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U.S. Economy Can Likely Weather Russia Crisis Shock But Democrats Face Peril – Financial Post

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(Bloomberg) — Inflation-walloped Americans are largely prepared to withstand the economic pain imposed by Russia’s Ukraine invasion. That may be little solace for President Joe Biden’s Democrats, who will pay a price at the ballot box for the surging cost of living, if history is any guide.

Consumer prices were already rising at the fastest pace in four decades even before the hit to energy and food supply chains caused by the war and sanctions imposed by the U.S. and its allies on Russia. Gasoline prices are already up about 20% this month, reaching an unprecedented $4.33 a gallon in recent days — contributing to the weakest consumer sentiment in more than a decade.

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Americans have overwhelmingly supported banning Russian oil imports, a step Biden took Tuesday. At the same time, polls show a majority see the nation as on the wrong track, and fault Biden’s handling of the economy, particularly on inflation. Biden now might be running out of time to turn opinions around before Democrats have to defend their razor-thin congressional majorities in November’s elections.

Voters tend to lock in their perceptions of the economy six to nine months before an election, said Christopher Wlezien, a political economist at the University of Texas at Austin who’s been analyzing elections for more than three decades.

“Things that happen late can still matter, but over time you have more and more history to overcome,” Wlezien says of election campaigns.

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Economists have scrambled to incorporate the impact of the geopolitical crisis. Goldman Sachs Group Inc. sees about a 20% to 35% chance of a recession in the next year. But put another way, their baseline is in accord with the assessment of Treasury Secretary Janet Yellen, who said Thursday she didn’t expect an economic downturn.

“We haven’t derailed our view on a still-solid recovery,” Bruce Kasman, chief economist at JPMorgan Chase & Co., said on Bloomberg Television Friday. “The U.S. economy has shown already pretty significant resilience in the face of shocks — the underpinnings are healthy.”

The latest shock comes against a backdrop of a powerful economic recovery.

The unemployment rate is historically low at 3.8%, and there’s a notable cushion of savings thanks to unprecedented federal support for households the past two years — median checking-account balances at the end of last year were well above 2019 levels, especially for lower-income Americans, analysis by the JPMorgan Chase Institute shows. And total consumer spending, adjusted for inflation, is notably higher now than before the pandemic. Furthermore, gasoline makes up less than 4% of the average consumer basket.

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The Biden administration has blamed inflation on Russian President Vladimir Putin’s invasion of his neighbor. This is “Putin’s price hike,” the president said Tuesday with regard to gas-price increases.

Trouble is, price gains are a whole lot broader than just energy, and they began well before the war. Americans are also simultaneously dealing with higher rent and food costs, along with the biggest jump in the cost of services — a category including airfares and hotel stays — since 1991. And inflation may not peak until April, according to Bloomberg Economics. Depending on how high oil prices rise, consumer-price increases could reach 9% or even over 10%. 

“I’m worrying about what will happen tomorrow,” says Naomi Ogutu, a 45-year-old single mother of three who’s been driving for Uber and Lyft since 2016 in New York and New Jersey after immigrating from Kenya in 2012. She used to spend about $200 per week on gas for her rideshare work but now pays $300.

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Most economists expect there to be at least some impact on consumer spending this year from the war overseas. As people spend more on necessities, they have less money to spend on discretionary items and services like dining out.

If oil prices stay near $120 a barrel for the rest of the year, then gasoline prices would likely average $4.40 a gallon, for an increase of $1.40, according to Oxford Economics. That would represent an additional cost of $190 billion this year for U.S. families — or $1,500 per household, says Lydia Boussour, the research group’s lead U.S. economist.

Six months ago, Chris Cary was doling out $500 a week in payday advances to workers at the two Virginia franchises of his staffing agency, Express Employment Professionals, in Newport News and Chesapeake — loaning the money interest-free and deducting it from their checks. That’s ballooned to $1,000 to $2,000 a week recently, with most workers citing transportation costs.

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“We’re getting two or three a day saying, ‘I need gas money,’” Cary says of his employees.

Political Risk

Democrats were already facing a difficult issue environment heading into the November elections, having lost ground in Virginia and other states in the off-cycle election last year. The sitting president’s party typically suffers a reversal in support during the midterms.

Biden’s approval rating — which really started to suffer in the chaos following the U.S.’s withdrawal from Afghanistan — now stands at 42.9%, roughly 10 points below this time last year, according to the RealClearPolitics average. An Economist/YouGov poll earlier this month found that 61% of Americans thought that inflation was a “very serious” problem. That number was even higher among registered voters, independents and suburbanites — the people Democrats most need to keep their razor-thin control of the House and Senate.

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The president at least may win support for his strong stance against Putin. 

“I support the higher good of protecting U.S. allies” even with higher prices, says Carol Reyes, a resident of the Atlanta suburb of Lawrenceville. “I haven’t thought of the breaking point, but nothing could sway my vote for freedom,” says the 50-year-old Democrat, who’s been making ends meet with credit cards since the pandemic.

While the prospects for the conflict in Ukraine are uncertain, Ethan Harris, head of global economics at Bank of America Corp., emphasizes the crisis is “a significant shock hitting a fundamentally strong backdrop.”

“We will get a lot more worried if we see two kinds of developments,” Harris says. First is a cut-off of Russian energy so severe it sends crude oil spiking to $175 a barrel, averaging $130 for the year. Second is a failure of inflation to recede, spurring the Federal Reserve to tackle inflation more aggressively. “Combining a major oil shock with serious policy tightening implies a serious risk of recession.”

©2022 Bloomberg L.P.

Bloomberg.com

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A timeline of events in the bread price-fixing scandal

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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