OTTAWA —
The Bank of Canada kept its key interest rate on hold Wednesday as it said the country’s economy won’t recoup the losses from COVID-19 until 2022, with the road to recovery dependent on the path of the pandemic.
In July, the Bank of Canada said it believed the country had been spared from a worst-case scenario.
The bank’s updated outlook in its monetary policy report said the rebound over the summer was stronger than expected as the country reversed about two-thirds of the decline seen in the first half of the year.
Officials estimate the economy will shrink by 5.7 per cent this year, but grow by 4.2 per cent next year, and 3.7 per cent in 2022, meaning gross domestic product won’t rebound to pre-pandemic levels for another two years.
In his opening remarks at a late-morning press conference, governor Tiff Macklem said it will take quite some time for the economy to fully recover from the COVID-19 pandemic, and the path will be “uneven across sectors and choppy over time.”
“We know the pandemic is reducing investment and is likely to cause long-lasting damage to some people’s job prospects. These forces will reduce Canada’s economic potential,” Macklem said.
The report forecasts annual inflation at 0.6 per cent this year, 1.0 per cent next year, and 1.7 per cent in 2022.
The bank held its overnight rate target at 0.25 per cent on Wednesday, which is where it will stay until the economy has recovered and inflation is back on target.
The bank also announced Wednesday that it intended to buy more longer-term bonds because those have a “more direct influence on the borrowing rates that are most important for households and businesses.”
James Laird, co-founder of Ratehub.ca said the outlook suggests low interest rates until at least 2023, which is the earliest the bank anticipates the economy would be able to handle higher rates.
The projections for growth and inflation mark a return to the bank’s usual practice of giving a longer view for the economy in its quarterly monetary policy report.
The report said the six months of experience with containment measures and support programs, as well as more information on medical developments like vaccines, has given the bank a better foundation to make a base-case forecast.
Underpinning the bank’s outlook are two major assumptions: That widespread lockdowns won’t be utilized again and that a vaccine or effective treatment will be widely available by mid-2022.
The country has recouped about two-thirds of the three million jobs lost in March and April. Emergency federal aid has replaced lost wages for millions of workers, and provided loans and wage subsidies to struggling businesses.
The recuperation from the drop earlier this year has been uneven, the report notes. The hardest hit sectors, such as restaurants, travel and accommodations, continue to lag.
Workers in those sectors, as well and youth and low-wage workers, continue to face high levels of unemployment, the report says.
All may be hit hard again by any new rounds of restrictions, the report notes. Some areas of the country have already imposed such public health restrictions in the face of rising COVID-19 case counts.
“The breadth and intensity of re-imposed containment measures, including impacts on schools and the availability of child care, could lead to setbacks,” the report says.
“Long breaks in employment have the potential for longer-term impacts on the income prospects of vulnerable groups.”
The report said government aid has played a key role in providing a financial lifeline to individuals and businesses.
Changes to employment insurance and new benefit programs will increase households’ disposable income, officials write, adding that the bank expects government aid to “provide important support to the economy throughout the recovery.
This report by The Canadian Press was first published Oct. 28, 2020
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.
