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U.S. economic recovery outlook steady even as Wall St touches record

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By Shrutee Sarkar

BENGALURU (Reuters) – The U.S. economy is recovering smartly from the deepest recession on record, but unlike financial markets, economic forecasters have yet to show any new wave of optimism about quelling the virus and business returning to normal.

Indeed, the latest Reuters poll suggests that if the world’s largest economy is to sustain its momentum, a second round of fiscal stimulus ahead of the upcoming presidential election to preserve jobs would be required.

The survey of over 110 economists taken Aug. 14-20 found the U.S. economy – which remains the global epicenter of the virus with over 5.5 million cases – would grow 18.8% this quarter on an annualized basis after shrinking a record 32.9% last quarter.

It was then expected to grow 6.1% in Q4, slightly slower than the 6.5% rate predicted in July. That is a bit stronger than the best quarter during the recovery from recession following the global financial crisis over a decade ago.

While the poll median for Q3 was the most optimistic since April, the Q4 consensus was cut for the third consecutive survey and there was no material change in the growth outlook next year, with growth seen slowing from 5.0% in the first quarter to 3.0% by Q4.

“With consumer confidence weakening, employment growth stalling and incomes being squeezed by lower federal unemployment benefits, there is the potential for a period of weaker economic activity in the absence of more support,” said James Knightley, chief international economist at ING in New York.

“There is still huge uncertainty about a vaccine and its efficacy. Given the economic challenges already mentioned we suspect that the recovery could take longer than many anticipate.”

The latest findings stand in sharp contrast to exuberance on Wall Street, where benchmark stock indexes have recovered all of the 35% losses incurred at the start of the pandemic and are trading just below record highs.

The Federal Reserve has pledged unlimited liquidity through its bond purchases after slashing interest rates to zero, the biggest such stimulus in history, while the U.S. Congress enacted a $2 trillion fiscal package earlier this year.

In minutes to its latest meeting, the Fed suggested more support for the economy would be required.

St. Louis Fed President James Bullard told Reuters this week Wall Street has called this “about right” so far and the United States would do better than many forecasters anticipate.

But Reuters polls accurately estimated the historic collapse in Q2 GDP, predicting a 30% contraction as early as April and came within 1.2 percentage points of the actual -32.9% outcome the week before the data was published late last month.

The latest median 2020 GDP forecast showed a contraction of 5.3%, compared to -5.6% predicted last month. But the growth outlook for 2021 was cut to 3.8% from 4.0%.

Asked how long would it take for the U.S. economy to reach its pre-COVID-19 level, more than half of respondents, or 28 of 48, said two or more years. The rest said one to two years and none said less than a year.

Such strong rates of growth are not forecast to generate much price pressure either, with inflation expected to bump around below 2% this year and next.

Much will depend in the near-term on whether Congress, deadlocked along party lines, comes to an agreement.

“Delinquencies will likely rise even further if some sort of deal cannot be worked out to extend supplemental unemployment benefits. Failure to reach a deal on more stimulus would have wide ranging impact on the economy,” said Sam Bullard, senior economist at Wells Fargo.

The jobs outlook is uncertain. Economists were almost split on the risk the job recovery reverses by year-end, with 24 saying it was high or very high and 20 saying it was low.

The unemployment rate was forecast to slip over the next two years, but would remain above pre-COVID levels, averaging 9.0% this year and 7.6% next year, compared with 3.5% reported just before the pandemic.

(For other stories from the Reuters global long-term economic outlook polls package:)

(Reporting by Shrutee Sarkar and Indradip Ghosh; polling by Vivek Mishra; Editing by Ross Finley and Andrea Ricci)

Source:- TheChronicleHerald.ca

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Swedish government promises $12 billion to kick-start economy in 2021 budget – SaltWire Network

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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)

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Swedish government promises $12 billion to kick-start economy in 2021 budget – The Guardian

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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)

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How the woman at the wheel of the N.W.T.'s economy sees the road ahead – CBC.ca

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Caroline Wawzonek just said goodbye to her dream job. 

Having spent a career working in human rights and criminal defence, chairing committees and working groups dedicated to bettering the justice system and addressing the chronic issues it creates, she was elected into office one year ago and immediately selected to become the N.W.T.’s new justice minister.

“To be there, frankly, at a pivotal time where I think there is this social movement for change — I absolutely loved it,” she said.

“It really has been what I wanted it to be,” she said. “That, you know, you can put your hand on something and start to see movement in a different direction.”

