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Trudeau Poised to Announce Three-Pillar Economic Recovery Plan – Yahoo Canada Finance

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Trudeau Poised to Announce Three-Pillar Economic Recovery Plan

(Bloomberg) — Prime Minister Justin Trudeau is set to unveil a new plan to try to contain the spread of Covid-19 and recharge Canada’s pandemic-battered economy, according to a senior government official.

The broad themes in this week’s so-called Throne Speech — which outlines his government’s priorities — will be a focus on the immediate task of tackling the coronavirus, a medium-term commitment to support Canadians through the pandemic and a “resiliency agenda” to spur recovery and reconstruction.

Trudeau’s agenda won’t establish budget targets, which will be left for Finance Minister Chrystia Freeland to detail later this year in a fiscal update, the official said, speaking on condition they not be identified because the document isn’t yet public.

Wednesday’s speech is one of the most anticipated in Trudeau’s five years in power, with questions mounting over how his governing Liberals plan to navigate their next policy steps amid surging Covid-19 case numbers and soaring budget deficits.

The prime minister needs to balance the need for more health-care spending with pledges to engineer an ambitious and green post-pandemic agenda. And he needs to do it without further eroding the nation’s financial credibility after one major credit-rating agency downgraded Canada’s debt.

“This government has set certain expectations and now the pressure is on them to meet their own expectations,” pollster Shachi Kurl, executive director of the Angus Reid Institute, said by phone.

Parliamentary Reset

Health care spending will be the first pillar for the economic recovery, the official said. This includes spending for vaccines, Covid-19 testing and support to localize outbreaks to maintain control over a resurgence of cases.

The second will be a pledge to provide financial support to Canadians who are struggling economically due to the pandemic, with a focus on shifting people back into the workforce.

Economic recovery and reconstruction efforts are the third pillar. This will include a pledge to help foster green investments, resolve major health issues such as long-term care for seniors and bolster support systems for the most vulnerable, like low-income women and minorities.

Trudeau has spoken publicly about plans to overhaul the employment insurance system, provide support for childcare and long-term care and build a cleaner economy through climate initiatives like retrofitting buildings and electric vehicles.

The prime minister suspended all parliamentary business last month after a public rift with his previous finance chief prompted Freeland’s appointment, claiming he needed a new legislative slate in order to move ahead with a “bold” new spending plan to help drive the recovery.

Canada has already budgeted C$380 billion ($289 billion) in new debt this year as a response to the downturn, spending that will likely drive the federal government’s debt to about 50% of economic output, from 31% last year. That’s triggered a backlash from business groups and economists, who are calling on Trudeau to commit to specific new debt targets to impose discipline on the budgeting process.

To assuage those concerns, Freeland vowed last week to preserve Canada’s reputation for sound fiscal management as her government considers the next steps to drive the recovery.

Trudeau is prepared to spend whatever it takes to combat the immediate impacts of Covid-19, given the emergency expenditures will only be temporary, the official said. Any future spending deemed structural, however, would be within new “fiscal tracks” that will be laid out by the finance minister later this year.

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Why the Best G.D.P. Report Ever Won’t Mean the Economy Has Healed – The New York Times

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The United States almost certainly just experienced its fastest three months of economic growth on record. That doesn’t mean the economy is strong.

The Commerce Department on Thursday will release its preliminary estimate of economic growth for the third quarter. Economists surveyed by FactSet expect it to show that gross domestic product — the broadest measure of goods and services produced in the United States — grew about 7 percent from the second quarter, or 30 percent on an annualized basis (more about that in a bit).

If those forecasts are even close to correct, it would represent the fastest growth since reliable records began after World War II. Until now, the best quarter was a 3.9 percent gain (16.7 percent annualized) in 1950.

This G.D.P. report will be particularly closely watched, arriving as the last major piece of economic data before Election Day next Tuesday.

But it doesn’t make sense to think about Thursday’s report in isolation. The third quarter’s record-setting growth is effectively an echo of the second quarter’s equally unprecedented contraction, when business shutdowns and stay-at-home orders led gross domestic product to fall by 9 percent. Strong growth was inevitable as the economy began to reopen.

While the economy has revived considerably since last spring, it is far short of its level before the pandemic. And progress is slowing.

“Employment has come back to some extent, but the unemployment rate is still high, wage and salary income is still low,” said Ben Herzon, executive director of IHS Markit, a forecasting firm. “Demand is still being depressed by the pandemic.”

In superlative-laden Facebook ads purchased days before the report, President Trump and his supporters have already begun to promote it as evidence of a strong rebound. The truth is more complicated. Here is how economists are thinking about the report, and why the numbers could be misleading.

If G.D.P. fell by 9 percent in the second quarter, and rose by about 7 percent in the third quarter, it might sound as if the economy is almost back to where it started.

