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Canada’s economy is spring-loaded for take-off – just as soon as we beat the pandemic – The Globe and Mail



As the third pandemic wave starts to hit, some good news: The Canadian economy is in unexpectedly solid shape.

There is still a lot of pain and job loss out there, and this week’s new round of shutdowns and lockdowns promise more. But reasons for optimism abound.

On Monday, Statistics Canada reported that almost 17,000 new businesses with at least one worker were created in December. That’s higher than the monthly average of 15,725 in the five years before the pandemic. Last October and November were also above average. It’s a sign that Canadians have confidence in the future, and, despite all the upheaval of the past year, they are seeing opportunities and taking risks.

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On Wednesday came more evidence of an economy that, throughout the winter, was coming back to life stronger than predicted. In January, the economy grew faster than anticipated, and February looks to have been positive as well. April will be a painful speed bump, but annualized growth in the first quarter is likely to clock in at more than 5 per cent.

It stands in stark contrast to expectations that 2021 would open with three months of contraction. The Conference Board of Canada this week forecast full-year 2021 growth of almost 6 per cent.

The economy is only down about 2 per cent from its prepandemic peak, after a dizzying drop of 18 per cent during the worst of last year’s shutdowns, according to National Bank. This unique recession, driven by a natural disaster, has been nothing like past downturns. Last spring’s contraction was sharper and deeper than the recessions of the 1980s, ’90s and 2000s, but the recovery has been much faster.

Canada’s economy has fared surprisingly well in recent months, despite continuing pandemic restrictions. It suggests that this month’s new round of temporary restrictions, though they will bite, can be weathered. The basic econo-pandemic equation, however, remains the same as ever: Economic health depends on public health. The faster Canada drives COVID-19 cases down, the more the economy can reopen and recover. And with vaccinations ramping up, a full recovery is in our future.

That’s the good news. There’s also some less good.

A key figure to watch is the employment rate – the share of the working-age population that is employed. About 80 per cent of jobs lost during the pandemic have been recovered, leaving 600,000 fewer Canadians working than when the pandemic started. And even that large number understates the gravity of the situation. Taking Canada’s growing population into account, the country is in fact short 764,000 jobs, compared with early 2020. The Parliamentary Budget Officer expects the unemployment rate to remain above the prepandemic 2019 rate of 5.7 per cent until 2023.

Long-term joblessness is also a worry. The number of Canadians out of work for more than six months has been between 1.4 million and 1.6 million since last May. That’s about two-thirds more than when the pandemic started.

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Other issues include the struggles of “lockdown industries,” from tourism to restaurants. While employment elsewhere has almost fully recovered, lockdown industry employment is down 17 per cent. The hardest hit are lower-wage workers. The sooner the pandemic is put down, the sooner those jobs will return. There should be ample demand when the economy reopens, as Canadians have piled up savings.

And speaking of growing demand, Canada may get a big boost from south of the border, destination for three-quarters of this country’s exports. The United States is well ahead of Canada in vaccinations, with every day bringing an enduring reopening closer. What’s more, the Biden administration is delivering US$1.9-trillion of stimulus and on Wednesday outlined US$2-trillion of infrastructure and other spending. The Federal Reserve last month estimated U.S. GDP would surge 6.5 per cent in 2021, far better than the 4.2 per cent it predicted last December.

The Bank of Canada has said that exceptionally lenient monetary conditions, including ultralow interest rates, will remain until the recovery is well under way. It’s the same approach as the Fed, and it is necessary – even if it is helping to fuel a housing-price explosion.

Put it all together and signs are that the Canadian economy is poised to come out of this pandemic at a gallop. The X-factor, as always, is the virus. The economy may be spring-loaded, but it can’t bounce back until the pandemic is beaten.

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TSX extends gains as gold prices rise, set to rise for third week



(Reuters) -Canada’s main stock index extended its rise on Friday after hitting a record high a day earlier as gold prices advanced, and was set to gain for a third straight week.

* At 9:40 a.m. ET (13:38 GMT), the Toronto Stock Exchange‘s S&P/TSX composite index was up 24.24 points, or 0.1%, at 19,326.16.

* The Canadian economy is likely to grow at a slower pace in this quarter and the next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.

* The energy sector climbed 0.6% even as U.S. crude prices slipped 0.1% a barrel. Brent crude added 0.1%. [O/R]

* The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.3% as gold futures rose 0.7% to $1,777.9 an ounce. [GOL/] [MET/L]

* The financials sector gained 0.2%. The industrials sector rose 0.1%.

