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 – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
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