It isn’t. The big drop in output in the second quarter means that third-quarter growth is being measured against a smaller base. A simple illustration of the same phenomenon: If you have $100 and lose half, you have $50. If you then manage to increase your money by half, that will bring your holdings to $75, not all the way back to $100.

To really evaluate the recovery, it makes sense to focus less on quarter-to-quarter changes and instead look at how the economy compares to the fourth quarter of last year, before the pandemic began. If economists’ forecasts are correct, G.D.P. will be 3 to 4 percent lower in the third quarter than at the end of last year. By comparison, G.D.P. shrank 4 percent over the entire year and a half of the Great Recession a decade ago.

In other words: Even after the record-setting rebound in the third quarter, the economy is still in a hole as large as the worst point of many past recessions.

Here is where things get really confusing: Third-quarter growth will look historically strong, even though all three months that made up the quarter were relatively weak.

That seeming paradox is the result of how the government reports G.D.P. statistics.

Quarterly G.D.P. figures represent the average amount of economic output over a three-month period. In normal times, output changes only gradually — growing or shrinking only 2 or 3 percent per year — so the change from the first month of a quarter to the last is small.

Last spring, however, changes that would ordinarily take years played out in a matter of weeks. Monthly estimates from IHS Markit show that G.D.P. fell more than 5 percent in March and more than 10 percent in April, before rising roughly 5 percent in May and 6 percent in June.

Quarterly averages obscure those big swings, however. G.D.P. fell 1.3 percent in the first quarter (when two relatively normal months were followed by the big drop in March) and 9 percent in the second (when output plunged in the first month of the quarter then rose in the next two).

The big rebound in May and June meant that the third quarter effectively had a head start. In fact, even if there had been zero growth in July, August or September, and the economy had stayed exactly the same size as at the end of the second quarter, that would still represent 5.4 percent quarterly growth — the strongest gain on record.

Recovering Lost Ground

Monthly and quarterly U.S. gross domestic product in 2020




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Change in

AVERAGE from

previous

quarter

Very little forecasted

month-to-month

change within Q3

QUARTERLY

AVERAGE

–9.0%

+7.5%

THIRD

Quarter

(forecast)

First

Quarter

SECOND

Quarter

$15

trillion

$10

$5

Jan.

Feb.

Mar.

April

May

June

July

Aug.

Sept.

Very little forecasted

month-to-month

change within Q3

Change in AVERAGE from

previous quarter

–9.0%

+7.5%

QUARTERLY AVERAGE

First Quarter

SECOND Quarter

THIRD Quarter

(forecast)

$15 trillion

$10

$5

Jan.

Feb.

March

April

May

June

July

Aug.

Sept.


Note: Monthly G.D.P. estimates are shown as seasonally adjusted annual rates, adjusted for inflation.

Source: IHS Markit

By Ella Koeze

Of course, the economy did experience some growth during the third quarter. IHS Markit estimates that G.D.P. grew about 1.5 percent in July and less than 1 percent in August and September. But those are much weaker gains than the quarterly G.D.P. figures might seem to suggest.

“Statistics that we’re used to using for small and slow movements are basically broken when it comes to looking at large and rapid movements,” said Justin Wolfers, a University of Michigan economist who occasionally contributes to The New York Times. “Typically a recession plays out over many quarters. This one played out over many weeks. So looking at the data through the lens of quarterly data misses all the action.”

Gross domestic product in the United States is usually reported at an annual rate, meaning how much output would grow or shrink if that rate of change were sustained for a full year. That convention makes it easier to compare data collected over different time periods. But during periods of rapid change, annual rates can be confusing.

In the second quarter, for example, G.D.P. fell at an annual rate of 31.4 percent. That makes it sound as if the economy shrank by nearly one-third, when in fact it shrank by a bit less than a tenth.

To avoid confusion, in the coverage of Thursday’s report, The Times plans to emphasize simple, nonannual percentage changes from both the second quarter and the fourth quarter of last year, before the pandemic began. (We gave a more detailed explanation of this decision before the second-quarter report in July.)

When the pandemic first hit last spring, many economists and policymakers hoped that by shutting down nonessential businesses and encouraging people to stay home, the United States could quickly bring the virus under control, then reopen with minimal lasting economic damage. That would allow for a “V-shaped” recession and recovery — a steep drop, followed by an equally steep rebound.

Relative to that expectation, the U.S. response has been a failure. The economy bounced back in May and June, but only partway. Most forecasters don’t expect G.D.P. to return to its pre-pandemic level until late next year at the earliest.

Compared with forecasts from April and May, however, the economic rebound has beaten expectations. The nonpartisan Congressional Budget Office, for example, released a forecast in late April showing a steeper second-quarter decline and a weaker third-quarter rebound than ended up happening. The office also expected the unemployment rate to stay above 10 percent through the end of this year; instead, the rate fell below that benchmark in August, and fell further to 7.9 percent in September.

