After the pandemic hit in 2020, some business owners and households were hard hit financially as a result of lockdown measures. But at the same time, many Canadians saw their bank accounts grow because of their reduced spending.
Those savings ballooned to over $300 billion and became so large that economists expected there would be a big boost to the economy when all that money was eventually spent.
But today, that sizeable stimulus still hasn’t happened. Experts aren’t sure exactly why.
The savings did help the economy, but not nearly as much as envisioned, and the bulk of the money is still sitting in bank accounts.
To this day, total household savings are still about $350 billion more compared to before the pandemic began, according to Statistics Canada. Lower and middle income households spent much of what they saved during the pandemic, while higher-income households have actually saved up more money, experts say.
That amount has stayed relatively consistent over the last year or two with little indication of a big spending splurge to come.
“There’s still a lot of excess savings that’s been accumulated during the pandemic that is still in the system. We haven’t seen a drawdown of that,” said Charles St-Arnaud, an economist with Alberta Central credit union. “The question at this moment is why?”
As economists dive into this financial data, what’s apparent is not only the disparity between income levels in the country, but also a trend of how the overall amount of pandemic savings in Canada remains quite large, while the savings stockpile has nearly all evaporated in the U.S.
There’s a lot of money that could be spent and benefit the economy, but that’s not happening, says Charles St-Arnaud, chief economist with Alberta Central. (Justin Pennell/CBC)
“The question is, when does that richer cohort decide to use it?” said St-Arnaud. “There doesn’t seem to be an inclination to increase consumption.”
As a result, the massive savings stockpile can’t be counted on to help the country avoid a possible recession this year. There’s also no cushion for lower-income households that continue to feel the financial pain of a higher cost of living.
No shortage of savings
The pandemic didn’t bring financial gain for everyone, especially for those who lost their jobs and businesses or racked up debt to stay afloat. Not everyone had extra money in the bank following a few years of restrictions — but many did.
In 2020, the average Canadian saved more than $5,000, for a total of $212 billion, according to Statistics Canada. Some people spent the money on travel and other purchases, while others paid down debt, made a down payment on a property, or started a renovation project.
Of the roughly $350 billion in savings, some of the money is no longer available because people used it to pay down debt or a mortgage. Using Statistics Canada data, economists say that leaves about $230 billion sitting in bank accounts, term deposits and other investments.
Rental units are pictured in Toronto on Jan. 12, 2024. The average asking price for rent in Canada reached $2,196 in January, a 10 per cent increase from this time last year — marking another record high amid a deepening rental crisis. (Evan Mitsui/CBC)
The initial boost of savings was spread relatively evenly across different age groups and income levels, St-Arnaud said.
But that’s now changed. The majority of the savings now belongs to higher-income Canadians, while lower- and middle-class households have used up their pandemic savings or are making withdrawals because experts say they likely need it to keep up with inflation.
Living expenses — from food and clothing to rent and utilities — are soaring throughout Canada.
“Earlier we may have, I don’t want to say overstated the importance of these savings, but we thought that these may insulate people from a broader pullback in spending,” said Carrie Freestone, an economist with RBC.
She points to data from the fall of 2023 showing how lower- and middle-income Canadians struggled to save money, and that’s one reason why consumer spending is falling. Without the cushion of savings, said Freestone, those households will feel more of a squeeze from inflation.
“We’re still going to see a bit of a pullback in consumption at the beginning of this year until the Bank of Canada starts cutting rates,” she said.
WATCH | A look at the Canadian savings stockpile since the pandemic began:
‘There’s still a lot of excess savings’
9 hours ago
Duration 1:56
Economists Charles St-Arnaud and Carrie Freestone discuss how much Canadians have saved since the pandemic began and why that money largely hasn’t been spent.
Stateside spending
In the U.S., Americans also saved up plenty of money during the pandemic. Still, as restrictions eased, they opened up their wallets and spent it. That flood of cash, in the trillions of dollars, helped stimulate the economy, even as interest rates rose and price tags climbed. Overall, the American economy has performed much better than experts had predicted.
Calculations vary about how much of the pandemic savings is left in the U.S., but the majority of Americans don’t have any of the money left to spend, according to the U.S. Federal Reserve.
“The majority of the population doesn’t have on average much of that savings leftover, if anything,” said Freestone. “It’s just a totally different trend that’s playing out” compared to Canada, she said.
There are several theories for why Canadians, on average, have held onto the savings, while Americans were much more inclined to spend. For starters, Canadian government support during the pandemic lasted longer compared to the U.S.
Conversely, lockdown measures eased much sooner in most states, so there were more opportunities to spend.
On average, Canadians carry much higher debt than Americans, so they may be more resistant to spending, experts say.
Among other suggestions, there’s also the different ways that mortgages are structured. In the U.S., the majority of homeowners sign a 30-year mortgage with a locked-in rate. Canadians, on the other hand, typically renew their mortgages every five years.
“A lot of mortgages are coming up for renewal over the next couple years that are going to renew into higher interest rates,” said Karen Routledge, an investment advisor and financial planner with Wellington-Altus Private Wealth.
Wealthier Canadians less inclined to cash in savings
Besides holding on to savings to pay down a mortgage, Routledge said there are many other reasons why some of her clients are holding on to savings, such as saving up for a bigger expense or simply wanting to take advantage of higher returns on term deposits and GICs.
“Interest rates on cash are better than they’ve ever been in pretty much the last 20 years,” she said. “They’re actually getting paid for it.”
Wealthier Canadians don’t need to use the savings to keep up with routine expenses, so some experts say they are less inclined to spend it.
“So, it just stays on the sideline and it might stay indefinitely,” said St-Arnaud, the economist with Alberta Central.
Economic growth has stuttered for much of the last year as a result of the Bank of Canada’s rate hikes in 2022. Wage growth is helping some households to keep up with inflation, while population growth is also helping keep the economy from falling into a recession.
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.
FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.
Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?
Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.
Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.
Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.
Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?
Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.
Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.
Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.
Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?
Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.
Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.
Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.
This report by The Canadian Press was first published Sept. 18, 2024.
ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.
The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.
He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.
The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.
Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”
The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.
Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.
This report by The Canadian Press was first published Sept. 18, 2024.
