The U.S. economy plunged at an unprecedented rate this spring and even with a record rebound expected in the just-ended third quarter, the U.S. economy will likely shrink this year, the first time that has happened since the Great Recession.
The gross domestic product, the economy’s total output of goods and services, fell at a rate of 31.4% in the April-June quarter, only slightly changed from the 31.7% drop estimated one month ago, the Commerce Department reported Wednesday.
The government’s last look at the second quarter showed a decline that was more than three times larger than the fall of 10% in the first quarter of 1958 when Dwight Eisenhower was president, which had been the largest decline in U.S. history.
Economists believe the economy will expand at an annual rate of 30% in the current quarter as businesses have re-opened and millions of people have gone back to work. That would shatter the old record for a quarterly GDP increase, a 16.7% surge in the first quarter of 1950 when Harry Truman was president.
The government will not release its July-September GDP report until Oct. 29, just five days before the presidential election.
While President Donald Trump is counting on an economic rebound to convince voters to give him a second term, economists said any such bounce back this year is a longshot.
Economists are forecasting that growth will slow significantly in the final three months of this year to a rate of around 4% and the U.S. could actually topple back into a recession if Congress fails to pass another stimulus measure or if there is a resurgence of COVID-19. There are upticks in infections occurring right now in some regions of the country, including New York.
“There are a lot of potential pitfalls out there,” said Gus Faucher, chief economist at PNC Financial Services. “We are still dealing with a number of significant reductions because of the pandemic.”
In 2020, economists expect GDP to fall by around 4% , which would mark the first annual decline in GDP since a drop of 2.5% in 2009 during the recession triggered by the 2008 financial crisis.
“With economic momentum cooling, fiscal stimulus expiring, flu season approaching and election uncertainty rising, the main question is how strong the labour market will be going into the fourth quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics.
“With the prospect of additinal fiscal aid dwindling, consumers, businesses and local governments will have to fend for themselves in the coming months,” Daco said.
The Trump administration is forecasting solid growth in coming quarters that will restore all of the output lost to the pandemic. Yet most economists believe it could take some time for all the lost output to be restored and they don’t rule out a return to shrinking GDP if no further government support is forthcoming.
So far this year, the economy fell at a 5% rate in the first quarter, signalling an end to a nearly 11-year-long economic expansion, the longest in U.S. history. That drop was followed by the second quarter decline of 31.4%, which was initially estimated two months ago as a drop of 32.9%, and then revised to a decline of 31.7% last month.
The slight upward revision in this report reflected less of a plunge in consumer spending than had been estimated. It was still a record fall at a rate of 33.2%, but last month projections were for a decline of 34.1%. This improvement was offset somewhat by downward revisions to exports and to business investment.
Building A Circular Economy In New York City And Beyond – Forbes
New York City is the second largest city in the world in terms of consumption—$1 trillion worth of products and services in 2015. (First is Tokyo). So for those interested in building a circular economy, from entrepreneurs to civic leaders, it’s a good place to focus on.
With that in mind, a group called the New York Circular City Initiative recently produced “Complex Challenges, Circular Solutions,” a report about, among other things, how to create a circular system in the Big Apple and, by extension, elsewhere in the U.S. and globally. (It’s also where that $1 trillion figure comes from).
The report concludes the circular approach could create over 11,000 new jobs across the income spectrum in New York City, deliver more than $11 billion in economic benefits and reduce waste to zero. “From economic regeneration to addressing income inequality, these are the type of programs New York City is looking hard at,” says Timothy Wilkins, global partner for client sustainability at Freshfields.
Furthermore, the timing might be especially right: Covid has shrunk supply chains, since suppliers need to be closer to one another, creating a need for more-local solutions.
What is a circular economy, anyway? The core idea is that, as the ever-skyrocketing global population puts an increasingly untenable pressure on natural resources, economies have no choice but to overhaul the design, manufacturing and, ultimately, end life of products. In a circular system, goods would be created with the intention of not just recycling, but reusing, them—basically. The result: No more waste. The Ellen MacArthur Foundation, a member of the initiative, describes it as “an industrial system that is restorative or regenerative by design.”
This is a tall order. To achieve it in New York City and elsewhere, the report investigates 10 “levers” that must be tapped—actions and innovations that cut across sectors.
