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US surge in coronavirus cases darkens outlook for economy – Financial Times

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The US economy is facing an accelerating surge in coronavirus cases and harsh new restrictions on business activity without the cushion of meaningful fiscal support, raising fears of a blow to the recovery.

Even though equity markets have rallied strongly on advances in the development of a vaccine, the deteriorating health situation across the country is presenting an imminent threat to the US economy as the winter months approach.

The US has already recorded more than 1m new coronavirus cases so far this month, with the healthcare system in parts of the country now under severe strain. Lockdown measures have been introduced in a number of states and major cities in an attempt to contain the spread.

Whereas the White House and Congress agreed to $3tn in government spending measures to counter the initial pandemic lockdowns in March and April, they failed to reach a deal on further stimulus before the election and have made little if any progress towards an agreement since the vote.

Joe Biden, the US president-elect, has called for a compromise even before he takes office in January given the urgency of the situation, a position that was reinforced on Sunday by Ron Klain, his pick for White House chief of staff.

“There’s a lot of things that are going to have to wait until Joe Biden is president, but this is not one of them,” he told NBC on Sunday, adding that direct help to people and state and local governments to prevent job losses was crucial. “This is a national crisis, it needs bipartisan action now.”

Even Donald Trump, the outgoing president who has waxed and waned over the issue of new coronavirus economic relief for months, said in a tweet over the weekend that he wanted an agreement.

Still, big differences remain between congressional Democrats who are pushing for a broader and more costly package worth more than $2tn, and Republican lawmakers who think the economy needs far less. This has economists worried that no significant agreement will be reached, leaving households and businesses to fend for themselves even as new lockdowns are introduced and workers are furloughed or dismissed.

Ron Klain testifying before an Emergency Preparedness, Response and Recovery Subcommittee hearing on Capitol Hill in Washington DC, in March
Ron Klain, Joe Biden’s chief of staff, called for swift action to counter the economic drag of rising Covid-19 cases © AFP via Getty Images

“From a health perspective and as a result from an economic perspective we’re really not in a good place, there’s really no way to sugarcoat it. We have essentially a fairly long winter ahead of us,” said Gregory Daco, chief US economist at Oxford Economics.

“The vaccine news, the pent-up savings, the possibility of coming back to a new normal in six months’ time are all very encouraging, and a source of optimism, but they do nothing for us today.”

Michael Feroli, a senior US economist at JPMorgan Chase, said if fiscal support ended up being slower or smaller than expected this time, compared with the aid delivered during the first virus wave, it would “definitely present some considerable risks to growth” at a time when momentum was already waning.

JPMorgan Chase data on its own credit and debit card spending released last week showed a notable dip in November, particularly in states suffering big rises in coronavirus cases.

“I wouldn’t say the evidence right now is conclusive that we are entering a double dip. But there are certainly some warning signs out there,” Mr Feroli said.

Nancy Pelosi, the Democratic speaker of the House of Representatives, on Friday said a stimulus package was a top priority for the next few weeks in Congress, during the “lame duck” session before new lawmakers and Mr Biden take office. “This is a red alert, all hands on deck,” she told reporters.

But Mitch McConnell, the Kentucky Republican and Senate majority leader, does not feel the same level of urgency and no serious negotiations have resumed on Capitol Hill.

The lack of fiscal support in the world’s largest economy as the coronavirus crisis worsens could raise pressure on the Federal Reserve to take further action, even though it has already delivered huge amounts of monetary support and lacks the tools to help struggling workers and companies directly.

The Fed refrained from any new policy moves in early November at its policy meeting following the presidential election, but discussed changes to its asset purchase programme that could “deliver more accommodation if it turns out to be appropriate”, as Jay Powell, the Fed chairman, described it in his press conference.

The prospects for such a step is likely to be a key focus when the Federal Open Market Committee next meets in mid-December, but some strategists said the US central bank may be forced to move even sooner.

Steve Englander, head of North America Macro Strategy at Standard Chartered, wrote in a note that the Fed could increase its asset purchases and try to expand its credit facilities for struggling businesses as its next move.

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Biden looks to fill out economic team with diverse picks – EverythingGP

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Yellen became Federal Reserve chair in 2014 when the economy was still recovering from the devastating Great Recession. In the late 1990s, she was President Bill Clinton’s top economic adviser during the Asian financial crisis. Under Biden she would lead the Treasury Department with the economy in the grip of a surging pandemic.

If confirmed, Yellen would become the first woman to lead the Treasury Department in its nearly 232-year history. She would inherit an economy with still-high unemployment, escalating threats to small businesses and signs that consumers are retrenching as the pandemic restricts or discourages spending.

