Canada’s households are emerging from an historic downturn flush with cash from government aid, boding well for the nascent recovery.
Gross domestic product plunged by an annualized 38.7 per cent in the three months through June, adding to an 8.2 per cent drop in the first quarter, Statistics Canada said Friday in Ottawa. But household disposable income surged on the back of state transfers, much of which has yet to be spent.
The data suggest Prime Minister Justin Trudeau’s aggressive spending has more than offset the impact of the recession on family finances, making the biggest contribution to a quick recovery and limiting potential long-term damage. Whether it’s enough to bring the economy back to normal remains an open question.
The second quarter will go down as by far the worst ever. But the collapse mostly reflects losses during one month — April — the nadir of the pandemic. Monthly GDP data supports the view that a sharp recovery is underway, with growth of 6.5 per cent in June, a record, and 3 per cent in July.
“The speed of the rebound seems out of sync with the confidence exuded by policy makers that it couldn’t happen this fast,” Derek Holt, an economist at Bank of Nova Scotia, said in a report to investors. “It is, but stay tuned.”
Government transfers rose 88 per cent non-annualized in the quarter, the largest jump on record. Almost a third of household income, an unprecedented share, was from government transfers. That, along with a sharp pullback in household spending, pushed the savings rate to 28 per cent, the highest ever. That mirrors data from the U.S., where incomes surged early in the pandemic because of federal relief checks.
The improvement in household balance sheets contributed to strong GDP showings beginning in May, and should support consumer spending going into the second half, Jocelyn Paquet and Kyle Dahms, economists at National Bank Financial, said in a report to investors.
“Monthly figures published up to now are hinting at a +41.1 per cent annualized rebound” in the third quarter, they wrote. “But the pace of this recovery remains highly uncertain and dependent on the evolution of the pandemic both at home and abroad.”
But for now, the outlook is better. Oil prices have recovered, the country’s housing market is booming again amid historically low interest rates, and the federal government has pledged to keep the fiscal taps open into the recovery period — keeping disposable income elevated.
What Bloomberg’s Economists Say
“Our tracking of high-frequency and alternative data signals the easy gains after the re-opening of the economy have largely been realized. We don’t expect to see a complete recovery in activity until at least late 2021, and anticipate an even longer road ahead for the labor market.” –Andrew Husby
Another reason for optimism: Canada has also avoided a new wave of cases like the one that continues to hamper the expansion south of the border.
With July’s estimate of a 3 per cent increase, Canada’s economy is now at 94 per cent of February’s levels, or put another way, has recouped around two-thirds of lost output from the height of the pandemic
Still, Canada’s economy isn’t expected to fully make up the losses until 2022. Labor data next week will show to what extent workers are transitioning away from government support and back into paid employment.
“The concern has long been that still exceptional softness in labor markets (the unemployment rate was still in double-digits at 10.9 per cent in July) would outlast exceptional policy supports,” Nathan Janzen, an economist at RBC Capital Markets, said in a report to investors.
The Canadian dollar pared gains on the report, and was trading 0.2 per cent higher at C$1.3105 against its U.S. counterpart at 11:06 a.m. Toronto time.
The second quarter was truly bad, with historic declines across the board. Household consumption plunged by an annualized 43 per cent, housing investment was down 48 per cent, and non-residential business capital spending was down 57 per cent.
Exports and imports plummeted by more than half. The drop in imports was larger than the collapse in exports, which means the trade sector actually contributed positively to growth in the second quarter.
The second quarter contraction is worse than the U.S. and Germany, but better than other parts of Europe like the U.K., Italy and Spain.
Friday’s data show that Canadians are eating, drinking and smoking more than they did pre-pandemic, but largely spending less on other things. Transportation services are down 81 per cent from the end of last year, while expenditures outside the country fell 90 per cent. Purchases on clothing, accommodation and restaurants have also seen big hits.
Despite the grim numbers in the rear-view mirror, economists are starting to raise 2020 Canadian forecasts. Bank of Montreal Chief Economist Doug Porter said his team will be revising upward its full-year GDP forecast for the first time in four months on the better-than-expected rebound.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.
The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.
Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.
On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.
In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.
It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.
This report by The Canadian Press was first published Nov. 7, 2024.
