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Trudeau's using our moment of crisis to reinvent our economy. That's exciting – StCatharinesStandard.ca

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In the short space of the next four weeks, the Trudeau government will design not just a proposed economic recovery plan for Canada, but a lasting economic renaissance only a notch or two shy of Sir John A. Macdonald’s National Policy in its impact.

The government will present highlights of its plans for pandemic economic recovery in the Throne Speech that soon follows the return of Parliament Sept. 24. More details will come with an economic statement later in the fall, and we’ll see the plan in full in a budget next year.

You can be sure that this vision of a new Canadian economy will be bold.

Having promised a thoroughly overhauled post-pandemic economy, especially in strengthening the social safety net, the Liberals have gone all in. They can’t back down from it.

Given the minority status of the government, and a confidence vote it faces after the Throne Speech that they could lose, the country might find itself voting on the Liberals’ proposed economic renaissance in an election sooner than later.

An early sign of the government’s resolve is the $37-billion package of new income supports it unveiled Aug. 20. Those measures extend pandemic-related emergency payments far beyond those of a U.S. counterpart program, which ran dry weeks ago and show no sign of resumption, though millions of Americans remain out of work.

In that same announcement, made jointly by newly appointed Finance Minister Chrystia Freeland and Employment Minister Carla Qualtrough, Ottawa also introduced increased sick-leave, caregiver, and maternity benefits.

The backdrop for those enhanced protections is a Liberal plan, signalled by the government for several weeks, to effectively replace the antiquated Employment Insurance program with the more streamlined and user-friendly Canada Emergency Response Benefit, which will still go under the name EI.

How much further the party intends to take its planned reinvention of the economy will be determined by intense cabinet, caucus and bureaucratic negotiations over the next few weeks.

That will be a high-stakes exercise, bearing resemblance to the lead-up to Medicare’s rollout in 1965 and the advent of the Charter of Rights and Freedoms in 1982.

The prospect of a snap election will influence those deliberations, of course.

But the Liberals seem intent on asking Canadians to consent to a sweeping economic renewal that tackles income inequality, climate crisis, immigration, economic sovereignty, industrial self-sufficiency, the gender-pay gap, Canada’s undernourished R&D sector and considerably more.

“The restart of our economy needs to be green,” Freeland said Aug. 20. “It also needs to be equitable, it needs to be inclusive, and we need to focus very much on jobs and growth.”

The Grits, in other words, are giving themselves an open-ended mandate for change, the ambition of which the country has seldom seen.

It’s fair to ask why they have embarked on this high-risk mission. It could see them reduced to opposition status in Parliament by this time next year if Canadians reject it.

  • The Liberals are not proposing radical change. Every advance they will propose is an expansion or acceleration of existing Canadian priorities and practices.

On climate change, for instance, the Trudeau government wants to lay the groundwork for a Canada able to exploit the lucrative environmental industries that will help define the 21st century — a public- and private-sector project already underway but still in its infancy.

And for the Grits, economic sovereignty largely takes the form of self-sufficiency in essentials like medical supplies that were long ago outsourced abroad.

Ottawa is also worried that Canada will suffer competitive disadvantage if it doesn’t match the heavy investments that Europe is making — during the pandemic, no less — in upgrading its social-safety nets, its tech-oriented intellectual property development, and environmental industries rich in export and job-creation potential.

  • The timing is right. Interest rates are at a historic low. The government’s cost of borrowing to pay for pandemic relief, a permanently stronger social safety net, and seed capital for tech-oriented startups with export potential is therefore manageable.

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And so far, the pandemic ballooning of the deficit, to an admittedly staggering $343 billion in the current fiscal year, hasn’t caused a spike in inflation.

Canada has not entered uncharted territory with its current, greatly enlarged 49.1 per cent net-debt-to-GDP ratio. That ratio peaked at 66.6 per cent in 1996. It took just 13 years to get that ratio down to 28.2 per cent by 2009, ahead of the Great Recession.