Two weeks ago, Wawzonek left that job as the result of a cabinet shuffle in the wake of former industry and infrastructure minister Katrina Nokleby’s stunning departure from cabinet.

But in the process, Wawzonek took on one of Nokleby’s old departments — Industry, Tourism and Investment (ITI) — adding it to her ongoing role as finance minister.

Walking out that meeting, Wawzonek had somehow gained an even greater responsibility than she had at justice: guiding the territory’s economy through an unprecedented crisis.

Seal fur crafts at the Inuvialuit craft store in Inuvik, N.W.T. As minister of ITI, Wawzonek’s mandate spans from responding to the needs of home crafters and small businesses to wooing billion-dollar mining conglomerates to the N.W.T. (Mackenzie Scott/CBC)

A ‘broad, broad obligation’

To quote Wawzonek, ITI is an “interesting department.” It’s amorphous mandate spans from wooing billion-dollar mining conglomerates to placating gas station owners in communities of fewer than 100 people.

“It’s not actually large in terms of its …  number of staff, and it’s not actually large in terms of its budget,” she said. “What it is huge with is its complexity.”

As minister of finance and, now, industry, Wawzonek will be tasked with not only announcing million-dollar relief funds and economic incentives, but ensuring they are implemented correctly.

That has not always been easy. ITI is sometimes the target of criticism from the territory’s private sector, accused of creating unnecessary delays and red tape.

Some of those problems originate in other departments, Wawzonek stressed. But she acknowledged ITI is frequently the “interface” between government and the private sector.

“If we’re not able to show that we’re hearing those concerns and translating it into action at [the] cabinet table … that is when that relationship breaks down,” she said.

Recently, that issue came to a head over how the government hands out contracts — in some cases, bypassing Indigenous companies that had been labouring to build capacity for decades in favour of southern-based corporations.

ITI has been criticized for handing lucrative contracts to southern corporations at the expense of Indigenous companies. Tlicho Grand Chief George Mackenzie, pictured here at the 2019 Tlicho annual gathering in Gameti, N.W.T., called the territory’s past approach an ‘insult’. (Walter Strong/CBC)

Wawzonek said her first priority will be to see a promised procurement review through to completion, during which controversial tools like the N.W.T.’s Business Incentive Policy will be up for discussion.

“We want to be providing value,” she said. “But we also want to ensure that to the best extent that we possibly can, the benefits of government procurement is staying in the North.”

“So I think there’s a very big picture discussion that needs to happen, and then there’s the one-on-one with businesses who say … this was a difficult process to navigate.”

But Wawzonek’s mandate letter — the longest of any minister — also asks her to address long-standing challenges that have stumped previous governments: increasing employment, diversifying the N.W.T.’s economy, and attracting new mining investment.

On the latter, Wawzonek is a realist about the problems facing the mining industry in the territory: unsettled land claims, a lack of infrastructure, and regulatory complexity often said to discourage investment.

Haul trucks lined up for a safety check at the Gahcho Kué diamond mine in February. Wawzonek said the problems facing the northern mining industry are not going to be resolved overnight. (Submitted by De Beers Group)

“The reality is with all three of them, those are not easy problems to fix tomorrow,” she said.

While mining will remain the cornerstone of the economy through her tenure, Wawzonek said she’ll take her lead from regional diversification strategies when deciding which other sectors to target for growth.

“Keeping in mind always that our goal … isn’t just to, you know, diversify for the sake of it,” she said. “It’s to grow an economy from the Northwest Territories.”

Problems predating COVID-19

Her biggest challenge — and greatest limitation — is impossible to ignore: an unending pandemic that has kept the territory’s borders closed and businesses hobbled.

COVID-19 received little mention in Wawzonek’s mandate letter, but it is likely to dominate her immediate future in the role.

Wawzonek has previously spoken about how COVID-19 is making the territory’s problems worse. But faced with the challenge of delivering a fair economic recovery on a tight budget, Wawzonek said not much has changed.

“Our economic challenges and our budgetary challenges started before COVID-19, right?” she said. “What COVID-19 has done is forced everyone to really … reckon with the reality.”

That makes the issue of judging her success or failure in the role a difficult one. Wawzonek takes a moment when asked how she’d judge herself.

In the end, she opts for modest goals — better budgeting in finance that shows the “value for dollar” of government programs, and a procurement review that makes businesses feel heard.

“I think they have to say when things are better,” she said.

“That to me would be success.”

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