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Opinion: Canada's economy need not fear the third wave of COVID-19 – The Globe and Mail



GM workers use human assistance automation to weld vehicle doors at the General Motors assembly plant in Oshawa, Ont., on March 19, 2021.

Nathan Denette/The Canadian Press

The emerging possibility of a third wave of COVID-19 in Canada – and another bout of shutdowns and stay-at-home orders to go with it – is something that none of us relish. It’s disappointing. It’s dispiriting. After a year of this, it’s exhausting.

But for the economy, a third wave would pose little more than an unwelcome yet navigable bump on the road to recovery.

After all, recent economic data attest to just how remarkably little damage the second wave inflicted, and how quickly our pandemic-hardened economy has bounced back. With some important growth forces falling into place, there’s good reason to believe the economy can weather a third wave even better than it did the second.

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First, let’s consider those economic indicators. Last week – with reports from Statistics Canada on manufacturing, retail sales and inflation – was particularly informative on that front.

The retail report, released Friday, showed that sales dipped 1.1 per cent in January, a month hit particularly hard by second-wave shutdown orders. Yet the decline was much smaller than Statscan’s preliminary estimate of 3.3 per cent, and the statistical agency estimated that sales rebounded a brisk 4 per cent in February – despite still-tight restrictions in many regions.

The manufacturing sector, meanwhile, barely skipped a beat in the second wave. Manufacturing sales jumped 3.1 per cent in January – again, exceeding Statscan’s preliminary estimate – delivering the strongest growth since last July.

The February inflation data showed that while the second wave may have weighed on prices for consumer services – which were most disrupted by closings – prices for goods gained steam, indicative of continued improving demand. Over all, inflation remains muted, but has bounced back from weakness associated with the arrival of the second wave in December.

Those encouraging signals add to previous data that suggested the economy had ridden out the second wave surprisingly well – including February employment figures showing that the labour market quickly recouped the massive second-wave job losses. Canadian real gross domestic product is on track for first-quarter growth at close to a 4-per-cent annualized pace, despite the second-wave shutdowns – far better than the GDP decline that most economists had anticipated at the start of the quarter. That comes on top of the nearly 10-per-cent annualized growth in the fourth quarter, which also shattered expectations that the rise of the second wave would stall growth.

It’s increasingly apparent that we’ve learned over the past year how to roll with COVID-19 restrictions and carry on our economic activities. Businesses have adjusted their supply chains, production and delivery systems; consumers have become adept at online shopping and curbside pick-up. We’ve shifted consumption patterns and preferences, but continued consuming. While closings still hit some businesses and sectors hard, the overall economic impact has become much more manageable.

It certainly helps that we can now see the light at the end of the pandemic tunnel, thanks to vaccines, which have provided a sense of optimism in the second wave of the pandemic that has continued to grow as the third wave approaches.

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Nevertheless, the Canadian delays in getting vaccine supplies over the winter have left our country more exposed to a third wave than some others, most conspicuously our neighbour and major trading partner to the south. After this weekend, about 9 per cent of Canadians have received at least one vaccine shot, compared with roughly one-quarter of U.S. residents. In Canada, there is a race on between the steadily increasing number of vaccinations and the rising rate of infections and hospitalizations with troubling COVID-19 variants – and the virus, for the moment, may be winning.

But even if the third wave temporarily slows Canada’s domestic economic activity, Canada stands to benefit from the spillover from U.S. growth, which looks less likely to be slowed by third-wave effects. In addition to its much more advanced vaccination situation, the U.S. economy is about to receive a massive lift from the U.S. government’s recently approved US$1.9-trillion stimulus package.

The Organization for Economic Co-operation and Development recently estimated that the U.S. stimulus could deliver about a 1-per-cent boost in Canadian GDP over the next 12 months, bringing a surge in demand from Canada’s biggest export market that could more than make up for any third-wave lag in domestic demand.

None of this is likely to make you particularly happy about the possibility that we’ll have to shut down businesses, or stay holed up in our homes, or avoid our friends and relatives, for a few more weeks in order to quell a third wave of this deadly virus. But at least we have plenty of reason for hope that we have the economic fortitude to overcome it.

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CANADA STOCKS – TSX ends flat at 19,228.03



* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Canadian dollar outshines G10 peers, boosted by jobs surge



Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.


(Reporting by Fergal Smith; Editing by Andrea Ricci)

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Canadian dollar rebounds from one-week low ahead of jobs data



Canadian dollar

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.

The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.

“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”

Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.

The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.

Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.

On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.

(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)

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