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What's Happening in the World Economy: 'Out sick' is New Threat to US Growth – Bloomberg

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Hello. Today we look at the wave of illness that’s crimping America’s recovery, the week ahead in global economics, and how Omicron threatens to dent consumption in China.

Get Well Soon

With the omicron wave of the pandemic rapidly spreading across the U.S., the robust economic recovery is facing a new threat that policy makers have little control over: people calling in sick.

What started as a series of holiday flight cancellations as pilots and other staff fell ill or were forced into quarantine is becoming a reality in factories, grocery stores and ports and again testing supply chains, Shawn Donnan writes.

At Capital Economics, senior U.S. economist Andrew Hunter calculated that upwards of 5 million workers were forced to stay home last week alone. 

Widespread absences are already constraining output, and several economists began the new year by downgrading their first-quarter forecasts.

Even if the hit is temporary, as most anticipate, the disruptions and closures are likely to slow the fragile rebound in some sectors and weigh on businesses’ future plans.

While economists and investors expect the impact to be short-lived, its magnitude may be sizable. Mark Zandi, chief economist for Moody’s Analytics, cut his first-quarter prediction for annualized gross domestic production to close to 2%, down from about 5%.

But he also raised his forecast for the second quarter, saying businesses and the economy are better prepared to face this new wave.

“I don’t expect the virus to sustainably subtract from economic growth on net this year,” Zandi said. Though omicron could, he said, affect how the Federal Reserve views the recovery and when it acts to raise rates. 

The Week Ahead

U.S. inflation probably hit the fastest in four decades, helping explain a shift in the Fed’s approach to monetary policy as well as more consumer anxiety about the economy. 

The widely followed consumer price index on Wednesday is forecast to rise 7.0% for the year through December and climb 0.4% from a month earlier.

The following day, another Labor Department report is projected to show prices paid to producers surged nearly 10% in 2021. Data on December retail sales and industrial production arrive Friday.

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These indicators will follow Tuesday’s congressional confirmation hearing of Fed Chair Jerome Powell. 

Elsewhere, inflation data may show weakening Chinese price pressures, Germany will give an indication of its growth in the last quarter of 2021, and South Korea is likely to keep tightening monetary policy.

Here’s the full rundown of the week ahead

Today’s Must Reads

  • Behind the curve | At this year’s annual meeting of the American Economic Association, prominent economists from both sides of the political spectrum argued that the Fed is behind the curve in the battle to contain inflation. Goldman Sachs now sees the Fed hiking four times.  
  • Hong Kong | Still pursuing a Covid-zero strategy, Hong Kong is facing tough new restrictions that will weigh on its economy.
  • New York port | The Port of New York and New Jersey is working to clear a small, but rare bottleneck of container ships anchored off the coast of Long Island.
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  • Energy transition | The European Central Bank’s inflation forecasts may need to be revised upward because of the continent’s attempts to cut carbon emissions and transition to green energy, an official said.
  • Sanctions worry | Concern among some big European nations about economic fallout raises the risk of a split with the U.S. on how strongly to hit Russia with fresh sanctions if it invades Ukraine.

Need-to-Know Research

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Delta has been bad for China’s consumption; Omicron could be worse. That’s the warning from Bloomberg Economics. 

The zero-tolerance policy on Covid-19 means any outbreaks are met with strong containment measures that stifle consumer spending. 

“For consumption, this is a grim prospect,” write economists Chang Shu and Eric Zhu. They envisage two scenarios for consumption in the first half of 2022, depending on the spread of the latest outbreak and the extent of the actions to contain it, especially around the Lunar New Year:

  • A benign case could see retail sales expanding 4% in 2022, down from an increase of about 13% in 2021 that was boosted by a low base.
  • A more severe scenario could see a smaller rise of around 3.7% this year due to a bigger dent in spending during the Lunar New Year holidays.
  • There could be upside to consumption if China relaxes the zero-tolerance policy.

On #EconTwitter

More from the American Economic Association’s annual meeting, where the Fed’s role in battling racism was also discussed…
 

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    Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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    VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

    Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

    The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

    “If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

    “Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

    Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

    The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

    The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

    Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

    More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

    Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

    “This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

    Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

    “We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

    Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

    Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

    Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

    “We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

    This report by The Canadian Press was first published Sept. 18, 2024.

    The Canadian Press. All rights reserved.

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    N.B. election: Parties’ answers on treaty rights, taxes, Indigenous participation

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    FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.

    Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?

    Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.

    Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.

    Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.

    Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?

    Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.

    Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.

    Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.

    Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?

    Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.

    Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.

    Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.

    This report by The Canadian Press was first published Sept. 18, 2024.

    The Canadian Press. All rights reserved.

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    Canadian Coast Guard crew member lost at sea off Newfoundland

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    ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.

    The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.

    He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.

    The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.

    Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”

    The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.

    Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.

    This report by The Canadian Press was first published Sept. 18, 2024.

    The Canadian Press. All rights reserved.

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