Canada’s economy to take a hit from the second wave, economist says

The Canadian economy faces a long, slow recovery from COVID-19, and some industries are never bouncing back to where they were, according to a new forecast from a business think tank.

The prediction, from the Conference Board of Canada, says things won’t get back to anywhere close to normal until there’s a vaccine to battle COVID-19, likely sometime next June.

“Until we’re seeing COVID fully behind us, it’s going to be a rough ride. We won’t see a complete recovery until there’s a vaccine and this has been brought under control. The biggest risk is if a vaccine ultimately isn’t found,” said Conference Board chief economist Pedro Antunes in an interview.

The Conference Board’s argument was bolstered by a report from Statistics Canada on Wednesday showing the size of the Canadian economy is still six per cent smaller than in February, and that just a quarter of industries have hit their pre-pandemic size.

Statistics Canada showed Canadian Gross Domestic Product grew by three per cent in July, after having grown by 6.5 per cent in June. The StatsCan report also said data is expected to show that the economy grew by just one per cent in August.

While the economy started to bounce back in May and June as COVID-related restrictions eased up, the start of the second wave spells more trouble, said Antunes.

“Before, we were trying to flatten the curve of new COVID cases. Now, it’s a case of COVID flattening the recovery,” Antunes said.

Consumer spending picked up as restrictions started to loosen, Antunes said, partly because of pent-up demand, and partly because of government support programs including the Canada Emergency Response Benefit and the Canadian Emergency Wage Subsidy.

“It was consumers to the rescue with a lot of borrowed government money,” said Antunes, who predicted the CEWS will eventually be extended until next June.

Some sectors will struggle more than others as the second wave continues, Antunes said, singling out the hospitality, travel and cultural industries.

Other industries are seeing disruptions which are likely permanent, he added. Among the most heavily-affected sectors in the long term, Antunes predicted, will be bricks and mortar retailers, and commercial real estate, particularly office buildings. Simply put, companies are realizing that having employees doing their jobs from home works just fine.

“I think telecommuting will become permanent in a lot of cases. And that also means there will be a lot of office space on the market,” said Antunes.

For retailers, a gradual move to e-commerce turned into a tidal wave because of COVID-19, and many customers won’t be going back once COVID ends.

“I think a lot of those changes are permanent. We had more of an increase in e-commerce in a few months than we did in six years,” said Antunes.

That assessment is backed up by retail analyst Lisa Hutcheson.

“The longer people shop online, the less likely they are to go back,” said Hutcheson, managing director of retail consultancy J.C. Williams Group.

The speedy rise in e-commerce, which Hutcheson said was equivalent to a decade’s worth of increases, has already knocked some companies out of business entirely.

“The retailers who weren’t making these changes are likely the ones who’ve gone out of business,” said Hutcheson.

In a recent survey, J.C. Williams Group found that 39 per cent of Canadians say they’ll stick with their current shopping habits even once an effective treatment for COVID-19 is found, Hutcheson said.

Source: – Toronto Star

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