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The US economy is powering through Delta – CNN

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

London (CNN Business)“Delta? What Delta?”

That was the take from Ian Shepherdson, chief economist at Pantheon Macroeconomics, after seeing the data on US retail sales for August.
What’s happening: Contrary to expectations, US retail sales increased last month as consumers continued to shell out on clothing, furniture and groceries.
It’s a promising sign heading into the crucial holiday shopping season, and indicates that the US economy is demonstrating resilience despite a spike in coronavirus cases triggered by the Delta variant.
“We see only very modest evidence that the spread of the Delta variant is having an impact on demand,” Citi’s Veronica Clark and Andrew Hollenhorst said in a note to clients.
Another signal: There were 332,000 initial jobless claims in the United States last week. That’s only a slight uptick from the week prior, when claims hit a pandemic low.
The four-week moving average has now dropped to 335,800 claims, its best level in the Covid-19 era, according to Jim Reid of Deutsche Bank.
That’s not to say the Delta variant isn’t having any impact. Seatings at restaurants in the United States appear to have dropped sharply in recent days, according to data from OpenTable.
On the radar: In August, spending at restaurants was flat month-over-month. Grocery store spending also climbed 1.8%, suggesting that Americans were opting to dine more at home again.
And we can’t forget the jarring US jobs report for August, when just 235,000 positions were added. Restaurants and bars registered a loss of 42,000 jobs.
Big picture: The data is promising, but also messy. Rising prices due to inflation could be contributing to higher retail sales, muddying the picture. Plus, there’s a huge element of uncertainty about the economic trajectory as colder weather sets in. The Federal Reserve, which meets next week, doesn’t have an easy job charting the path forward.
For the time being, many are choosing to look on the bright side. New variants may weigh on the economic recovery, but could be far less damaging than early in the pandemic, as vaccinations help consumers feel more confident and allow governments to avoid reimposing strict rules.
“You’ll see more resilience with each wave,” Jeffrey Sacks, head of investment strategy for Europe, the Middle East and Africa at Citi Private Bank, predicted earlier this week.

Wall Street is unfazed by China’s potential ‘Lehman moment’

The implosion of Lehman Brothers 13 years ago this week showed how the collapse of a single business can send shockwaves around the world.
Now, more than a decade later, policymakers and investors in the United States are watching closely as a massive property developer thousands of miles away teeters on the brink of default, my CNN Business colleague Matt Egan reports.
Catch up: The risk is that the collapse of Evergrande, a Chinese real estate company with a staggering $300 billion of debt outstanding, could set off a chain reaction that spreads overseas.
“Some fear an Evergrande meltdown will have systemic risks on par with the impact Lehman Brothers’ demise had on the US stock market,” Ed Yardeni, president of Yardeni Research, wrote in a note to clients Thursday.
Like Lehman in its heyday, Evergrande is massive. It’s one of the world’s biggest businesses by revenue, and employs about 200,000 people.
But for now, investors are confident that authorities in Beijing would use their vast control over the Chinese economy to limit the damage. So far, there’s no evidence of contagion in US markets.
“I don’t think the Evergrande meltdown, and the financial problems of Chinese property companies more broadly, will reverberate back on the US economy,” Mark Zandi, chief economist at Moody’s Analytics, told CNN Business.
Not alone: “We think that the ‘China’s Lehman moment’ narrative is wide of the mark,” Simon MacAdam, senior global economist at Capital Economics, wrote in a note on Thursday. MacAdam said even a “messy collapse” of Evergrande would have “little global impact beyond some market turbulence.”
Only time will tell, however, how systemically important the company really is — and what Beijing may do to cushion the blow.

These were the week’s hottest IPOs

Companies that made their public market debuts in the United States this week are generating tons of hype, benefiting from investor enthusiasm for new stocks in industries ranging from software to athletic wear.
The highlights: ForgeRock, a San Francisco-based company that makes identity verification software, hauled in $275 million through its stock sale. Its shares also enjoyed a huge pop in their first day of trading on the New York Stock Exchange, jumping 46% on Thursday.
Stock in Swiss sportswear brand On, which is backed by tennis superstar Roger Federer, has surged 56% above the company’s initial public offering price since Wednesday.
And Thoughtworks, a tech consultancy, has seen its stock on the Nasdaq jump almost 50% in its first two days of trading.
Bloomberg calculates that IPOs on US exchanges — excluding special-purpose acquisition companies, or SPACS — raised almost $4.4 billion this week.
Step back: Buzzy IPOs have generated mixed returns this year. The Renaissance IPO exchange-traded fund, which tracks the biggest newly-listed public companies in the United States, is up just 7.3% year-to-date, compared to a 19.1% rise in the S&P 500. Its top holdings include Snowflake, Palantir, Datadog and Coinbase.
But newer stocks have started to perform better in recent months. The Renaissance IPO ETF has climbed 4.6% in the third quarter, versus a 4.1% increase in the S&P 500.

Up next

Manchester United (MANU) reports results before US markets open.
Also today: The University of Michigan’s survey of consumer sentiment posts at 10 a.m. ET.
Coming next week: The Federal Reserve holds a policy meeting as investors scrutinize the central bank’s next steps.

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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 Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

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