Fund was poised to break its lending record in 2022.
Supply Strains
The worldwide snarl-up in supply chains that was brought on by the pandemic — as factories shut down and transit routes suffered from bottlenecks — eased significantly this year. That offers hope for better trade conditions and fewer price pressures next year — although one big unknown is the prospect for the world’s manufacturing powerhouse China after it dropped its Covid Zero policy.
Labor Strength
One surprise has been the resilience of labor markets worldwide. The US, for example, recorded an unemployment rate of just 3.7% in November. A headache for central bankers is this is fueling higher wages with workers increasingly seeking more pay to offset the inflation spike, in turn risking a wage-price spiral as companies seek to compensate for the higher employment costs. Strikes are also more prevalent.
Housing Bust?
After a run-up during the pandemic, house prices in some countries turned downward in 2022 — and many analysts expect a broader housing bust next year, as high interest rates make mortgages expensive. That’s a risk for economic growth, which typically benefits from a so-called wealth effect when homeowners feel richer in a booming market — and suffers when the opposite conditions take hold.
What’s Next?
One striking feature of the world economy at the end of 2022 is the difficulty of seeing what’s coming next. In the period from the arrival of Covid to the Russian invasion of Ukraine, a much-cited gauge of policy uncertainty has been at the highest levels on record. That suggests caution is in order for anyone trying to figure out how the past year’s trends will extend into 2023.
–With assistance from Vince Golle, Ana Monteiro and Robert Jameson.
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.
