OTTAWA—The Bank of Canada slashed a key interest rate Wednesday in a bid to blunt the economic impact of the spread of COVID-19 even as Prime Minister Justin Trudeau warned that a slowdown is already taking hold.
“We are currently seeing an impact on the global economy,” Trudeau said Wednesday, citing disrupted supply chains because of the virus’ impact in China and a downturn in travel and tourism.
“We’re seeing a slowdown,” the prime minister said during a visit to Saint-Jérôme, Que.
Federal Finance Minister Bill Morneau has said the government is looking at contingency measures to support the economy but that was too soon to say whether such steps will be needed.
But Trudeau on Wednesday suggested that an economic hit is inevitable, noting that some industries are already facing “challenging situations.” He pledged that Ottawa would work “in concert” with companies side-swiped by the impact.
“We’re continuing to work extremely hard to counter the impacts on our economy that the virus will be bringing,” he said.
As part of its response, the government announced a new cabinet committee to oversee its response to the virus, including the health and economic impacts. The committee will be chaired by Deputy Prime Minister Chrystia Freeland and includes Public Safety Minister Bill Blair, Health Minister Patty Hajdu, Morneau and Melanie Joly, whose economic development portfolio includes tourism.
The news came the same day the Bank of Canada lowered its target for the overnight rate by 50 basis points to 1.25 per cent and said it’s prepared to take further action “if required.” That matches Tuesday’s rate cut by the U.S. Federal Reserve.
Explaining its decision, the bank said that while Canada’s economy has been operating close to its potential, the virus is a “negative shock” to the economic outlook.
“Business activity in some regions has fallen sharply and supply chains have been disrupted. This has pulled down commodity prices and the Canadian dollar has depreciated,” the bank said.
“It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity,” it said.
Avery Shenfeld, managing director and chief economist of CIBC Capital Markets, said that some impacts are already being felt, such as depressed commodity prices. But Shenfeld expects that consumers and businesses will become more cautious in their spending given the uncertainty, one likely factor in the Wednesday’s rate decision.
“The Bank of Canada is clearly judging that it’s coming and coming soon,” he said of the possible spending slowdown.
With new cases being reported in the United States and European countries working to contain the virus, Shenfeld cautioned that policy makers simply can’t predict how much further it will spread, making it impossible to predict the economic effects.
“Nobody knows, incuding the Bank of Canada but it’s already clear it’s a material hit to growth and warranted an attempt to provide some offset to the Canadian economy,” he said in an interview.
The rate cut is not a cure-all for the looming economic clouds but will help boost confidence and encourage spending, he said.
“It’s not a vaccine and it’s not a medication that is going to cure people who are ill. Nor will it get people out of quarantine,” Shenfeld said.
“But those people who are not quarantined or in cities that aren’t as affected by the disease will be encouraged to spend a little more and we need all of that,” he said.
The Bank of Canada noted that the impact of the virus only adds to other factors that were already weighing on the Canadian economy, such as the rail line blockades that halted freight shipments and ongoing strikes by Ontario teachers.
“In light of all these developments, the outlook is clearly weaker now than it was in January,” the bank said.
Quebec looks to revive economy weakened by coronavirus crisis by fast tracking infrastructure projects – Global News
Quebec is looking to ramp up 202 infrastructure projects across the province in response to the novel coronavirus pandemic’s toll on the economy.
Bill 61, known as an “Act to restart Quebec’s economy and to mitigate the consequences of the public health emergency” due to the COVID-19 crisis, was unveiled by the government on Wednesday.
As part of the plan, the government wants to accelerate the construction of schools, seniors’ homes, roads and public transit systems. If passed, the bill will allow some projects to be fast tracked without all the regular procedures in place.
Treasury Board President Christian Dubé said the province wants to help people and sectors recover during the health crisis as lockdown measures implemented in March are slowly eased. He insisted that rigor will still be used when it comes to doling out contracts.
