TORONTO —
After a tumultuous 2020, those with their eyes on the Canadian and global economies can expect improvements in 2021, according to one expert.
“I actually think the economy is going to do very well in 2021,” Ian Lee, an associate professor at Carleton University’s Sprott School of Business, told CTV News Channel on Friday. “Not spectacularly, but much better than in 2020.”
Lee attributes this in part to Canadians’ saving rate in 2020, which he said has “gone through the roof.”
Lockdown measures to prevent the spread of COVID-19 meant that those with disposable income had less to spend it on. Statistics Canada reports that after the first quarter of 2020, Canadians saved an average of 7.6 per cent of disposable income, up from 2.3 per cent in the first quarter of 2019.
But by the second quarter of 2020, Canadians were saving 28.2 per cent, a dramatic increase from the 3.1 per cent they were saving in 2019’s second quarter.
“I cannot remember it being this high,” Lee said.
With vaccines being rolled out in 2021, Lee said there is renewed hope that Canadians will soon be able to leave their homes and make the kinds of purchases that will stimulate the economy.
“I think we’re going to see a very significant increase in spending because people are going to be so grateful and so happy it’s behind us,” he said. “We can get out of our houses, go to restaurants, go out flying and travelling and so forth. So I think we’ll see that pent-up demand express itself in 2021.”
WILL SMALL BUSINESSES BOUNCE BACK?
Even with this expected spending ahead, small businesses in Canada are barely holding on, with some already forced to shutter.
“Small businesses always had much smaller profit margins than big business,” Lee said. “I think it’s inevitable we’re going to see a significant increase in failures – small business bankruptcies – over the winter months.”
Lee said he believes this “inevitable” outcome may be why many provinces have not gone into universal lockdowns, instead trying to focus restrictive measures where they were most needed to try to help those whose livelihoods are at stake.
“I don’t think it’s going to be as bad on small businesses,” Lee said of the year ahead. “But it’s still going to be negative, no question about it.”
But he adds if governments continue to make these lockdown considerations in the new year, it could allow small businesses to generate some cash flow.
“Between that and the backstops provided by the government, I think they’re hoping it’ll be enough to carry them through the winter into the spring when the vaccine starts rolling out,” he noted.
REAL ESTATE MAY NOT BE NOT AS GOOD AS IT SEEMS
One of the key backstops provided by central banks, including the Bank of Canada, is record low interest rates, which has led some to seek approval for a home mortgage.
And while low rates may be good for those seeking a loan, it’s also led to rising home prices, making the buyer’s market more competitive and pricey.
“I don’t think we’re going to see in 2021 the average increases in real estate prices that we saw in this last year,” Lee said. “It’s not sustainable.”
Lee points to a collapse in immigration levels in Canada due to the pandemic as a contributing factor.
“People don’t realize […] the impact of immigration – the positive impact of immigration,” Lee said.
Immigrants need homes in Canada, Lee said, but can also bring wealth with them to spend in the Canadian economy.
All this, he said, will yield lower real estate prices in 2021: “I think it will be much more modest this year.”
U.S. POLITICS COULD IMPACT STOCK MARKET
With several uncertainties still ahead in 2021, a rise in the stock market is anything but a sure thing despite low interest rates, reopening economies and more liquidity.
“I don’t think it’s going to explode,” Lee said, pointing to the changing administrations in the U.S. as a possible “wildcard.”
U.S. President-elect Joe Biden has announced plans for a stimulus for Americans, as well as plans for improving infrastructure, which Lee said could “rev up” the U.S. economy, but Biden’s plans may be constrained by the Republican-controlled Senate.
Democrats have an opportunity to take hold of the Senate Jan. 5, but only if they can win both of the Georgia runoff elections.
“It’s unpredictable, but I don’t think we’re going to see huge increases in the stock market averages for 2021,” Lee said.
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.