One important lever for New York City, which buys $19 billion worth of goods and services each year, is procurement, according to Oliver Dudok van Heel, head of client sustainability and environment at Freshfields and the report’s lead author. To that end, one move the report suggests is for the city to target 5% of procurement to be made through circular business models. “You’d be unleashing demand for those kinds of products and you could really kickstart the market,” he says.
Also important, says Dudok van Heel, is the idea of a marketplace. That includes two models. One is consumer-oriented, with the creation of what he calls a “circular mall” where everything for sale is “second life” or second-hand.
For a model, you can look at ReTuna, a mall in Eskilstuna, Sweden, where all retailers must sell used and repurposed goods. Residents can also can drop off their recycling and donations, which stores can then resell or reuse. Also, in Sweden, there’s a 25% reduction in the value-added tax on second-hand goods, according to Dudok van Heel.
The other model is b-to-b, what you might call a materials market. Waste, of course isn’t only created when consumers throw away the finished product. The production of goods also results in a large amount of excess stuff. Thus there’s an opportunity for businesses to form marketplaces where waste that would typically be tossed could be traded and bought, creating new value for the material.
A case in point is Queen of Raw, a New York City-based startup with an online marketplace that matches buyers and sellers of unused fabric, from organic cotton to faux fur. Founder Stephanie Benedetto also built MateriaMX, a service for enterprise sellers aimed at helping them find waste in their supply chains in real-time.
Another likely industry: construction, where all waste is usually thrown away because component materials can’t be separated out. If a recycling organization could separate, say, timber from metals, it all could all be traded on a marketplace, turning that unwanted trash into a newly valuable commodity.
With the right industrial planning processes, such an approach could also work among states. So rather than sourcing stuff from the other side of the world, at a significant cost, New York State could engage in a marketplace with, say, Rhode Island.
One city-specific example is in Austin. Through the Austin Materials Marketplace, an online platform launched in 2014, businesses and other groups can trade anything from discarded lumber to towel racks, turning their unwanted waste into someone else’s raw material. “Waste is no longer waste. It’s a resource,” says Dudok van Heel.
Other levers include finance, since these initiatives will all need innovative funding to get off the ground, and education, that is, “getting people to understand how as citizens they can become part of the solution,” he says.
Both Biden and Trump victories present implications for Canada's economy, shows new report from RSM Canada – Canada NewsWire
- Analysis of policies and data from both candidates suggests that a victory for either could pose risks for Canada’s economy
- Canada’s increasing economic dependence on the U.S. also a large factor in any potential headwinds
- COVID-19: Canadian economic growth expected to be gradual, with economy projected to contract 5.5 per cent in 2020, followed by a 6 per cent expansion in 2021
- Consumer sector has been pivotal to Canada’s economic recovery process to date, while labour and manufacturing are still in shock
TORONTO, Oct. 20, 2020 /CNW/ – RSM Canada (“RSM”), the leading global provider of audit, tax and consulting services focused on middle market businesses, today launched its third 2020 issue of “The Real Economy: Canada” – a quarterly report that provides Canadian businesses with economic analysis and insights into factors driving growth, or economic headwinds, in Canada’s middle market.
With the U.S. presidential election taking place in just a matter of weeks, and Canada looking to navigate a second wave of the COVID-19 pandemic, the latest Real Economy: Canada report shines a light on how the election outcome, combined with Canada’s reliance on the U.S. economy, might alter Canada’s recovery and longer-term outlook.
This report also looks at how Canadian industries have fared since the onset of the pandemic and explores measures the federal government and other authorities can take as the recovery process continues.
Key findings in this quarter’s report include:
- Recovery for both Canadian and U.S. economies are closely intertwined
- Growing dependence on the U.S. due to CUSMA and deteriorating relationship with China has hampered Canada’s ability to chart its own economic course.
- Data shows total trade between Canada–China has trended downward since the beginning of the U.S.-China Trade War in 2018. In comparison, total trade between Canada and the United States increased during this period.
- Current administration’s struggles to cap COVID-19 cases suggest a Trump re-election would present economic risks to Canada due to close economic ties.
- Biden’s proposed ‘Made in America’ tax incentive, which offers tax credits for companies in the U.S. that expand employment and salaries domestically, could potentially discourage future Canadian market expansion.
