Britain’s economic recovery from the shock of the COVID-19 pandemic has gathered pace, data showed on Friday, but government borrowing rose past the £2-trillion ($3.45-trillion) mark and fears of future job losses are mounting.
Retail sales rose above prepandemic levels in July, the first full month for many shops reopening after lockdown, and August’s Purchasing Managers’ Index (PMI) data showed the fastest growth in almost seven years.
But Britain’s economy still faces a long recovery after shrinking by a record 20 per cent in the second quarter, the largest decline of any big country.
“The U.K. is still seeing a V-shape bounce in activity. But … a hot summer can quickly turn to a cold autumn,” HSBC economist Liz Martins said, pointing to a softening in euro zone business activity as coronavirus cases begin to rise again.
Retail sales in July were 1.4 per cent above year-ago levels and 3.0 per cent above their level before the pandemic, the Office for National Statistics said.
August’s preliminary composite PMI, which covers most businesses outside retail, hit its highest level since October 2013.
But employers are increasingly planning to shed jobs and were making staff redundant rather than bringing them back from a government-subsidized furlough scheme that expires in October.
“Scarring from the pandemic and lingering doubts about the sustainability of recovery resulted in a need to cut overheads,” said Tim Moore, economics director at IHS Markit, which compiles the PMIs.
The Bank of England forecasts unemployment will reach 7.5 per cent by the end of the year, almost double its most recent reading.
Separately, the Confederation of British Industry said manufacturing orders were “severely depressed”, with little improvement in August.
Stuttering PMI surveys for the euro zone — where countries exited lockdown earlier than Britain — suggested the boost from pent-up demand was already fading.
Retail sales are only part of overall household spending. A GfK survey showed no improvement in consumer confidence since early July.
Within retail, different businesses have had contrasting fortunes. Grocery sales are 3 per cent up on the year and online sales are 50 per cent higher than before the pandemic. But sales volumes at clothing and footwear stores are 25 per cent lower than last year.
Stores including Marks & Spencer, Boots and John Lewis have announced plans for major job cuts.
Friday’s data also laid bare the impact of increased public spending and a slide in tax revenues on the public finances.
Public sector net debt exceeded £2-trillion ($3.45-trillion) in July for the first time, and is its highest since 1961 as a share of gross domestic product.
Government borrowing so far this financial year is £150.5-billion ($260-billion), almost seven times higher than in the same period in 2019, though below the £178.8-billion (308.7-billion) Britain’s budget forecasters predicted last month.
The government has spent more than £35-billion ($60-billion) so far on its job support scheme, the largest single measure to tackle the economic impact of the pandemic.
Government figures showed 6.8 million jobs were furloughed at the end of June, down from 8.9 million in early May.
Source: – The Globe and Mail
Trudeau Poised to Announce Three-Pillar Economic Recovery Plan – Yahoo Canada Finance
(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.
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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Swedish government promises $12 billion to kick-start economy in 2021 budget – The Journal Pioneer
By Simon Johnson
STOCKHOLM (Reuters) – Sweden’s government will pump 105 billion crowns ($12 billion) into the economy in 2021 through tax cuts and spending in a record giveaway aimed at getting the economy back on its feet after the coronavirus pandemic-induced slump.
Sweden’s economy will shrink around 4.6% this year, the minority coalition said its budget on Monday, a milder hit than many other European countries, some of which are being forced to re-impose COVID restrictions after a surge in new cases.
“Economic policy is going into a new phase,” Finance Minister Magdalena Andersson told reporters. “It is about a record-large budget to restart the Swedish economy: 100 billion so that we can work our way out of the crisis.”
The Social Democrat and Green coalition said the budget would focus would be on boosting jobs, welfare and supporting the switch to a carbon-free future.
Most measures, agreed with two small, centre-right parties which help keep the coalition in power, were already known.
Individuals and companies will get a tax cut and local authorities and welfare services more cash while around 10 billion crowns will go toward fighting climate change.
The budget is expected to create around 75,000 jobs.
LONG TERM WINNERS
While Sweden looks to have got off relatively lightly economically in the short term, analysts caution that it is too early to pick the longer term winners and losers from the pandemic.
Much will depend on how government largesse, including Europe’s 750 billion euro recovery find, is spent.
Sweden also faces a number of structural challenges, not least in the labour market where unemployment among young people and immigrants is uncomfortably high.
A dysfunctional housing market also threatens long-term economic stability while funding the country’s comprehensive welfare model as society as a whole ages will require a huge increase in productivity.
The government has promised to keep the taps open, at least for the next few years – tax cuts and spending will boost the economy by 85 billion in 2022.
But with a general election due that year, longer term policies remain unclear. The last national vote resulted an a virtual stalemate between the centre-left and centre-right blocs and there is little evidence that voters are any clearer about what they want now.
(Reporting by Simon Johnson, additional reporting by Johan Ahlander; Editing by Niklas Pollard and Toby Chopra)
US household wealth hits record even as economy struggles – CKPGToday.ca
Sep 21, 2020 9:07 AM
WASHINGTON — Americans’ household wealth rebounded last quarter to a record high as the stock market quickly recovered from a pandemic-induced plunge in March. Yet the gains flowed mainly to the most affluent households even as tens of millions of people endured job losses and shrunken incomes.
The Federal Reserve said Monday that American households’ net worth jumped nearly 7% in the April-June quarter to $119 trillion. That figure had sunk to $111.3 trillion in the first quarter, when the coronavirus battered the economy and sent stock prices tumbling.
Since then, the S&P 500 stock index has regained its record high before losing some ground this month. It was up 2.8% for this year as of Friday. The tech-heavy Nasdaq has soared more than 20% this year.
The full recovery of wealth even while the economy has recovered only about half the jobs lost to the pandemic recession underscores what many economists see as America’s widening economic inequality. Data compiled by Opportunity Insights, a research group, show that the highest-paying one-third of jobs have almost fully recovered from the recession, while the lowest-paying one-third of jobs remain 16% below pre-pandemic levels.
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