And in the more recent four years of deficit-financed investment in Canada for which the Trudeau government won an electoral mandate in 2015, the average debt-to-GDP ratio has been just 31.6 per cent.

The Grits or their successors stand a good chance of restoring that pre-pandemic ratio once the days of extraordinary pandemic spending have passed.

For purposes of comparison, a prosperous Japan’s debt-to-GDP ratio has exceeded 200 per cent for decades. Kevin Page, the former parliamentary budget officer, said recently that Canada’s public finances are in better shape than most advanced economies.

As for our emergency pandemic government spending, it’s worth noting that Canada is on a level playing field our biggest trading partners — they too have run up their deficits and debt to protect their people.

But perhaps what most influences the Grits’ thinking is that Canadians, in adjusting so quickly to pandemic realities, are geared to accepting sensible change on economic reinvention if a good case can be made for it.

Nor are Canadians fretful about deficits and debt, regarding this year’s pandemic spending as money well spent to limit permanent pandemic damage to individuals’ finances and to the economy.

Actually, Liberals are betting that most Canadians are impatient for change in a gap between rich and poor that has widened even more during the pandemic, especially for women; and about our stubbornly slow progress in the fight against climate crisis.

The Grits could bungle this once-in-a-lifetime chance to create a more successful economy, as they did with the National Energy Program (NEP). Or they can get it right, as they did with a Medicare system that Canadians cherish — a triumph that was achieved by a minority government.

The NEP was sprung on Alberta and the country with notoriously little genuine consultation.

By sharp contrast, for the economic renaissance they’re now planning, the Grits have been soliciting input all year from the premiers, leaders in industry and organized labour, environmental and poverty activists, and of necessity in a minority government, opposition leaders and backbenchers.

And because an election is on the near horizon, we will all have our say on this proposed latest nation-building project.

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Economy

Economic rebound slows as Statistics Canada says economy grew 3.0 per cent in July – Toronto Star

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OTTAWA – The pace of Canada’s economic rebound from the COVID-19 pandemic slowed in July, and maybe even more in August, Statistics Canada says, suggesting the country is in what experts described as a long, choppy path to recovery.

Statistics Canada says real gross domestic product grew by three per cent in July, matching the agency’s preliminary estimate and economists’ expectations, but below the 6.5 per cent recorded in June, and May’s 4.8 per cent bump.

Gains have been linked to the loosening of restrictions that forced non-essential businesses to close in March and April, but they haven’t been enough to haul the economy back to pre-pandemic levels.

Overall, Statistics Canada said the economy in July was about six per cent below its pre-pandemic level in February, even if some sectors like retail and real estate have recouped their losses and then some.

Looking at August, the statistics agency said growth likely continued albeit at a slower pace as it provided a preliminary estimate of a one per cent climb in GDP for the month.

“That’s suggesting the steam in the recovery is going away and so, this for me is suggesting that we might be moving from a quick rebound phase of the recovery to a more challenging phase,” said TD senior economist Sri Thanabalasingam.

The August figure will be finalized late next month.

The path of the recovery over the coming months will be tied to the path the pandemic takes, which could lead to rollbacks of reopening measures.

Rising case counts have prompted such calls as the country heads into what several public health officials say is a second wave of the novel coronavirus pandemic.

The increase in COVID-19 infections, coupled with the August figure suggests the sharp rebound in the third quarter won’t carry over to the final three months of the year, said CIBC chief economist Avery Shenfeld.

“Easing up on COVID-19 restraints fed into solid Canadian GDP gains in July and August, but the concerns now are whether we will pay for some of that greater openness,” Shenfeld wrote in a note.

The Conference Board of Canada said health measures and testing should prevent another full shutdown of economic activity earlier this year, but warned of localized lockdowns as one hurdle.

The pandemic is going to flatten the recovery curve for the next year at least, said Pedro Antunes, the organization’s chief economist.

