Ultimately, the economy is expected to bounce back to pre-pandemic levels as vaccines become broadly available next year.
“While lockdowns will restrain the economy’s growth in late 2020 and early 2021, our forecast assumes a stronger and sustained recovery in activity once the vaccine is more widely distributed,” said RBC. “By the end of 2021, we project the GDP will be back to pre-shock levels.”
Consumers are expected to drive that recovery as employment improves and households feel comfortable reducing their savings.
“The large pool of savings amassed by Canadian households during the crisis will be a key driver of the economy in 2021,” RBC said, noting that it estimates household savings surged by $160 billion during the pandemic, as lockdowns prevented spending and government supports propped up incomes.
Yet while consumer confidence rebounds, businesses will likely be more cautious in the coming year, RBC said.
“Investment and inventory rebuilding are expected to begin in 2021 although given the uncertain global backdrop and changes to consumer demand the recovery may be slow,” it said.
Given the continued economic uncertainty, both fiscal and monetary supports will remain in place next year, RBC noted.
It forecasts that the Bank of Canada will maintain its policy rate at 0.25% throughout 2021 and continue to buy securities to keep longer-term rates low.
Furthermore, these low interest rates and strong household savings are expected to help support the housing market in 2021. While the market is expected to slow somewhat in 2021 from its pace in 2020, sales and prices are likely to remain elevated.
Inflation rates, meanwhile, are “likely to move modestly higher” in the coming year, the report noted, as the recovery gains momentum.
Against this backdrop, RBC said the Canadian dollar will likely hold steady against the U.S. dollar in the first half of 2021 before coming under pressure in the second half as markets look for central banks to start curbing monetary stimulus.
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.
