Well, the New Year began much as the old year ended. Across the board there are numerous reasons for North Americans not to be overly optimistic about the rest of the year. Several key factors are leading us to this conclusion.
- The Omicron variant of COVID-19 has created a fourth or fifth wave, depending on who you are talking to. Although Omicron appears to have possibly peaked, it has once again severely strained our health care systems. In addition, the unvaccinated continue to represent the largest number of hospitalizations, especially when it comes to patients in our ICUs. Our health care providers continue to be under a great deal of strain, especially after two years of treating COVID patients. There is now a tremendous backlog of elective surgeries and treatments. In addition, although CDC studies show the effectiveness of booster vaccine shots in preventing severe COVID cases, far fewer adults have gotten booster shots to date. When will we move from a pandemic to an endemic?
- In most jurisdictions, kids are back for in-person learning in schools. However, there are still a large number of children under the age of twelve who have not received their first dose of a COVID vaccine. With the Omicron variant being twice as contagious as the Delta variant, many parents are concerned about the safety of schools and the potential effect of the disease on their children. Indeed, statistics have shown that more children are being hospitalized due to Omicron. Questions have been raised about whether in-person learning can continue in the near future.
- Even with the economy starting to reopen, a number of economic issues have arisen. Among these is the forecast of continuing hyperinflation over the coming months. There continue to be supply chain problems, shortages of skilled labour and increasing fuel, food and housing prices. With the current annual inflation rate running at around six percent, Canadians have not seen such a high inflation rate since 1991. A survey of consumer expectations showed Canadian households also expect inflation to stay above 3 percent over the next couple of years, above the two percent average considered normally acceptable. Central banks have little choice but to raise interest rates this year which will have a major effect on government and personal debt payments down the road.
- Internationally, both the U.S. and Canada, as members of the North Atlantic Treaty Organization (NATO), will have to deal with on-going Russian threats suggesting a possible military incursion into eastern Ukraine. Although the Ukraine is not a member of NATO, the allied countries strongly believe that there needs to be an immediate and firm reaction to any Russian incursion. As a warning to Russian President Vladimir Putin, NATO countries are arming and training the Ukraine military and defence forces in preparation for such an event.
- China’s economy is slowing, a worrying sign for the world. China’s National Bureau of Statistics indicates that economic output from October through December of 2021 was only 4% higher than during the same period a year earlier. This is a far cry from previous annual growth rates ranging between 6 and 9 percent in recent years. The Omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains. Being a major supplier to the North American markets, any continuing slowdown in China’s economy will have a severe impact on U.S. and Canadian businesses and consumers.
- COVID-19 government relief programs for the unemployed and businesses affected by government-imposed lockdowns and public health measures are being phased out. This could result in many hardships for lower income individuals and small to medium-sized businesses. The resulting loss of income due to the pandemic will have an impact on government revenues in the near future. Many government support programs may have to be reviewed for termination or reduction under expected future austerity measures.
FROLITICKS 
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