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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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CANADA STOCKS – TSX ends flat at 19,228.03

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* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Canadian dollar outshines G10 peers, boosted by jobs surge

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.

 

(Reporting by Fergal Smith; Editing by Andrea Ricci)

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Canadian dollar rebounds from one-week low ahead of jobs data

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.

The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.

“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”

Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.

The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.

Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.

On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.

(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)

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