After a provincial order to shut all non-essential businesses in Ontario, a normally bustling Queen Street West is lined with closed stores and empty of shoppers in Toronto on March 25, 2020.
Melissa Tait/The Globe and Mail
Canada’s economic momentum is at risk of stalling as COVID-19 cases surge across the country, forcing local and provincial governments to extend or tighten restrictions.
Like most of Europe and the United States, Canada is grappling with a second wave of the novel coronavirus that is growing steeper by the day, and which shows little sign of easing. To curb the spread, Manitoba moved this week to shutter all non-essential stores and Toronto extended its ban on indoor dining.
The economy now finds itself in a vulnerable spot. After a summer of business reopenings and rebounding activity, growth is suddenly no longer a given. Making matters worse, some small-business support programs – for wage subsidies and rent relief – are in varying states of limbo, right when many companies need another dose of financial help.
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“Stagnation is our expectation,” said Eric Lascelles, chief economist at RBC Global Asset Management, projecting that growth will come in flat in November and December. “As sectors get closed, economic damage mounts.”
Heading into the fall, economic growth was strong, albeit slowing from summer’s rapid pace. In a preliminary estimate, Statistics Canada said real gross domestic product rose 0.7 per cent in September. That would leave overall output about 4 per cent lower than before the pandemic.
The early signs for October were encouraging, too. Employment rose by more than 80,000 and consumer spending held firm.
“In both the U.S. and Canada, [last Friday’s] surprising jobs data suggested that a second wave of the virus hadn’t yet dented overall growth in October,” Avery Shenfeld, chief economist at CIBC Capital Markets, said in a client note. “But we can look across the pond to Europe, where even higher caseloads seem very likely to squeeze [fourth-quarter] GDP, for what could be in store here if we can’t contain infection rates.”
Containment has been a struggle of late. Canada is now consistently seeing more than 4,000 new confirmed cases of COVID-19 every day, with the seven-day moving average rising quickly. Despite a variety of restrictions, Ontario set a new daily record on Wednesday. And in Quebec, where much of the province has been under partial lockdown since Oct. 1, cases are trending higher again after a reprieve.
“Suddenly the neat-and-tidy analysis [of how the virus is spreading] has become less neat and tidy,” Mr. Lascelles said.
In Manitoba, the economic situation has taken a turn. Manitoba is now grappling with a virus surge that’s prompted the provincial government to impose the strictest second-wave restrictions in the country, starting Thursday. Those include the closing of in-person retail shopping (except for grocery stores and pharmacies), gyms, movie theatres and salons.
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“I understand where the province is coming from, that we need to get a grip on this quickly before it gets too out of control,” said Roberto Sinopoli, president of Verde Salon Group, which has two locations in Winnipeg. Still, he added, it’s “a shock” to go back into lockdown.
The upside is that Canada’s economy is better equipped for the second wave. Provincial restrictions are more targeted than before, allowing most industries to continue operating. Meanwhile, federal income supports continue flowing to the underemployed. That should keep the economy from backsliding in the fourth quarter.
But for the small-business community, there is a great deal of concern. Ottawa announced updates to the wage subsidy and the new Canada Emergency Rent Subsidy in early October. However, they still have not received Parliamentary approval after last-minute changes and procedural delays.
Deputy Prime Minister Chrystia Freeland is expected to face the Senate Thursday to discuss the programs, but lobby groups and opposition politicians fear the growing delays will leave entrepreneurs without added help until sometime in December.
The Canadian Federation of Independent Business has estimated that between 55,000 and 218,000 small businesses – nearly one in five – could shut down, depending on government aid. The lobby group is in the midst of updating those numbers, which could rise along with aid program delays and COVID-19′s second wave.
Another concern is how consumers will respond to rising coronavirus cases. “As the virus numbers grow more adverse, people do behave more cautiously and there’s some economic damage that comes from that as well,” Mr. Lascelles said.
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After emerging from the first lockdown, revenue was down sharply at Verde Salon Group, Mr. Sinopoli said. That was because of not only capacity limits, but also wary customers.
“Consumer behaviours have shifted significantly,” he said. When people are panicked by the virus, “the last thing they’re thinking about is getting their hair done.”
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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
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