“We will not go against laws or regulations,” he said, adding the bill will permit for certain authorizations to be given more quickly.
The proposed legislation will revive the economy and allow for a less bureaucratic process, according to Dubé.
“We know we were all weathering an unusual storm,” he said.
Under the plan, about 90 infrastructure projects would be ramped up in the health sector, including construction on 48 seniors’ homes. This also includes renovation plans for hospitals in Montreal, such as the renovation and expansion of Lachine Hospital.
In the education sector, about 39 projects would be fast tracked. This includes the construction of new elementary and high schools as well as the expansion of other academic institutions such as Dawson College in Montreal.
When it comes to roads and public transit, the Legault government is looking at accelerating about 50 projects. This includes the long-awaited extension to the Montreal Metro’s blue line.
Finance Minister Eric Girard described the situation as “exceptional” when outlining the details of the bill alongside Dubé.
Girard also announced that he will provide an update on the province’s finances on June 19, but warned that the pandemic has had a grip on the economy.
“This year is going to be a negative year,” he said. “The worst year for the economy since World War Two.”
The announcement comes as Quebec saw 291 new cases of COVID-19, the disease caused by the virus, on Wednesday. It leads the country with 51,884 infections.
The death toll stands at 4,794 after 81 more fatalities were reported from the previous day.
As of Wednesday, the number of hospitalizations decreased by 34 for a total of 1,141. There are 158 people in intensive care.
— With files from the Canadian Press
© 2020 Global News, a division of Corus Entertainment Inc.
Mayor Watson asks province to consider local reopening of economy – Ottawa Citizen
Mayor Jim Watson has asked Premier Doug Ford to consider reopening the City of Ottawa’s economy as part of a regional approach to relaxing COVID-19 restrictions.
“Mayor Watson spoke to Premier Ford last night and expressed his support for a more regional approach given our city is doing better than many other parts of the province,” Watson’s press secretary Patrick Champagne said Wednesday morning.
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“As you know, we also have the added challenge of being a border city, creating an unlevel playing field, as businesses like hair salons and barber shops have reopened in Gatineau but not in Ottawa. Premier Ford fully understood our dilemma and committed to keeping the Mayor’s perspective in mind as they consider a regional approach to reopening the Ontario economy.”
Ford last week expressed interest in a regional approach to reopening Ontario’s economy based on COVID-19 testing and results, rather than tweak provincial emergency orders and have the rules apply to the entire province.
US services index shows biggest part of economy is stirring – BNNBloomberg.ca
U.S. service providers started to emerge in May from a pandemic-induced tailspin as nationwide lockdowns on business and social interaction began to lift.
The Institute for Supply Management said Wednesday that its non-manufacturing index rose 3.6 points to 45.4.
While the monthly increase was the largest in more than two years, the gauge remained below the 50 mark that shows most service-related industries continued to contract.
The purchasing managers group’s gauge of business activity, which parallels the ISM’s factory production index, jumped 15 points, the most in records dating back to 1997, to a still-tepid 41. Along with an improvement in new orders, the figures are a welcome sign that the economy is stabilizing and will gradually recover from a deep recession.
The median forecast in a Bloomberg survey of economists called for an improvement to 44.4 in the overall non-manufacturing index.
The report, however, also showed the labor market remains severely disrupted by the pandemic. The ISM measure of employment at services, which represent almost 90 per cent of the economy, only rose 1.8 points from the worst reading on record in April.
A Labor Department report on Friday is projected to show another 8 million decline in May payrolls after an unprecedented 20.5 million slump in April. The unemployment rate is forecast to soar to nearly 20 per cent.
A pickup in demand as states lift lockdowns and businesses begin to reopen is needed to help stabilize the job market. The ISM’s report showed an index orders at service providers climbed 9 points to a still-weak 41.9.
Meanwhile, the index of supplier deliveries in non-manufacturing industries fell for the first time in four months, indicating an easing in supply-chain bottlenecks and transportation delays.
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