NEERA TANDEN, Office of Management and Budget director

Tanden is the president and CEO of the liberal think-tank Center for American Progress. She was the director of domestic policy for the Obama-Biden presidential campaign, but she first made her mark in the Clinton orbit.

Tanden served as policy director for Hillary Clinton’s 2008 presidential campaign. Before that, she served as legislative director in Clinton’s Senate office and deputy campaign manager and issues director for Clinton’s 2000 Senate campaign. She also served as a senior policy adviser in the Bill Clinton administration.

If confirmed, she would be the first woman of colour and the first South Asian woman to lead the OMB, the agency that oversees the federal budget.

BRIAN DEESE, director of the White House National Economic Council

Deese, a former senior economic adviser in the Obama administration and now the managing director and global head of sustainable investing at BlackRock, would be the top economic adviser in the Biden White House. He worked on the auto bailout and environmental issues in the Obama White House, where he held the title of deputy director of both the NEC and the OMB.

CECILIA ROUSE, chairwoman of the Council of Economic Advisers

Rouse is a labour economist and head of Princeton University’s School of Public and International Affairs. She served on the CEA from 2009 to 2011, and served on the NEC from 1998 to 1999 in the Clinton administration.

Notably, she organized a letter earlier this year signed by more than 100 economists calling for more government action to mitigate the fallout for Americans caused by the coronavirus pandemic.

Rouse, who is Black, would be the first woman of colour to chair the CEA.

Biden is also expected to name Heather Boushey, the president and CEO of the Washington Center for Equitable Growth, and Jared Bernstein, who served as an economic adviser to Biden during the Obama administration, to serve on the council. Both Boushey and Bernstein advised Biden during the presidential campaign.

___

Associated Press writers Alexandra Jaffe, Christopher Rugaber and Michael Balsamo contributed to this report.

Aamer Madhani, The Associated Press

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Freeland to deliver Liberal plan to revive Canada's post-pandemic economy today – CBC.ca

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The federal government will release its long-awaited fiscal update today — a spending plan to help Canadians cope with COVID-19 while recharging the national economy and key sectors battered by the global crisis.

Deputy Prime Minister and Finance Minister Chrystia Freeland will rise in the House of Commons at 4 p.m. ET today to outline details of her plan to both boost job creation and cut greenhouse gas emissions.

Government sources have told CBC News the plan will include new but time-limited spending measures to support hard-hit industries and vulnerable Canadians, while laying the groundwork for the policy priorities presented in September’s speech from the throne.

The update comes in the wake of optimistic reports suggesting promising vaccine candidates could roll out early in the new year — and as COVID-19 caseloads continue to grow alarmingly in some parts of the country. Numbers have reached record highs in some regions, prompting new or extended restrictions and business closures.

The measures in today’s economic statement are expected to include:

  • Support for airlines and the tourism and hospitality sector, hit hard by heavy losses due to border closures and lockdowns. The sources suggest the update will include assistance for airlines, hotels and restaurants, and for the companies that supply them.
  • Money to help long-term care homes stop the spread of infections.
  • Support to help women return to work.
  • Stimulus spending for infrastructure projects tied to the government’s promise to reduce greenhouse gas emissions as part of the economic recovery.

Record deficit projected

The government has not tabled a budget for this fiscal year, but in July delivered what it called a “fiscal snapshot” that projected the deficit would hit a record $343.2 billion.

The Trudeau Liberals last delivered an actual budget in March 2019, when they were still in their first mandate.

The Trudeau government has pushed back at calls to deliver an economic forecast since the current health crisis began, maintaining that the pandemic made it impossible to accurately predict economic growth or the scope of necessary emergency spending.

Conservative Leader Erin O’Toole said the government’s delays in procuring rapid testing and vaccines have put workers and the economy in a “risky” situation.

“There is no plan for the economy if we don’t have rapid testing and vaccines as swiftly as possible,” he said during a news conference in Ottawa Sunday.

“We’re already seeing small businesses teetering on the edge. That is leading to the uncertainty and the concern out there about the wellbeing of tens of thousands of Canadian families that have invested everything in their restaurant or their autoshop or a range of businesses that are close to bankruptcy.”

WATCH | What to expect in the long-awaited fiscal update:

CBC News’s David Cochrane breaks down what Finance Minister Chrystia Freeland is expected to announce in Monday’s federal fiscal update, including details on the deficit and new pandemic spending. 1:16

NDP Leader Jagmeet Singh said today’s update is the perfect opportunity to announce “bold measures” to address the needs of the Canadians most severely affected by the pandemic.

“The COVID-19 pandemic has shown how fragile the services that were supposed to help people are, and the importance of strengthening our social safety net so that no one is left behind,” he told CBC News.

