U.S. economic activity appeared to stall in recent weeks, a Federal Reserve report published on Wednesday showed, with job growth and inflation both slowing, and near-term business prospects looking slightly worse than previously.
“Expectations for future growth deteriorated a little, though contacts still largely expected a further expansion in activity,” the U.S. central bank said in its latest “Beige Book” compendium of surveys and interviews, conducted across its 12 districts through May 22.
Contacts across districts noted that while labour markets remained strong, they had “cooled some,” the report said, with businesses in some regions reporting a pause in hiring or reductions in staffing because of weaker demand or greater uncertainty.
Meanwhile districts reported that the pace of inflation had slowed, with prices rising “moderately” and contacts in most parts of the country expecting a similar pace of price increases in the coming months.
In May, Fed policy makers increased the benchmark short-term interest rate a 10th straight time, taking it to a range of 5.0 per cent to 5.25 per cent, and signalled that they were near or possibly at the end of a rate-hike campaign that began last March.
Since that meeting, economic data have generally come in stronger than expected, with the unemployment rate at a decades-low 3.4 per cent and inflation by the Fed’s preferred gauge at 4.4 per cent, more than twice the Fed’s target.
But many Fed policy makers since then have signalled they may wait before undertaking any further policy tightening. While inflation is still too high, they say, the full impact of the Fed’s rate hikes so far is still making its way through the economy, and the degree of credit tightening from bank failures in March remains difficult to gauge.
The Fed’s snapshot of business, bank and worker conditions published Wednesday also said financial conditions “were stable or somewhat tighter” in most of the country.
Fed policy makers have said credit conditions are a key input to their calculations for monetary policy-setting.
Over all, bank-sector stress appears to have receded in the months since the March collapse of Silicon Valley Bank and Signature Bank, despite the failure of an additional regional bank – First Republic – on May 1.
U.S. lawmakers look on course to approve a deal struck over the weekend that raises the debt ceiling and averts a catastrophic default on U.S. Treasuries.
Fed policy makers next meet June 13-14, before which they will get several additional key pieces of economic data, including the monthly government labour market report for the month of May, and a fresh read on the consumer price index.
The Beige Book may also help shape their views of where the economy is heading, and over all did not signal the economy is either experiencing a hard stop or, conversely, a resurgence that would suggest the Fed’s rate hikes to date are not doing their job to slow the economy.
About half of districts reported no change in economic activity in recent weeks, the report showed, while four reported small increases and two reported “slight to moderate declines.”
And there were plenty of pockets of weakness.
“One department store contact reported a sharp sales decline in his stores that he said had ‘worsened throughout March and April,’” the Cleveland Fed said.
The Minneapolis Fed, like some other districts, noted growth in consumer spending over all, but a decrease in activity at minority and women-owned businesses, with one contact who provides technical assistance to women entrepreneurs noting that higher interest rates “scare new entrepreneurs.”
At the St. Louis Fed, banking contacts said loan demand had softened and they expected further weakening ahead. “Contacts reported that clients have been taking distributions from their portfolios to pay off loans and avoid new borrowing,” it said.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
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