The global economy is entering the final quarter of its worst year in living memory in a precarious state with the coronavirus threatening to wreak yet more destruction on labor markets.
The darkening outlook for U.S. employment, the impending halt to a U.K. furlough and the expiry of a moratorium on German insolvencies provide a glimpse of the trouble in store. The International Labour Organisation estimated recently that the world would lose working hours equivalent to 245 million full-time jobs in the last three months of 2020.
The quarter began with a portent as blue-chip employers from Walt Disney Co. to Royal Dutch Shell Plc and Continental AG announced tens of thousands of staff cuts within a 24-hour period. Then on Friday, the U.S. Labor Department revealed slowing job gains in September, with many Americans giving up on looking for work.
Adding to those omens, the U.K.’s main furlough program will end later this month, and a group representing the country’s events industry predicts more than 90,000 people will be made redundant in coming weeks.
Renewed clusters of infections underscore the vulnerability of already battered economies to further damage that could ultimately hit livelihoods. The latest outbreak in Paris may force bars and restaurants to close, while London is at a “tipping point,” according to a local health official.
What Bloomberg’s Economists Say…
“A second wave of infections, major corporate layoffs in the U.S. and the end of the furlough scheme in the U.K. flag the risk unemployment will rise into year-end. Bad news for the immediate outlook is also bad news for the medium term, with deeper labor market scars threatening to drag on the recovery — even after a Covid-19 vaccine is eventually found.”
–Tom Orlik, chief economist
Click here for what happened last week and below is our wrap of what is coming up in the global economy.
U.S. and Canada
On Wednesday, the Federal Reserve will release minutes of its Sept. 15-16 meeting of the Federal Open Market Committee. It could be especially fruitful for Fed watchers, beginning with details of the debate over the committee’s new guidance on the conditions that will be necessary to trigger a rate increase.
The minutes may also reveal whether policy makers discussed increasing asset purchases and continuing to restrict bank dividends. There may also be a separate section summarizing discussions that preceded a special Aug. 27 vote on the new framework, under which the Fed will allow inflation to run higher and unemployment to go lower than officials previously had tolerated.
In terms of economic data, traders will be looking at the latest reports on trade and the weekly jobless claims.
In Canada, Bank of Canada Governor Tiff Macklem is set to speak Thursday and the jobs report for September is due Friday.
With China shut for its Golden Week holidays, attention shifts to the rest of the region. It’s a busy week in Australia, with the central bank announcing its interest-rate decision on Tuesday, hours before the government unveils its budget plan. Prime Minister Scott Morrison’s government will likely outline additional fiscal stimulus, including infrastructure spending and tax cuts, to pull the economy out of its first recession in nearly 30 years.
Bank of Japan Governor Haruhiko Kuroda will speak at events in the coming week. His remarks on the economic recovery and the outlook for prices will be closely watched for any signs of less gloom as the central bank prepares for a meeting later this month. Japanese wage and household spending data will offer the latest indication of how the economy is picking up after recent patchy signals.
Europe, Middle East, Africa
For European Central Bank policy makers including President Christine Lagarde and Chief Economist Philip Lane this week will be a chance to offer any clues on whether the latest disappointing inflation data are enough to move the needle in the debate for extra stimulus. Minutes of the ECB’s September meeting will be published Thursday.
Investors will also be listening closely to remarks by Bank of England officials for signs of any divergent views on the economic rebound and the potential use of negative rates. Monthly U.K. GDP numbers are due Friday.
In the Nordics, Norwegian central bank chief Oystein Olsen speaks after surprising markets last month with a more dovish forward guidance than anticipated. Later in the week, Norway published its economic output data for August.
Central banks in Poland, Serbia and Uganda are expected to keep interest rates unchanged, while Botswana may have room to cut.
Monday’s reading of Mexico’s consumer confidence may show a fourth month of improvement.
In central banking, Peru on Wednesday will pause at 0.25% for a sixth month as the economy begins to turn around, while the minutes from policy makers’ Sept. 24 meeting out Thursday may cement bets that Mexico’s comfortable holding at 4.25%.
Price data this week will show inflation coming off pandemic-lows in Mexico, Brazil and Chile, while still well under target in Colombia. Brazil’s retail sales report for August will show monthly and annual gains with some loss of momentum.