The bad news is that progress has slowed sharply since that spring rebound. Many economists have recently revised downward their forecasts for the end of the year, in part because Congress did not provide more stimulus money before the election.

“The recovery has been faster than expected, but it is bending off pretty sharply,” Mr. Herzon said. “We got a sharp recovery, but there appears to have been a limit to that recovery.”

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US consumer confidence eased in October as economy views dim – BNN

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Consumer confidence unexpectedly pulled back in October as Americans became more concerned about prospects for employment, incomes and the economy.

The Conference Board’s index decreased to 100.9 from a downwardly revised 101.3 reading in September, according to a report Tuesday. The reading fell below the median estimate of 102 in Bloomberg’s survey of economists.

The gauge of expectations slipped 4.5 points to 98.4, while a measure of sentiment about current conditions rose to a seven-month high of 104.6.

Economists project the expansion in the world’s largest economy to moderate after a projected record annualized increase in the third quarter. The reading, which shows sentiment remains well below pre-pandemic levels, comes a week before the presidential election and underscores the impact of the virus and lack of new stimulus.

“There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement.

The decline in expectations was mainly driven by a dimmer short-term outlook for jobs. The share of respondents who said that they expect fewer jobs in the next six months rose to 20.2 per cent from 16.1 per cent, the report showed. Larger percentages also said that they expect business conditions to worsen and less income.

Respondents indicated they were more less likely to make big purchases, including cars and appliances, in the coming months. The share planning to buy a home increased slightly to a three-month high of 6.6 per cent.

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The US economy probably grew at record speed in the third quarter. But the crisis isn't over – CNN

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Just five days before the presidential election, the Bureau of Economic Analysis will report US gross domestic product — the broadest measure of economic activity.
Economists polled by Refinitiv expect the economy expanded about 7%, when adjusted for seasonal particularities, between July and September compared to the prior three months. That would be a sharp gain from the second quarter, when the economy shrunk a seasonally-adjusted 9%.
The government typically measures quarterly GDP gains and losses on an annualized basis, which assumes the quarterly growth rate continues for a whole year. In normal times, this approach makes it easier to compare economic performance over time. But during a fast-moving crisis like the coronavirus pandemic, it makes things a little more confusing.
On an annualized and seasonally-adjusted basis, economists expect a 31% jump in the third quarter. That would be the biggest gain since the government began tracking quarterly GDP numbers in 1947. And it comes after huge losses in the second quarter, when GDP collapsed at an annualized and seasonally-adjusted rate of 31.4% — the biggest drop on record.
The partial rebound is a sign of improvement, but economists warn, it’s not as impressive as it may sound.
“The enormous contraction of GDP in the second quarter means any growth in the third quarter is coming off of a significantly smaller base of GDP,” said Josh Bivens, director of research at the Economic Policy Institute.
So the jump we will see in Thursday’s data doesn’t mean the economy is out of the woods yet — not even close. If the forecasts are right, economic activity would be about $747 billion per year below its prior peak — meaning, the recovery is far from complete.

Measuring the rebound

The US economy fell into a recession in the first half of the year.
The National Bureau of Economic Research defines a recession as a period between the peak of economic activity and the nadir. At this point, we can’t be sure that we’re out of a recession just yet. Early signs point to a slowdown in economic activity this quarter, and as Covid-19 cases spike again across America, a second lockdown — and deeper recession — are not outside the realm of possibility.
If the recession is indeed already over, the pandemic downturn would have been much shorter than the average recession, which lasted about 12 months in the post-World War II period. But this one was much deeper, said Douglas Porter, chief economist at BMO Financial Group.
Either way, the economic crisis is not over, even if Thursday’s data shows a jump in economic activity.
“The huge GDP growth it will indicate is growth off a level severely depressed by a first-ever lockdown of much of the US economy. The measure itself is meaningless,” said Daniel Alpert, senior fellow and adjunct professor of macroeconomics at Cornell Law School.
The economy is still in a far worse state than at the start of the year. Millions of people remain unemployed and rely on government benefits to make ends meet. Employers have added back only about half of the 22 million jobs lost in March and April.
“In the real world, GDP is a pretty abstract concept. Jobs and paychecks are not,” Bivens said.
Last month, an unexpectedly high number of women dropped out of the work force. Experts think that’s due to childcare responsibilities as schools are still not fully back up and running because of the pandemic.
Industries like travel and hospitality continue to struggle as people stay home more and Covid restrictions prevent business as usual. On top of all that, the virus is still spreading.
Economists are growing concerned whether the rebound will keep going in the final three months of the year, given Congress has been unable to agree on another stimulus package to get the economy back on track.

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