The reason for the apparent paradox, experts suggest, has more to do with economics than the epidemic itself.
Part of the explanation is the drag of Canadian consumer debt, which began the quarter at 164 per cent of household income, about 30 per cent higher than the comparable debt level in the U.S., he said.
In the second quarter, the ratio in Canada decreased to 146.4 per cent.
Canadians, typically conservative, spent less during lockdown, choosing instead to pay down their debts, said Peter Miron, senior vice-president of Environics Analytics Group in Toronto.
“People in Canada were paying off their plastic for lack of opportunity to buy things,” Miron noted, adding that many were also building their savings as a precautionary measure.
People in Canada were paying off their plastic for lack of opportunity to buy things
Peter Miron
That’s part of the reason why Canada’s recovery from the bottom of the virus-driven recession has been less dramatic than that in the U.S.
While U.S GDP is expected to produce an overall decline of 4.0 per cent this year, comparable Canadian data shows a 5.6 per cent expected GDP contraction, TD Economics found in a Sept. 18 analysis. That is reflected in the difference in unemployment rates forecast by TD’s economics unit: 8.5 per cent in the U.S. vs. 9.7 per cent for Canada.
Benjamin Tal, deputy chief economist for CIBC in Toronto, notes that government support programs in both Canada and the U.S. provided more income to households than was lost in the epidemic and market meltdown.
Source: – Financial Post
