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Canadian economy set to roar back after COVID restrictions lifted: conference board report – National Post

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The comeback will be fed in part by the immense household savings Canadians accumulated last year

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OTTAWA — The Canadian economy is poised for a sharp rebound this year and next after a year of pandemic restrictions, but a “red hot” housing market fuelled in part by government-funded household savings could still hamper growth, a new report says.

The Conference Board Of Canada expects the Canadian economy to grow 5.8 per cent in 2021, the highest since 2007 when a global commodities boom sent Canadian GDP rocketing up to 6.8 per cent. Growth in 2022 is expected to average four per cent, double the roughly 1.8 per cent average economists predicted before the pandemic.

The report, entitled “Hope At Last,” echoes other economic outlooks that see the Canadian economy roaring back to life once restrictions are lifted, reversing one of the deepest periods of retrenchment in recent memory. The comeback will be fed in part by the immense household savings Canadians accumulated last year, with the savings rate surging from 1.4 per cent prior to the pandemic to 14.8 per cent in 2020.

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But the Conference Board also warns that a big chunk of savings has been funnelled into an increasingly overcrowded housing market,

“Some of the recent increase in household incomes has ended up in the housing sector,” the report said. “Canadian resale markets are red hot, fuelled by low interest rates and a desire for more living space.”

It said there are “signs that markets could be overheating,” and warned that the “collapse of such a bubble would have wide-ranging, negative effects on the economy.”

Liberal ministers including Finance Minister Chrystia Freeland have been boasting about their contribution to sky-high household savings levels, saying they would act as “pre-loaded stimulus” once shutdowns are reversed.

  1. The largest proportion of COVID-19 support programs have flowed to middle- and upper-income earners, according to Statistics Canada.

    Liberals’ COVID-19 benefit programs continue to outpace wage losses, new StatsCan data show

  2. The Canadian economy posted its worst showing on record in 2020.

    In 2020, Canadian economy suffered biggest contraction since the Great Depression

The Trudeau government has faced criticism for what some characterize as an overzealous response to the pandemic — most notably in its $2,000 per month Canada Emergency Response Benefit (CERB) and Canada Recovery Benefit (CRB) — that has in turn fed into high household savings.

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Robert Kavcic, senior economist at Bank of Montreal, also warned on Tuesday about the pace of growth in Canada’s real estate markets, saying Ottawa should intervene in order to cool things down.

“We believe policymakers need to act immediately, in some form, to address the home price situation before the market is left exposed to more severe consequences down the road. As it stands now, prices are going parabolic across a number of markets and the price strength appears to be feeding on itself.”

Housing markets in Canada continued to grow last year, and are expected to pick up pace as demand remains high.

Kavcic called for policies that would break the “market psychologies” that say prices will rise forever, and which tend to bring about severe corrections.

“Despite the devastating impacts of the pandemic, residential construction activity increased last year, and additional gains are anticipated in 2021 as well,” the Conference Board said. Meanwhile, investment in commercial real estate is expected to taper off, largely due a wider acceptance of work from home practices and uncertainties about when workers might begin to return to the office on a regular basis.

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Still, pent up consumer demand and higher oil prices are likely to keep the economy buoyant for two years at least, the report said.

“With consumer demand for tourism and recreational services having been suppressed for more than a year, we expect to see a strong rebound in spending on services once restrictions are lifted,” it said.

The Conference Board expects oil prices to average US$68 per barrel in 2021 and US$71 per barrel in 2022, partly filling a gap that has persisted since mid-2015 when oil markets collapsed.

Economists at the Conference Board do warn about a lack of pipeline capacity, and point out that “growing opposition to the Enbridge Line 3 pipeline is a downside risk to the sector’s investment outlook.”

The US$1.9-trillion stimulus package recently passed in U.S. Congress, the American economy will see “a sharp rebound in economic activity south of the border,” the report, said, which will feed into Canadian exports. But exports will continue to lag behind past years in Canada as dependency on foreign imports continues to grow.

“Although Canada’s export sector will get a solid boost from a fuelled-up U.S. economy over the next two years, Canada’s trade sector will be a neutral force this year, with exports expanding at nearly the same pace as imports.”

• Email: jsnyder@postmedia.com | Twitter:

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

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(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

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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

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* 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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