— With assistance by Alaa Shahine, Nasreen Seria, Robert Jameson, Benjamin Harvey, Christopher Condon, and Theophilos Argitis
Both Biden and Trump victories present implications for Canada's economy, shows new report from RSM Canada – Canada NewsWire
- Analysis of policies and data from both candidates suggests that a victory for either could pose risks for Canada’s economy
- Canada’s increasing economic dependence on the U.S. also a large factor in any potential headwinds
- COVID-19: Canadian economic growth expected to be gradual, with economy projected to contract 5.5 per cent in 2020, followed by a 6 per cent expansion in 2021
- Consumer sector has been pivotal to Canada’s economic recovery process to date, while labour and manufacturing are still in shock
TORONTO, Oct. 20, 2020 /CNW/ – RSM Canada (“RSM”), the leading global provider of audit, tax and consulting services focused on middle market businesses, today launched its third 2020 issue of “The Real Economy: Canada” – a quarterly report that provides Canadian businesses with economic analysis and insights into factors driving growth, or economic headwinds, in Canada’s middle market.
With the U.S. presidential election taking place in just a matter of weeks, and Canada looking to navigate a second wave of the COVID-19 pandemic, the latest Real Economy: Canada report shines a light on how the election outcome, combined with Canada’s reliance on the U.S. economy, might alter Canada’s recovery and longer-term outlook.
This report also looks at how Canadian industries have fared since the onset of the pandemic and explores measures the federal government and other authorities can take as the recovery process continues.
Key findings in this quarter’s report include:
- Recovery for both Canadian and U.S. economies are closely intertwined
- Growing dependence on the U.S. due to CUSMA and deteriorating relationship with China has hampered Canada’s ability to chart its own economic course.
- Data shows total trade between Canada–China has trended downward since the beginning of the U.S.-China Trade War in 2018. In comparison, total trade between Canada and the United States increased during this period.
- Current administration’s struggles to cap COVID-19 cases suggest a Trump re-election would present economic risks to Canada due to close economic ties.
- Biden’s proposed ‘Made in America’ tax incentive, which offers tax credits for companies in the U.S. that expand employment and salaries domestically, could potentially discourage future Canadian market expansion.
- Trump’s protectionist tendencies would indicate Canada may see further headwinds with its largest trading partner if he’s re-elected.
- Biden’s willingness to adopt Trump’s tough stance on China if elected suggests Canada will likely continue to be negatively affected by U.S.-China trade relations.
- Canadian oil pricing will be hit hard if Biden follows through on his campaign promise to cancel the Keystone XL pipeline, a critical venture for Western Canada oil producers that would provide direct access to the Gulf Coast refineries and world markets.
- Consumer confidence’s summer comeback have influenced forecasts of a V-shaped GDP recovery in the coming quarters and sustained growth into 2022.
- However, the recent resurgence of new infections has dealt a blow to recovery and consumer expectations.
- The service sector, which now employs nearly 80 per cent of the total labour force, lost 850,000 jobs since the start of the pandemic.
- Danger of lingering damage to labour force through loss of skills & productivity, and the ability of an idle labour force to keep up with the acceleration in technological changes.
- New manufacturing orders 11 per cent below their pre-crisis peak and roughly 5 per cent less than last year.
“Despite a rocky relationship between Canada and the current U.S. administration in recent years, it’s clear that a victory for either Trump or Biden would pose risks to Canada’s economy,” says Alex Kotsopoulos, vice president, projects and economics with RSM Canada. “The issue is that Canada has become increasingly dependent on its neighbour south of the border, and when you combine this with the strong ‘America First’ policies of both presidential candidates, Canada will feel the brunt of those decisions. Therefore, it’ll be important for the Canadian government to proactively engage with the new administration to shore up trade and supply chains, which will be vital in the Canada’s own recovery.”
Joe Brusuelas, chief economist with RSM US LLP, added: “When looking at Canada’s economic recovery data from the pandemic so far, it’s clear that the resurgence of Canada’s consumer sector has led the charge after a lengthy shutdown. However, to achieve stronger growth the labour force and industrial sector will be critical pieces of the puzzle, and while there is no meaningful or complete recovery until there is a vaccine, further expansion of the real economy by fiscal and monetary authorities will be important to keep recovery moving in the right direction.”
For more information on RSM Canada’s ‘The Real Economy: Canada‘, or to download the report, please visit: https://rsmcanada.com/our-insights/the-real-economy/the-real-economy-canada-volume-7.html
RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.
RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in 120 countries. RSM Alberta LLP is a limited liability partnership and independent legal entity that provides public accounting services. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. For more information visit rsmcanada.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.
