The economic recovery underway in Canada will be stronger in the near-term than expected a few months ago, according to a Reuters poll of economists who said a resurgence in coronavirus infections and high unemployment were the two biggest risks.
Like many other countries, the Canadian government imposed strict lockdowns to quell the spread of the novel coronavirus, forcing businesses to close and citizens to stay home, bringing swathes of the economy to a standstill.
Canada, with a population of around 38 million, has recorded over 100,000 cases. Infections are still rising, but at a much slower pace than its closest neighbour and largest trading partner, the United States.
The July 6-9 Reuters poll of 32 economists showed the economy rebounding by an annualized 30% in the current July-September quarter, a sharp upgrade from the 19% forecast in the last Reuters poll taken in April.
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Still, the quarter through June was predicted to look a bit worse, shrinking 40% compared with 37.5% predicted in a poll taken two months back. If realized, that would be the deepest contraction since comparable records began six decades ago.
“In the very near-term, economic activity has not been as bad as we were expecting, but still there are a lot of concerns going forward around how much the economy can recover without prompting another resurgence in the virus spread,” said Nathan Janzen, senior economist at RBC.
“Absorbing the remaining amount of economic slack leftover at the end of this year will be a much slower and gradual process than the initial bounce-back we are probably going to see in the third quarter as containment measures ease.”
Indeed, Canada’s economy was expected to contract 6.8% this year as a whole, worse than the 5.7% contraction predicted in April. The rebound expected in 2021 was only slightly higher, 5.2% from 4.5% previously.
Nearly two-thirds of economists, or 11 of 17, who replied to a separate question said the recovery outlook has either remained the same or worsened over the past month.
14:21 Canada’s fiscal snapshot: One-on-one with Finance Minister Bill Morneau
Canada’s fiscal snapshot: One-on-one with Finance Minister Bill Morneau
“Overall, while the economy is on the mend, it’s still early days and both businesses and consumers will continue to grapple with uncertainty over the foreseeable future,” said Ksenia Bushmeneva, an economist at TD Economics.
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Asked what were the top downside risks to the economy this year, nearly all economists chose a resurgence of coronavirus cases and about half said high unemployment.
One-third said limited or slow reopening of the economy and one-quarter said lower oil prices. Crude oil is one of Canada’s top exports.
The Bank of Canada has slashed its key interest rate by 150 basis points to 0.25% this year and made its first foray into bond buying on the open market. But borrowing costs were expected to be left unchanged through to end-2022 at least.
In the meantime, Finance Minister Bill Morneau said this week the federal government has spent more than C$212 billion in direct COVID-19 support.
Inflation forecasts were cut, with the rate now expected to hover around 0.5% until Q2 2021, well below the central bank’s target range of 1-3%.
(Reporting by Mumal Rathore and Indradip Ghosh; Polling by Nagamani Lingappa; Editing by Ross Finley and Bernadette Baum)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
