Paralysis is not supposed to be one of the symptoms of COVID-19, the disease caused by the new coronavirus sweeping the world.
But drastic action by the world’s central banks — the “bazooka” as German Finance Minister Olaf Scholz labelled it, a term quickly adopted by the financial media — has left economic actors stunned and immobilized.
Evidence of that paralysis came from close to home yesterday.
While the headline from the Canadian Real Estate Association’s monthly release boasted of a resurging property market, far more revealing was what the group’s economists said about the future.
“As providers of the most accurate and timely housing data and statistics, CREA cannot credibly update its quarterly forecast at this time,” said the association in bold type at the top of its data report for February.
Less than two weeks ago, when Bank of Canada governor Stephen Poloz announced his first big interest rate cut, there were fears the sharp fall in lending costs would goose the Canadian property market with the attendant danger of recreating a real estate bubble.
Jack Craft, owner of the Endless Mountains War Memorial Museum in Sonestown, Pa., holds a bazooka in 2012, in front of a Korean War-era Jeep. German Finance Minister Olaf Scholz has labelled drastic action by the world’s central banks a ‘bazooka.’ (The Associated Press)
Now even the experts aren’t sure. And things are changing quickly. Only last week there were accusations that the central bank was scheming to restart the economy on the backs of overborrowed Canadians.
Suddenly, what seemed like a reasonable concern over the threat of more reckless borrowing has transformed into new worries that the spring property market and the retail sector are crumbling as house hunters and shoppers stay home.
And housing is only one sector under assault by a tangle of interdependent consequences of the new coronavirus for which no one had developed strategies. Canada’s fossil fuel sector knew there were challenges ahead, but they did not include a sudden plunge in demand followed by a vicious price war.
“The macroeconomic backdrop is completely uncharted waters for oil and gas companies,” said Tom Ellacott, vice-president of the energy research company Wood MacKenzie.
Deputy Prime Minister Chrystia Freeland, left, and Health Minister Patty Hajdu participate in a press conference on COVID-19 in Ottawa on Monday. Canada is barring entry to all travellers who are not Canadian citizens, permanent residents or Americans — one of a set of extraordinary new measures to stop the spread of the disease. (Justin Tang/The Canadian Press)
With no way to know what energy prices for the rest of the year will be, investment plans made a few weeks ago have become meaningless.
The caricature of so many of us closeting ourselves with bales of toilet paper and emergency supplies in the safety of our homes applies to investors as well. As world leaders, including Prime Minister Justin Trudeau, repeatedly announce updated ways of coping with the virus, investment plans made yesterday are out of date today.
As the Bank of Canada governor once told us during the disputes with the U.S., the main economic impact of trade uncertainty was that companies and individuals considering whether to spend money cut their investment plans until they could see the way forward.
Bewildering unknowns
If that is how investors reacted to ambiguity over the future of trade, it is no wonder the current set of unknowns has them bewildered.
Will government rules to slow the spread of the virus get stricter yet? Will the shortage of parts we saw when Asian factories closed recur in the U.S., our biggest trading partner, as cases and deaths climb? Will the path of the disease in the U.S. and Canada be staggering like in Italy or mild like in Singapore?
Will job losses lead to a vicious circle of collapsing demand? How many consumers or businesses will default on loans? Can the consumer confidence that has recently been leading the economy bounce back?
German Chancellor Angela Merkel arrives with Finance Minister Olaf Scholz for a cabinet meeting in Berlin on Feb. 5. Scholz has labelled drastic action by the world’s central banks a ‘bazooka.’ (Jens Meyer/The Associated Press)
And just as the bizarre quest for too much toilet paper was accelerated by social media feedback, a new round of uncertainty for investors has been caused by investors themselves.
Why do markets keep selling off even as experts reassure us stocks will bounce back? Is there something wrong that we don’t know and everyone else does? Will the economy and the market structure crack under the strain?
With so many questions unanswered, even more rate cuts and a suite of government plans to inject money into the economy at various levels apparently are not enough to make that uncertainty go away. And there is no point in telling people not to panic.
“First, those who are already panicking are unlikely to listen. Second, those who aren’t will start to wonder if they should,” wrote emergency preparedness expert Simon Wessely in the Financial Times on the weekend.
Everything will change when we know — or at least think we know — the answers to some of those questions. And while we are waiting, rather than staring into the abyss, perhaps this is the time to think ahead and imagine an inevitably brighter future.
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.