NDP pushes for child care support

The NDP is calling on the federal government to fund child care services that would allow more parents to return to work safely. It’s also pressing the government to launch a universal pharmacare program.

Green Party Leader Annamie Paul said it’s not enough for the government to present a “laundry list” of spending today. With a vaccine expected next year, she said, it must present a green recovery plan with economic and social investments.

“With a glimmer of hope on the horizon, it is vital that we seize this moment to prepare a green recovery plan that will engage every possible innovation, technology and resource at Canada’s disposal to enhance our ability to face challenges,” she said. 

The Green Party is calling for a guarantee that any supports the Liberals offer carbon-intensive sectors are “responsible and conditional.” It also wants to see larger investments in projects and sectors that speed up progress toward a net-zero emissions economy.

Business hopes to see long-term growth plan

Business groups say they hope to see a plan today that charts a course through the ongoing crisis to long-term economic recovery and growth.

Canadian Chamber of Commerce president and CEO Perrin Beatty said he wants to see a shift from broad supports to smaller, more targeted federal programs to help the most vulnerable Canadians and sectors, including the restaurant, accommodation, arts and entertainment and retail sectors.

He said he hopes to see a plan that will boost Canada’s business investment and competitiveness — and not a suite of “unaffordable” new permanent programs.

“Even as we navigate our way through this second wave of the pandemic, Canada needs its government to set the conditions for a strong, business-led recovery. Canadian families and businesses continue to pay a high price because of COVID-19, and the hard work of getting Canada’s economy ready for recovery must start now with a clear and coherent plan,” he said in a media statement.

Business organizations say they want to see a fiscal update focused on boosting growth. (Evan Mitsui/CBC)

Cash-strapped municipalities are also looking for good news in today’s statement.

Federation of Canadian Municipalities president Garth Frizzell said he hopes to see “clear successor arrangements” to the safe restart agreement, which saw the federal government set aside $19 billion for the provinces to help them weather the second wave and drive job growth post-pandemic.

“The fall economic statement is an opportunity to build on the federal-municipal partnership that has kept Canadians safe, and essential front line services running strong, since the beginning of the pandemic,” he said.

“They rely on us to keep doing that through 2021, and that’s why municipalities need to see a clear commitment that the federal government will continue to work with us to ensure support for municipal operating and transit costs.”

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Turkish Economy Fared Much Better Than Peers in Third Quarter – BNN

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(Bloomberg) — Turkey’s coronavirus-battered economy fared far better than all peers in the third quarter, driven by a stimulus campaign that sacrificed the lira and price stability.

Gross domestic product last quarter rose 6.7% from a year earlier, after shrinking 9.9% in the previous three months, according to data released on Monday. The median of 14 forecasts in a Bloomberg survey was for 4.8% growth. The seasonally and working day-adjusted figures showed an expansion of 15.6% in the third quarter from the previous three months.

The $736 billion economy outperformed all Group of 20 nations including China, thanks in part to a combination of interest-rate cuts, fiscal spending and a government-led credit push.

Below are some of the highlights of the GDP report released by the state statistics institute in Ankara:

  • Last quarter’s growth was driven by a rise in household consumption, which jumped 9% from a year earlier.
  • Exports dropped 22% on an annual basis, after falling 36% in the preceding three months. Imports rose 16% following a 8% drop.
  • Gross fixed capital formation, a measure of investment by businesses, rose an annual 23%.

To help businesses and consumers ride out the the pandemic, the Turkish government pushed banks to ramp up lending. Loan growth remained robust throughout the summer, slowing toward the end of the third quarter.

At the same time, the central bank injected liquidity by scooping up government bonds, and delivered 1,575 basis points of easing until rate cuts stopped in June, leaving Turkey’s inflation-adjusted borrowing costs among the lowest in the world. The weighted average cost of funding dropped as low as 7.34% in July, then started growing for the rest of the quarter to end at 11.1%.

With the lifting of most virus-related restrictions imposed in the previous quarter, domestic tourism gained pace, and airports were opened to most foreign tourists.

The picture for the fourth quarter is less rosy as Turkey began reimposing limitations following a virus surge and replaced its central bank and economy chiefs. President Recep Tayyip Erdogan pledged to support his new economic managers with “bitter-pill” policies that conflict with his views — but only after the currency hit record lows, keeping headline inflation in double digits. The lira has lost 24% against the dollar this year.

The central bank’s new governor, Naci Agbal, started his tenure by raising interest rates by the most in over two years, a move that could damp demand.

“The fourth quarter will point to a slower growth picture.” said Enver Erkan, an Istanbul-based economist at the Tera Yatirim investment house.

(Updates with highlights of the report in the fourth paragraph)

©2020 Bloomberg L.P.

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