“We’re going to be creating fewer jobs on a monthly basis going forward, we’re going to see the increases in economic activity or GDP being much more subdued in terms of their increases overall,” he said.

The Conference Board’s outlook expected the unemployment rate won’t fall back to its pre-pandemic levels until 2025.

Thanabalasingam said it could be early 2022 before before the economy gets back to where it was prior to COVID-19.

July’s GDP report from Statistics Canada noted that all 20 industrial sectors it tracks posted increases in July, with agriculture, utilities, finance, insurance and real estate sectors recouping losses suffered since the start the pandemic.

Manufacturing grew 5.9 per cent in July, following a 15.1 per cent expansion in June as more operations ramped up production, but still remained about six per cent below where it was pre-pandemic.

The hard-hit accommodations and food services sector posted a third consecutive month of double-digit increases, jumping 20.1 per cent in July.

Thanabalasingam said despite the bump, the amount of activity in the industry was about two-thirds of where it was in February, as more people went shopping and case numbers dropped.

“There’s still a very, very long way to go, even though they’re posting these strong growth rates,” he said.

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“My worry is that as caseloads continue to rise and some of these provinces think about rolling back some of those reopening measures . . . then is this as good as it could get for these sectors?”

The health care and social assistance sector rose by 3.7 per cent in July, as more doctors, dentists and diagnostic laboratories reopened in line with the rollback of restrictions.

This report by The Canadian Press was first published Sept. 30, 2020.

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31.4 per cent spring slide for a U.S. economy likely to shrink in 2020 – CTV News

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WASHINGTON —
The U.S. economy plunged at an unprecedented rate this spring and even with a record rebound expected in the just-ended third quarter, the U.S. economy will likely shrink this year, the first time that has happened since the Great Recession.

The gross domestic product, the economy’s total output of goods and services, fell at a rate of 31.4% in the April-June quarter, only slightly changed from the 31.7% drop estimated one month ago, the Commerce Department reported Wednesday.

The government’s last look at the second quarter showed a decline that was more than three times larger than the fall of 10% in the first quarter of 1958 when Dwight Eisenhower was president, which had been the largest decline in U.S. history.

Economists believe the economy will expand at an annual rate of 30% in the current quarter as businesses have re-opened and millions of people have gone back to work. That would shatter the old record for a quarterly GDP increase, a 16.7% surge in the first quarter of 1950 when Harry Truman was president.

The government will not release its July-September GDP report until Oct. 29, just five days before the presidential election.

While President Donald Trump is counting on an economic rebound to convince voters to give him a second term, economists said any such bounce back this year is a longshot.

Economists are forecasting that growth will slow significantly in the final three months of this year to a rate of around 4% and the U.S. could actually topple back into a recession if Congress fails to pass another stimulus measure or if there is a resurgence of COVID-19. There are upticks in infections occurring right now in some regions of the country, including New York.

“There are a lot of potential pitfalls out there,” said Gus Faucher, chief economist at PNC Financial Services. “We are still dealing with a number of significant reductions because of the pandemic.”

In 2020, economists expect GDP to fall by around 4% , which would mark the first annual decline in GDP since a drop of 2.5% in 2009 during the recession triggered by the 2008 financial crisis.

“With economic momentum cooling, fiscal stimulus expiring, flu season approaching and election uncertainty rising, the main question is how strong the labour market will be going into the fourth quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics.

“With the prospect of additinal fiscal aid dwindling, consumers, businesses and local governments will have to fend for themselves in the coming months,” Daco said.

The Trump administration is forecasting solid growth in coming quarters that will restore all of the output lost to the pandemic. Yet most economists believe it could take some time for all the lost output to be restored and they don’t rule out a return to shrinking GDP if no further government support is forthcoming.