* On the TSX, 117 issues advanced, while 102 issues declined in a 1.15-to-1 ratio favoring gainers, with 14.26 million shares traded.

* The largest percentage gainers on the TSX were Cascades Inc, which jumped 4.2%, and Ballard Power Systems, which rose 2.9%.

* Lghtspeed POS fell 5.6%, the most on the TSX, while the second biggest decliner was goeasy, down 4.9%.

* The most heavily traded shares by volume were Zenabis Global Inc, Bombardier and Royal Bank of Canada.

* The TSX posted 23 new 52-week highs and no new low.

* Across Canadian issues, there were 160 new 52-week highs and 12 new lows, with total volume of 29.68 million shares.

(Reporting by Shashank Nayar in Bengaluru;Editing by Vinay Dwivedi)

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Canadian economy likely to slow, but COVID-19 threat to growth low



By Indradip Ghosh and Mumal Rathore

BENGALURU (Reuters) – The Canadian economy is likely to grow at a slower pace this quarter and next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.

Restrictions have been renewed in some provinces as they struggle with a rapid spread of the virus, which has already infected over 1 million people in the country.

After an expected 5.6% growth in the first quarter, the economy was forecast to expand 3.6% this quarter, a sharp downgrade from 6.7% predicted in January.

It was then forecast to grow 6.0% in the third quarter and 5.5% in the fourth, compared with 6.8% and 5.0% forecast previously.

But over three-quarters of economists, or 16 of 21, in response to an additional question said tighter curbs from another COVID-19 wave were unlikely to derail the economic recovery, including one respondent who said “very unlikely”.

Canada is undergoing a third wave of the virus and while case loads are accelerating, the resiliency the economy has shown in the face of the second wave suggests it can ride out the third wave as well, without considerable economic consequences,” said Sri Thanabalasingam, senior economist at TD Economics.

The April 12-16 poll of 40 economists forecast the commodity-driven economy would grow on average 5.8% this year, the fastest pace of annual expansion in 13 years and the highest prediction since polling began in April 2019.

For next year, the consensus was upgraded to 4.0% from 3.6% growth predicted in January.

What is likely to help is the promise of a fiscal package by Prime Minister Justin Trudeau late last year, which the Canadian government was expected to outline, at least partly, in its first federal budget in two years, on April 19.

When asked what impact that would have, over half, or 11 of 20 economists, said it would boost the economy significantly. Eight respondents said it would have little impact and one said it would have an adverse impact.

“The economic impact of the federal government’s promised C$100 billion fiscal stimulus will depend most importantly on its make up,” said Tony Stillo, director of Canada economics at Oxford Economics.

“A stimulus package that enhances the economy’s potential could provide a material boost to growth without stoking price pressures.”

All but two of 17 economists expected the Bank of Canada to announce a taper to the amount of its weekly bond purchases at its April 21 meeting. The consensus showed interest rates left unchanged at 0.25% until 2023 at least.

“The BoC is set to cut the pace of its asset purchases next week,” noted Stephen Brown, senior Canada economist at Capital Economics.

“While it will also upgrade its GDP forecasts, we expect it to make an offsetting change to its estimate of the economy’s potential, implying the Bank will not materially alter its assessment of when interest rates need to rise.”



(Reporting and polling by Indradip Ghosh and Mumal Rathore; editing by Rahul Karunakar, Larry King)

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CANADA STOCKS – TSX rises 0.78% to 19,321.92



* The Toronto Stock Exchange‘s TSX rises 0.78 percent to 19,321.92

* Leading the index were Martinrea International Inc <MRE.TO​>, up 7.4%, Fortuna Silver Mines Inc​, up 7.1%, and Hudbay Minerals Inc​, higher by 6.7%.

* Lagging shares were AcuityAds Holdings Inc​​, down 6.7%, Ballard Power Systems Inc​, down 6.5%, and Northland Power Inc​, lower by 6.0%.

* On the TSX 165 issues rose and 60 fell as a 2.8-to-1 ratio favored advancers. There were 18 new highs and no new lows, with total volume of 203.0 million shares.

* The most heavily traded shares by volume were Royal Bank Of Canada, Suncor Energy Inc and Air Canada.

* The TSX’s energy group fell 0.59 points, or 0.5%, while the financials sector climbed 0.86 points, or 0.3%.

* West Texas Intermediate crude futures rose 0.27%, or $0.17, to $63.32 a barrel. Brent crude  rose 0.36%, or $0.24, to $66.82 [O/R]

* The TSX is up 10.8% for the year.

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