Mass event and travel cancellations will hit companies and the economy hard, but the short-term pain could enable both individual industries and the economy to recover faster if COVID-19 is quickly contained.
That’s the main takeaway for Canadians, according to Lisa Kramer, professor of finance at the University of Toronto.
Consumers and businesses cancelling or postponing travel plans and social gatherings will deal a serious blow to airlines, hotels, event planners and conference organizers, among others, Kramer said.
“But if we’re doing this right, this will be a relatively short-term phenomenon.”
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The focus right now has to be on following the advice of health authorities, not only because the economy must take a backseat to the imperative of protecting the population but because business activity itself will benefit from a swift response to the virus, Kramer said.
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2:57 Coronavirus outbreak: Finance Minister says government is prepared to support businesses affected by virus
Coronavirus outbreak: Finance Minister says government is prepared to support businesses affected by virus
How long the current turmoil lasts is the key question facing the airline industry, said aviation expert John Korenic.
If airline travel sees a bounce-back by the end of April, then the impact of the current cancellations and travel restrictions wouldn’t be “as dramatic,” Korenic said.
Airline stocks plunged on Thursday after U.S. President Donald Trump announced a 30-day travel ban between the U.S. and Europe, a move the administration hopes will help limit the spread of the virus.
German carrier Lufthansa closed 14 per cent lower, ending at a near eight-year low as the epidemic forced it to halt the sale of the international operations of its airline caterer LSG.
On Wall Street, airline stocks tanked 11 per cent, while cruise liner Carnival plummeted after its Princess Cruises said it would suspend global operations for two months.
It’s uncertain whether Canadians airlines will see a temporary boost in passenger volumes from the U.S. travel ban, Korenic said. While Americans abroad will be allowed to return home, it remains unclear whether Europeans travelling through Canada would be allowed into the U.S.
The International Air Transport Association has estimated losses of up to $113 billion in 2020 for the passenger side of the aviation industry.
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The cost of a Boeing 737 Next Generation jet, for example, runs around $300,000 per month, Korenic said.
“So if it’s sitting on the ground, obviously this is quite an impact there,” Korenic said.
1:54 Alberta premier concerned about energy sector layoffs amid impacts from COVID-19, falling oil prices
Alberta premier concerned about energy sector layoffs amid impacts from COVID-19, falling oil prices
Still, Canada’s major airlines are well-capitalized, which puts them in a better position to weather the storm compared to their international peers, he added.
However, whether and to what extent passenger travel bounces back during the summer months remains the crucial unknown for the industry right now, Korenic said.
Travel and event cancellations will also have a significant effect on consumer demand in Canada, Kramer said.
Both the National Hockey League and the National Basketball Association have suspended their 2019-20 season in response to rising number of COVID-19 cases in North America — among them Utah Jazz player Rudy Gobert.
In the music industry, artists postponing planned events and tours include Mariah Carey, Pearl Jam, KISS and Ciara. On March 6, South By Southwest, the beloved Austin, Texas-based music festival, become the first officially cancelled music gathering in the U.S. Coachella, one of North America’s largest music festivals, has been postponed until October.
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A number of conferences are on the chopping block as well, including Facebook’s Global Marketing Summit and Google’s I/O developer event.
“We’re not accustomed to seeing this kind of broad response across all sectors to something like a pandemic,” Kramer said.
Cancelled events are just one aspect of how people are being encouraged to limit social interactions, which will have an impact on overall consumption levels.
While some are ramping up spending by stocking up on goods like canned food and toilet paper, “it wouldn’t be unexpected for consumption to decline a bit going forward,” Kramer said.
Still, it’s too soon to tell whether Canada is headed for a recession, she added.
1:11 Alberta woman with COVID-19 talks about being in self-isolation
Alberta woman with COVID-19 talks about being in self-isolation
“If consumption goes down, we have measures in place in this country … to dampen the effect of that.”
On Wednesday, Prime Minister Justin Trudeau announced a $1-billion stimulus package for the Canadian economy, including special government benefits for workers who must go on sick leave or see their work hours reduced.
From a business and economic point of view, right now, the priority is to stop the virus, Kramer said.
“If we’re sensible about this and continue to follow the advice of the public health authorities, we’ll really be grateful for it after … because this will just prepare us longer-term for getting back to business.”
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— With files from Reuters and Adam Wallis at Global News
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
