(Bloomberg) — All eyes are on U.S. data this week after Friday’s jobs report showed a drop in payrolls for the first time since April, highlighting how surging coronavirus infections are taking a greater toll on parts of the world’s biggest economy.
Rising fuel costs led to a slightly firmer, yet still subdued, pace of inflation last month, while a resurgent coronavirus stifled retail sales, economists project a pair of U.S. reports to show.
The government’s consumer price index is garnering more scrutiny as investors and economists debate the possibility of accelerating inflation in coming months. Extremely easy monetary policy, trillions of dollars in fiscal relief that may keep expanding under the incoming Biden administration, and higher materials costs are providing the basis for increased price pressures.
Federal Reserve Chair Jerome Powell, who speaks Thursday, is in the spotlight as optimism over additional pandemic aid lifts hopes for the economy later this year. Officials have signaled interest rates will stay near zero through at least 2023 and vowed to keep buying bonds at a pace of $120 billion a month until “substantial further progress” is seen toward their employment and inflation goals.
Exactly how long that takes is not spelled out, though a few policy makers, including Chicago Fed President Charles Evans and Atlanta’s Raphael Bostic, said last week they might support reducing the pace of buying by year-end if the economy bounces back strongly enough. Still, Fed Vice Chair Richard Clarida said Friday he doesn’t expect the central bank to begin tapering its asset purchases in 2021.
A government report at the end of the week is expected to show increased Covid-19 infection rates continued to take a bite out of retail sales. Economist project a third straight decline in purchases at retailers excluding motor vehicle dealers.
What Bloomberg Economics Says…
“Economic slack in general and labor slack in particular will stifle any sustained pickup in price pressures. This will yield the Fed an extremely long runway before officials will need to legitimately contemplate reducing accommodation.”
–Carl Riccadonna, Andrew Husby and Eliza Winger
For more, read Bloomberg Economics’ full Week Ahead for the U.S.
Elsewhere in the world economy, China data are likely to show the recovery extended into the year-end, and central banks in South Korea, Poland and Peru set rates.
Click here for what happened last week and below is our wrap of what is coming up in the global economy.
Europe, Middle East, Africa
Germany will publish its first reading for 2020 GDP on Thursday, with analysts predicting Europe’s biggest economy contracted 5.2%, the most since the 2009 financial crisis. That report may also provide the first official indication from any Group of Seven country on its growth performance during the fourth quarter. Further hard data from around the euro area include a November reading for industrial production in the region.
Christine Lagarde’s first public appearances of the year may provide clues for investors on the implications for monetary policy, as the European Central Bank president participates in events on Monday and Wednesday. Highlights of officials’ deliberations at their last decision on Dec. 10 will be released on Thursday, when the institution also begins a quiet period before its forthcoming meeting the following week.
In the U.K., GDP data for November will give an initial glimpse of the economic damage inflicted by a renewed lockdown that imposed that month to contain the coronavirus. Economists predict a sharp drop of 4.8%, the first contraction in seven months.
The only two central banks in the region due to take monetary decisions this week are Poland and Serbia. Economists predict both institutions will keep rates on hold.
Israel is expected to report December data that will show a ninth straight month of declining consumer prices, highlighting the Bank of Israel’s struggle to curb the appreciation of the shekel. Saudi Arabia and Turkey report unemployment figures.
For more, read Bloomberg Economics’ full Week Ahead for EMEA
Asia
China’s consumer prices are expected to have flat lined in December while factory deflation moderated and exports continued to power the nation’s recovery, data Monday and Thursday are set to show.
India’s consumer price index figures due Tuesday are expected to show inflation moderating back to within the Reserve Bank of India’s target range of 2% to 6%.
South Korean jobs data out Wednesday will offer the latest snapshot of a labor market showing a split between a slow recovery of employment in the service sector and worsening falls in factories. Later in the week the Bank of Korea is expected to keep policy on hold. Governor Lee Ju-Yeol, who has flagged concern over the uneven nature of the recovery, will give comments after the decision.
Bank of Japan Governor Haruhiko Kuroda speaks on Thursday in his first scheduled appearance since the start of a renewed state of emergency in Tokyo.
For more, read Bloomberg Economics’ full Week Ahead for Asia
Latin America
Since the pandemic struck last year, only two countries in the region have posted year-on-year growth in industrial output — Brazil and Chile. Data out Monday is set to reveal that Mexico’s not quite there yet.
After the shock of 2020, one sign of a world returning to something akin to normal is the fact that inflation once again matters in Brazil. December figures posted Tuesday will show that the annual rate rose for a seventh month and is now well above the 3.75% target.
Consumer price data out Thursday for Argentina will be near lows for the year, but most observers see it accelerating in 2021.
Later in the day, Peru’s central bank will all but certainly keep its key rate unchanged at a record-low 0.25% for a ninth month.
A report Friday in Brazil will show retail sales extending an extraordinary run, fueled by government cash handouts and cheap credit, likely posting a sixth consecutive year-on-year rise.
For more, read Bloomberg Economics’ full Week Ahead for Latin America
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.