SOURCE RSM Canada
For further information: Media contact: Ben Rose or Stephen Colle, FleishmanHillard HighRoad, 416-214-0701, [email protected]
Letter: There is no trade-off between public health and the economy – Open Democracy
The UK Government’s approach to suppressing COVID-19 risks becoming the worst of all possible worlds. Partial measures to half-close the hospitality and other sectors without providing sufficient financial support to the businesses in them will not suppress the rate of infection sufficiently to cut the death rate and protect the NHS, but will almost certainly lead many businesses to close and workers to lose their jobs.
As both SAGE and The Lancet have said, short but deep ‘circuit breaker’ lockdowns are the only way to rapidly reduce the R rate to a level which can then allow the economy and social life to open up again. But they must be accompanied by the generous furlough and business support schemes for which the Chancellor was rightly praised in the spring. Support to the self-employed and those on Universal Credit also needs to be increased.
Yes, this will cost the Treasury money. But, as in times of war, there is no effective economic limit on crisis spending: debt can be absorbed now by the Bank of England and paid back over 25 years or more.
Over the medium term there is no real trade-off between public health and the economy. Only by suppressing the virus will the economy be able properly to reopen. This is likely to require periodic circuit breaker lockdowns; but with sufficient Treasury support those will almost certainly cause less economic and mental hardship than permanent half-measures. Ultimately, exiting this destructive cycle requires a functioning test and trace system, with local health teams, rather than private and centralised companies, in charge.
Professor Simon Wren-Lewis, Emeritus Professor of Economics, University of Oxford
Professor Jonathan Portes, Professor of Economics and Public Policy, King’s College London
Professor Daniela Gabor, Professor of Economics and Macro-Finance, UWE Bristol
Professor Michael Jacobs, Professor of Political Economy, University of Sheffield
Dr Jo Michell, Associate Professor of Economics, UWE Bristol
Britain's economic recovery faltering, Bank of England to step up spending: Reuters poll – TheChronicleHerald.ca
By Jonathan Cable
LONDON (Reuters) – The Bank of England is likely to supplement its quantitative easing war chest next month to offer more support to an economy still struggling amid coronavirus restrictions on activity and fears of a no-deal Brexit, a Reuters poll found.
Surging coronavirus infection numbers have pushed the government to tighten curbs across swathes of the country to try to stop the spread. More areas face tougher lockdowns in coming days.
A national lockdown earlier this year that forced businesses to close and citizens to stay home meant the UK economy contracted an historic 19.8% in the second quarter.
While the Oct. 13-19 poll predicted 16.7% growth last quarter, the outlook has darkened. The economy is expected to expand 2.6% this quarter and 1.0% next – weaker than the respective 3.4% and 1.3% median forecasts given last month.
For all of 2020, the economy will contract 10.1% but expand 6.1% next year, according to the poll of 78 economists, compared with the respective -10.0% and +6.1% forecasts given last month.
“The resurgence of COVID-19 across the UK and the resulting restrictions mean the recovery is set to stall. It now looks fairly inevitable that the Monetary Policy Committee will top-up its asset purchase programme,” said James Smith at ING.
With Bank Rate already at a record low of 0.10%, and 59 of 64 economists who responded to an extra question saying the MPC would not take it below zero, the focus will be on bond buying, or quantitative easing.
Having added 300 billion pounds to the programme earlier this year, taking its total projected spend on gilts to 725 billion pounds, the median forecast in the poll was for a 100 billion pound top-up on Nov. 5.
“That would give policymakers scope to continue making purchases until early summer next year if the pace of purchases stays broadly similar,” ING’s Smith said.
Bank Rate was not expected to move until 2023 at least and only two of the 68 economists polled expected any change next month.
London said on Monday the door was still open if the European Union wanted to make some small concessions to save Brexit trade talks but unless the bloc budged there would be a no-deal exit in 10 weeks.
Britain’s informal EU membership – known as the transition period – ends on Dec. 31.
“Enough progress has been made to keep the talks alive so that negotiators return to the table and a deal will eventually be done and be in place by the end of the year,” said Liz Martins at HSBC.
The latest Reuters poll gave a median 40% chance no deal is made, unchanged from last month, and as in all Reuters polls since the June 2016 decision to leave the bloc, it said the most likely outcome was still some form of free trade agreement.
“It remains in everyone’s interest to avoid a no-deal outcome,” said Peter Dixon at Commerzbank.
“The economic headwinds posed by COVID-19 will exacerbate the costs of a no-deal Brexit, and the British government would be wise to do whatever is necessary to avoid it.”
(Reporting by Jonathan Cable; polling by Sarmista Sen and Swathi Nair; Editing by Hugh Lawson)
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