(Bloomberg) — The world economy is entering the second half of 2020 still deeply weighed down by the coronavirus pandemic with a full recovery now ruled-out for this year and even a 2021 comeback dependent on a lot going right.
It’s a scenario few if any predicted at the start of the year when most economists were banking on another year of expansion and a U.S. and China trade agreement was meant to give corporate and investor confidence a shot in the arm.
Instead, the rare pandemic forced swathes of the global population into what the International Monetary Fund dubs ‘The Great Lockdown.’ Central banks and governments responded with trillions of dollars in unprecedented support to prevent markets from melting down and to keep furloughed workers and struggling companies afloat until the virus passed.
Even with those rescue efforts, the world is still suffering its worst economic crisis since the Great Depression. While some gauges of manufacturing and retail sales in major economies are showing improvement, hopes for a V-shaped rebound have been shattered as the reopening of businesses looks shaky at best and job losses risk turning from temporary to permanent.
It’s an economic trajectory Federal Reserve Bank of Richmond President Thomas Barkin has likened to riding the elevator down, but needing to take the stairs back up.
“There is a real danger of confusing rebound with recovery,” Carmen Reinhart, the World Bank’s chief economist, said at the Bloomberg Invest Global conference on June 23. “True recovery means you are at least as well off as you were before the crisis started and I think we are a long way off that.”
Uncertain Times
Much depends on the spread of the coronavirus, a vaccine for which remains out of grasp. The World Health Organization warns the worst of the pandemic is still to come as cases top 10 million and deaths have risen beyond 500,000. And even in countries where the virus appeared contained, fresh flare ups are frequent.
The IMF estimates that by the end of this year 170 countries — or almost 90% of the world — will have lower per capita income. That’s a reversal from January, when it predicted 160 countries would end the year with bigger economies and positive per capita income growth.
It’s now likely that global gross domestic product by the end of 2021 will in many cases still be lower than where it was at the end of 2019, according to HSBC Holdings Plc economists led by Janet Henry. Bloomberg Economics describes it as ‘Goodbye Victory V, Hello Worry W.’
Central bankers remain on the alert to do more. Federal Reserve Chairman Jerome Powell has warned the outlook is “extraordinarily uncertain” and European Central Bank President Christine Lagarde has spoken of a “restrained” recovery that will change parts of the economy permanently.
What Bloomberg’s Economists Say
Six months ago, Covid-19 was not on anyone’s radar. Three months ago, there was hope it could be contained. Now, the pandemic appears all-consuming. Longer lasting lockdowns, a ceiling on activity for contact-intensive sectors, the scarring impact of high unemployment, and stimulus that – in some important parts of the world – is falling short, all weigh on the outlook. Bloomberg Economics is lowering its estimate for global growth in 2020, and anticipates a weaker recovery into 2021.
Click here to read the full report
–Tom Orlik, Chief Economist
To be sure, there are pockets of recovery that could gain traction. Morgan Stanley economists are sticking to forecasts of a V-shaped recovery, pointing to positive surprises in recent economic data, especially in the U.S. and euro region.
Global markets are split between investors who are betting on a V-shape recovery, and those expecting significant dislocations. The MSCI All-Country World Index of global stocks has gained nearly 40% from a March low, but is still down about 6% this year, as investors bet policy stimulus around the world will cushion the economic impact from the pandemic. U.S. 10-year Treasury yields have tumbled by more than 100 basis points this year to around 0.67%.
Mixed Performance
Lessons on how the recovery plays out are being drawn from Asia where the virus has been brought under control but the rebound has been mixed.
In South Korea, which flattened its infection curve months ago, the emergence of new virus clusters is casting a chill on shoppers.
China’s manufacturing activity climbed in June, as did other manufacturing gauges across the region, yet new orders continue to show weakness.
That worrisome outlook means businesses are navigating in the dark, according to Joerg Wuttke, president of the EU Chamber of Commerce in China, who expects the uncertainty to last for another couple of years.
‘Chainsaw’ Recovery
“The recovery is not V, it is not W, it is looking like the top of a chainsaw,” he said. “Up and down and up and down and painful all the way.”
It also means that fast-expanding emerging economies won’t be the global growth engine they have been, with the World Bank predicting this group of countries will shrink 2.5% — their worst performance in data that starts in 1960. Latin America is now on the front lines of the virus.
A complete rebound to pre-crisis levels looks impossible until the virus is controlled — an outlook that’s especially true for sectors such as tourism, transport and entertainment where restrictions are expected to linger.
The hit to labor markets has been worse than initially estimated and will be impossible to repair in the second half of 2020 even under the most optimistic scenario, according to the International Labour Organization. It last week estimated that working hours in the second quarter were 14% lower than before the virus, equivalent to a loss of 400 million full-time positions.
Although U.S. companies added 4.8 million people to payrolls in June, only three in 10 jobs lost have been recovered and initial applications for unemployment benefits remain elevated. More than 2.8 million Americans lost their jobs for good in June.
Debt Worries
“While a near-term mechanical bounce in economic activity in response to the easing of lockdown measures looks likely, we expect the subsequent climb to be long and arduous,” said Joachim Fels, global economic adviser at Pacific Investment Management Co.
There are other challenges too.
Record levels of debt will restrain how much additional support governments can roll out — on top of the $11 trillion fiscal stimulus already in train.
Governments are grappling with how to extend or terminate costly near-term measures to fund wages and keep companies alive, while at the same time gearing up for longer-term stimulus to drive a recovery.
That borrowing won’t come without side effects, such as keeping zombie companies going, according to Alicia Garcia Herrero, chief Asia Pacific economist with Natixis SA.
“If there is no clean-up of debt, going back to pre-crisis levels will take even longer,” said Garcia Herrero.
Meantime, central banks have slashed interest rates to new lows with some embracing negative borrowing costs. In a bid to cap market rates, multiple types of assets have been bought and policy makers continue to tweak their tool kit with hints of more innovation to come.
Morgan Stanley predicts $13 trillion in cumulative central bank balance-sheet expansion from the U.S., euro region, Japan and U.K. through the end of 2021.
Even with those steps, it’s too soon to conclude they will be enough, said Kazuo Momma, who used to be in charge of monetary policy at the Bank of Japan.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
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.