So far this year, the economy fell at a 5% rate in the first quarter, signalling an end to a nearly 11-year-long economic expansion, the longest in U.S. history. That drop was followed by the second quarter decline of 31.4%, which was initially estimated two months ago as a drop of 32.9%, and then revised to a decline of 31.7% last month.

The slight upward revision in this report reflected less of a plunge in consumer spending than had been estimated. It was still a record fall at a rate of 33.2%, but last month projections were for a decline of 34.1%. This improvement was offset somewhat by downward revisions to exports and to business investment.

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Economic rebound slows as Statistics Canada says economy grew 3.0 per cent in July – The Battlefords News-Optimist

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OTTAWA — The pace of Canada’s economic rebound from the COVID-19 pandemic slowed in July, and maybe even more in August, Statistics Canada says, suggesting the country is in what experts described as a long, choppy path to recovery.

Statistics Canada says real gross domestic product grew by three per cent in July, matching the agency’s preliminary estimate and economists’ expectations, but below the 6.5 per cent recorded in June, and May’s 4.8 per cent bump.

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Gains have been linked to the loosening of restrictions that forced non-essential businesses to close in March and April, but they haven’t been enough to haul the economy back to pre-pandemic levels.

Overall, Statistics Canada said the economy in July was about six per cent below its pre-pandemic level in February, even if some sectors like retail and real estate have recouped their losses and then some.

Looking at August, the statistics agency said growth likely continued albeit at a slower pace as it provided a preliminary estimate of a one per cent climb in GDP for the month.

“That’s suggesting the steam in the recovery is going away and so, this for me is suggesting that we might be moving from a quick rebound phase of the recovery to a more challenging phase,” said TD senior economist Sri Thanabalasingam.

The August figure will be finalized late next month.

The path of the recovery over the coming months will be tied to the path the pandemic takes, which could lead to rollbacks of reopening measures.

Rising case counts have prompted such calls as the country heads into what several public health officials say is a second wave of the novel coronavirus pandemic.

The increase in COVID-19 infections, coupled with the August figure suggests the sharp rebound in the third quarter won’t carry over to the final three months of the year, said CIBC chief economist Avery Shenfeld.

“Easing up on COVID-19 restraints fed into solid Canadian GDP gains in July and August, but the concerns now are whether we will pay for some of that greater openness,” Shenfeld wrote in a note.

The Conference Board of Canada said health measures and testing should prevent another full shutdown of economic activity earlier this year, but warned of localized lockdowns as one hurdle.

The pandemic is going to flatten the recovery curve for the next year at least, said Pedro Antunes, the organization’s chief economist.

“We’re going to be creating fewer jobs on a monthly basis going forward, we’re going to see the increases in economic activity or GDP being much more subdued in terms of their increases overall,” he said.

The Conference Board’s outlook expected the unemployment rate won’t fall back to its pre-pandemic levels until 2025.

Thanabalasingam said it could be early 2022 before before the economy gets back to where it was prior to COVID-19.

July’s GDP report from Statistics Canada noted that all 20 industrial sectors it tracks posted increases in July, with agriculture, utilities, finance, insurance and real estate sectors recouping losses suffered since the start the pandemic.

Manufacturing grew 5.9 per cent in July, following a 15.1 per cent expansion in June as more operations ramped up production, but still remained about six per cent below where it was pre-pandemic.

The hard-hit accommodations and food services sector posted a third consecutive month of double-digit increases, jumping 20.1 per cent in July.

Thanabalasingam said despite the bump, the amount of activity in the industry was about two-thirds of where it was in February, as more people went shopping and case numbers dropped.

“There’s still a very, very long way to go, even though they’re posting these strong growth rates,” he said.

“My worry is that as caseloads continue to rise and some of these provinces think about rolling back some of those reopening measures . . . then is this as good as it could get for these sectors?”

The health care and social assistance sector rose by 3.7 per cent in July, as more doctors, dentists and diagnostic laboratories reopened in line with the rollback of restrictions.

This report by The Canadian Press was first published Sept. 30, 2020.

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