Economic Outlook

Former BOC governor says economy facing ‘tripod of angst’

When it comes to the state of the economy, particularly during a federal election campaign marred by the COVID-19 pandemic, a former Bank of Canada governor likens it to be a “tripod of angst.”

Stephen Poloz, who spent seven years at the helm of the central bank until 2020, said many Canadians are “understandably distraught” by the handling of federal finances.

“There is a sort of tripod of angst among regular folks: high government debt, the possibility that we’ll have higher taxes, and higher inflation connected to that debt,” Poloz said in an interview Tuesday. “People need some reassurances.”…read more.

Goldman Sachs economists lowered their US growth forecast for 2021 to 5.7% from 6.2% on expectations of a “harder path” ahead for consumers.

This revision follows a weak August jobs report that showed the domestic economy added a disappointing 235,000 jobs during the month, falling well short of a forecast for a gain of 733,000 from a Bloomberg survey.

While consumption in the US has jumped by 16% since the depths of the pandemic and hit its pre-virus trend in the second quarter, the path forward looks littered with hurdles, Goldman economist Ronnie Walker wrote.

“The Delta variant is already weighing on Q3 growth, and fading fiscal stimulus and a slower service-sector recovery will both be headwinds in the medium term,” Walker said…read more.

Bank of Canada leaves interest rate and quantitative easing unchanged

The Bank of Canada is leaving its target for the overnight rate at 0.25 per cent.

Its stimulus program known as quantitative easing (QE) is being maintained at a target pace of $2 billion per week.

Despite weaker than expected GDP data that showed a contraction in the second quarter, Canada’s central bank says the economy remains on track for now. It blamed the contraction on supply chain bottlenecks and an expected housing market slowdown…read more.

Canadian Consumer Confidence Plummets by Most Since April 2020

Confidence among Canadian consumers fell by the most since the depths of the pandemic, suggesting that the elevated sentiment that sparked Prime Minister Justin Trudeau’s bid for re-election may soon be fading.

The Bloomberg Nanos Canadian Confidence Index, which collects views from 250 respondents regarding their economic outlook, personal finance, and jobs security, declined 1.6 points to 62.6 for the week ending on August 27, marking the sharpest decline since April 2020.

The survey also showed that the proportion of Canadians expecting the economy to strengthen over the next six months fell from 54% at the beginning of July to 37% last week, while the share of respondents that said their finances have improved over the past year declined from 26% to 20% during the same period. Similarly, Canadians’ optimism regarding the booming real estate market has also faded, as approximately 51% revealed they foresee home prices to grow over the next six months; this is the lowest score for the question since February…read more.

Major firms to hire thousands more, underscoring global supply-chain woes

Walmart Inc said on Wednesday it planned to hire 20,000 workers at its supply chain division ahead of the busy holiday season as the world’s largest retailer and other major rivals battle a logistics and labor crunch.

The roles, a mix of part-time and full-time jobs ranging from freight handlers to lift drivers, will be offered at 250 Walmart and Sam’s Club distribution centers, fulfillment centers and transportation offices, the world’s largest retailer said.

A nationwide labor shortage due to the COVID-19 pandemic has spurred retailers to raise wages this year, with many worried that they will not have enough workers in stores and warehouses during the holiday shopping season…read more.

Canadian economy unexpectedly contracts; dollar weakens

Canada’s rebound unexpectedly stalled through spring and early summer, raising questions about the resiliency of the nation’s economy.

Gross domestic product fell at an annualized 1.1 per cent pace from April to June, Statistics Canada reported on Tuesday, down from a revised 5.5 per cent in the first three months of the year. Economists in a Bloomberg survey were anticipating a 2.5 per cent expansion. Adding to the disappointment, economic growth fell a further 0.4 per cent in July, according to a preliminary estimate.

It’s a worse-than-expected result that may prompt analysts to reconsider how quickly the nation’s economy will be able to fully recovery from the pandemic, heightening worries about growth just as the country braces for a fourth wave of COVID-19 cases…read more.