(Bloomberg) — The key to if — or when — the US economy falls into recession will depend on how the latest turmoil in the banking sector spills over to Main Street.
Less lending and tighter loan standards would make it tougher for people to buy cars and homes, and harder for businesses to expand and invest. Elevated concerns about the banking system and heightened odds of a recession also risk turning households more cautious about spending and businesses wary of beefing up payrolls or pursuing capital investments.
The economy was already showing some cracks from the Federal Reserve’s steep interest-rate hikes to stave off inflation. The failure of three US banks followed by a crisis of confidence in Credit Suisse Group AG spooked investors on concerns about the stability of the financial sector.
With conditions changing by the hour, traditional economic data points — typically released monthly or quarterly with a lag — prove less helpful.
Following are some places to look to gauge the economic fallout from the tumult in the banking sector. It should be noted, though, that some of these indicators have already retreated in recent months which will make deciphering the impact even more challenging:
Bank Lending
Each Friday around 4:15 p.m. in Washington the Fed releases a slew of information on assets and liabilities at the nation’s commercial banks. Statistics on consumer, real estate and commercial loans are all included, as well as broken out into broader categories based on bank size.
The report, known as the H.8, will be closely watched by economists and investors for insight into lending patterns and deposits at both regional banks and the nation’s biggest banks.
The Senior Loan Officer Opinion Survey on Bank Lending Practices is a quarterly survey of up to 80 large domestic banks and 24 US branches of foreign banks that also offers insight into lending standards as well as demand for and loans to businesses and households.
While not a high-frequency measure, the next report will be released in April — an opportune insight in the wake of the turbulence seen in March. Indications of a tightening of bank lending standards may raise concerns about the economy’s prospects.
Consumer Confidence
Consumer confidence is fickle and fragile, and while certainly not perfect, it can at times help signal changes in personal spending.
Early indications are that the upheaval in the banking sector is having an impact. A measure by Penta and CivicScience showed confidence in the US economy fell by the most since June in the two weeks ended March 14.
Results of the University of Michigan’s March survey of consumers, set for release later on Friday, was conducted Feb. 22-March 15 and will likely reflect some impact from the latest market turmoil. The final index, out March 31, will offer a clearer picture of consumers’ initial reaction to the bank failures. The data are released twice a month.
The Conference Board has a similar measure, which is due on March 28.
Credit Card Spending
A key way to assess whether Americans are pulling back on spending is through credit card data.
The Bureau of Economic Analysis estimates spending on a variety of services and merchandise using daily payment card data. Unlike personal spending data that’s released monthly and with a significant lag, BEA generally updates this data weekly.
Several private sources also regularly provide insights into consumer spending patterns, including Bank of America Corp. and Visa Inc.
Business Sentiment
The Census Bureau’s Business Trends and Outlook Survey offers one way to get timely insight into firms across the economy. The survey is sent out to roughly 200,000 businesses every two weeks and includes figures on performance, revenue, employees and hours worked. The next release will include the two weeks ending March 26.
The National Federation of Independent Business, a small-business association, regularly polls its members on questions like hiring plans, capital expenditures, and ease of getting a loan. The NFIB released their latest results earlier this week, so the next reading won’t come for about another month. Reports come out on the second Tuesday of each month.
Household Behavior
The Household Pulse Survey, an experimental Census Bureau survey started in the depths of the pandemic, has become a key source of timely information on topics ranging from employment status to food sufficiency and methods used to meet spending needs. The data are collected in two-week intervals of two-weeks on, two-weeks off.
OpenTable, a booking platform for reservations at restaurants, has daily data on reservations at the national level as well as across a variety of US cities. While it can be volatile, a sustained downturn in reservations could point to Americans pulling back on discretionary spending.
Job Availability
Businesses tend to slow and ultimately freeze hiring when demand wanes in order to limit job cuts. While government data on vacancies is published with a significant lag, many job-search websites offer much more up-to-date figures on the status of labor demand.
Indeed offers a near real-time look at job postings on their site by country, state, city and sector. Vacancies in many sectors were already on the decline before the events of the last week.
Reductions in temporary staffing can also be an indicator of business concerns about the future. The final step is larger layoffs, something that can often be seen in WARN notices — or an advance notice of plant closings and mass layoffs — before government metrics.
–With assistance from Alex Tanzi, Augusta Saraiva and Ben Holland.
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.
