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UK Economy Probably Entered Its Worst Slump Since Lockdown – BNN

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(Bloomberg) — The UK economy probably shrank for the first time since the nation was in a coronavirus lockdown at the start of 2021, adding to pressure for action from the contenders vying to take over as prime minister.

Gross domestic product for the second quarter probably shrank 0.2%, according to a survey of economists by Bloomberg News ahead of the official figures due to be published this week.

The drop would mark a pause in the recovery from the pandemic and the start of a more protracted downturn, which the Bank of England expects to last into early 2024. That outlook is roiling the race to replace Boris Johnson as leader of the ruling Conservative Party and prime minister.

Liz Truss and Rishi Sunak, who are competing in the race set to conclude in September, spent the weekend promoting their ideas to help. The central bank last week forecast that inflation will accelerate past a 40-year high to more than 13% this year, weighing heavily on consumer spending power.

Former Prime Minister Gordon Brown and the BOE’s former Chief Economist Charlie Bean this weekend added their voices pushing for an aid package that would help those hardest hit. They say the measures Johnson’s government brought forward earlier this year aren’t enough.

“The main package for households was worth about £15 billion, and there is certainly a case for something of at least that magnitude again,” Bean said in an interview on Times Radio.

Brown called for an emergency budget, warning that almost half of all households will tip into fuel poverty this winter because of a surge in the cost of electricity and natural gas.

“A financial time bomb will explode for families in October as a second round of fuel price rises in six months sends shock waves through every household and pushes millions over the edge,” Brown wrote in the Observer newspaper. He’s scheduled to appear on ITV on Monday.

The remarks and the outlook for rising natural gas prices add to the pressure on Truss and Sunak to explain what they would do to revive the economy. 

Truss, the front-runner, has said she’d push through immediate tax cuts to help. Sunak, the former chancellor of the exchequer, says those measures would take too long to implement and wouldn’t help enough of those most in need.

A YouGov poll published on the front page of the latest edition of the Times, which is backing Sunak, suggested that most voters would rather the next prime minister focus on tackling inflation and the looming cost-of-living crisis rather than slashing taxes.

The economic backdrop is deteriorating rapidly as the surge in inflation makes businesses and consumers more cautious about spending.

The GDP report probably will show that the economy shrank 1.2% in June alone, held back in part by bank holidays to mark Queen Elizabeth II’s jubilee. 

The BOE warned last week that the UK probably will enter recession in the fourth quarter of this year and keep shrinking for the whole of next year. 

Energy prices are the biggest factor weighing on households. Starting in October, utilities will be allowed to charge £4,000 ($4,860) a year for the average power and gas bill, the highest level ever and almost four times the level of a year ago.

The BOE last week said gas futures are now about double the level they were in May, triggering a big increase in the central bank’s outlook for inflation.

Truss spent the weekend drawing attention to her vow for an immediate tax reduction and said that measure could help prevent a recession.

“I do not believe in resigning our great country to managed decline or accepting the inevitability of a recession,” Truss wrote in the Sunday Telegraph. “I would use this to immediately tackle the cost-of-living crisis by cutting taxes, reversing the rise on national insurance and suspending the green levy on energy bills.”

Read more:

  • UK Energy Price Cap Estimate Tops £4,000 for the First Time
  • Truss to Speed Up UK Tax Cuts in Leadership Bid, Telegraph Says
  • BOE Governor Tips Into Political Storm Over Surging UK Inflation

(Adds YouGov poll in 11th paragraph)

©2022 Bloomberg L.P.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

The Canadian Press. All rights reserved.

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September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

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OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

The Canadian Press. All rights reserved.

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Economy

How will the U.S. election impact the Canadian economy? – BNN Bloomberg

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How will the U.S. election impact the Canadian economy?  BNN Bloomberg



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