- Trump’s protectionist tendencies would indicate Canada may see further headwinds with its largest trading partner if he’s re-elected.
- Biden’s willingness to adopt Trump’s tough stance on China if elected suggests Canada will likely continue to be negatively affected by U.S.-China trade relations.
- Canadian oil pricing will be hit hard if Biden follows through on his campaign promise to cancel the Keystone XL pipeline, a critical venture for Western Canada oil producers that would provide direct access to the Gulf Coast refineries and world markets.
- Consumer confidence’s summer comeback have influenced forecasts of a V-shaped GDP recovery in the coming quarters and sustained growth into 2022.
- However, the recent resurgence of new infections has dealt a blow to recovery and consumer expectations.
- The service sector, which now employs nearly 80 per cent of the total labour force, lost 850,000 jobs since the start of the pandemic.
- Danger of lingering damage to labour force through loss of skills & productivity, and the ability of an idle labour force to keep up with the acceleration in technological changes.
- New manufacturing orders 11 per cent below their pre-crisis peak and roughly 5 per cent less than last year.
“Despite a rocky relationship between Canada and the current U.S. administration in recent years, it’s clear that a victory for either Trump or Biden would pose risks to Canada’s economy,” says Alex Kotsopoulos, vice president, projects and economics with RSM Canada. “The issue is that Canada has become increasingly dependent on its neighbour south of the border, and when you combine this with the strong ‘America First’ policies of both presidential candidates, Canada will feel the brunt of those decisions. Therefore, it’ll be important for the Canadian government to proactively engage with the new administration to shore up trade and supply chains, which will be vital in the Canada’s own recovery.”
Joe Brusuelas, chief economist with RSM US LLP, added: “When looking at Canada’s economic recovery data from the pandemic so far, it’s clear that the resurgence of Canada’s consumer sector has led the charge after a lengthy shutdown. However, to achieve stronger growth the labour force and industrial sector will be critical pieces of the puzzle, and while there is no meaningful or complete recovery until there is a vaccine, further expansion of the real economy by fiscal and monetary authorities will be important to keep recovery moving in the right direction.”
For more information on RSM Canada’s ‘The Real Economy: Canada‘, or to download the report, please visit: https://rsmcanada.com/our-insights/the-real-economy/the-real-economy-canada-volume-7.html
RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.
RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in 120 countries. RSM Alberta LLP is a limited liability partnership and independent legal entity that provides public accounting services. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. For more information visit rsmcanada.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.
SOURCE RSM Canada
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Letter: There is no trade-off between public health and the economy – Open Democracy
The UK Government’s approach to suppressing COVID-19 risks becoming the worst of all possible worlds. Partial measures to half-close the hospitality and other sectors without providing sufficient financial support to the businesses in them will not suppress the rate of infection sufficiently to cut the death rate and protect the NHS, but will almost certainly lead many businesses to close and workers to lose their jobs.
As both SAGE and The Lancet have said, short but deep ‘circuit breaker’ lockdowns are the only way to rapidly reduce the R rate to a level which can then allow the economy and social life to open up again. But they must be accompanied by the generous furlough and business support schemes for which the Chancellor was rightly praised in the spring. Support to the self-employed and those on Universal Credit also needs to be increased.
Yes, this will cost the Treasury money. But, as in times of war, there is no effective economic limit on crisis spending: debt can be absorbed now by the Bank of England and paid back over 25 years or more.
Over the medium term there is no real trade-off between public health and the economy. Only by suppressing the virus will the economy be able properly to reopen. This is likely to require periodic circuit breaker lockdowns; but with sufficient Treasury support those will almost certainly cause less economic and mental hardship than permanent half-measures. Ultimately, exiting this destructive cycle requires a functioning test and trace system, with local health teams, rather than private and centralised companies, in charge.
Professor Simon Wren-Lewis, Emeritus Professor of Economics, University of Oxford
Professor Jonathan Portes, Professor of Economics and Public Policy, King’s College London
Professor Daniela Gabor, Professor of Economics and Macro-Finance, UWE Bristol
Professor Michael Jacobs, Professor of Political Economy, University of Sheffield
Dr Jo Michell, Associate Professor of Economics, UWE Bristol
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