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Spend on haircuts, home renos and restaurants to stimulate economy: CIBC – BNN

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TORONTO — Canadians who want to help the country’s economy rebound should book haircuts, hire tradespeople for home renovations and keep ordering from local restaurants, economists say.

They believe these actions are more likely to quickly stimulate Canada’s economy and keep money within the country than online impulse shopping, which many have gravitated to during COVID-19 lockdowns.

“We could get a little bit more bang for every buck that’s spent by households if they were incentivized to spend more on the services that have domestic content and those also just happen to be the services that have been hardest hit during the pandemic,” said Royce Mendes, a senior economist with at CIBC.

Spending on services, said Mendes on Friday, helps stimulate a rebound because the people who offer them are likely to take money they earn and spend it within the domestic economy again.

If they see demand for their services return quickly enough, they may spend more on supplies needed for their work and may hire back Canadians laid off during the pandemic.

The economy lost almost 213,000 jobs in January as lockdown measures erased months of gains and marked the worst monthly declines since last April. The hospitality and service industry were hit particularly hard because restaurants, salons and other entertainment venues were ordered closed in many provinces to quell the spread of the virus.

However, Statistics Canada said Friday that 259,000 jobs were added in February, almost entirely wiping out losses sustained since the start of the year.

Douglas Porter, Bank of Montreal’s chief economist, said spending on services can help stimulate the economy and bring back even more jobs, but the reality is lockdowns and restrictive measures still remain in parts of the country, so haircuts or trips to the gym aren’t an option for everyone.

“Canadians should really double down on trying to help local businesses and services as much as they can and in the here and now and that’s with things like supporting your local restaurant through takeout or a small retailer through curbside pickup,” he said.

While he’s hoping Canadians will boost the economy by opening up their wallets, he warned that it won’t be an option for everyone.

Some have seen their financial situation bolstered during the pandemic, but others have taken on mounting debt or lost their source of income.

“Before this all began, the single biggest concern for the Canadian economy was an overextended consumer, so I would say this (spending advice) applies to people whose finances can actually handle that,” he said.

Yet Porter doesn’t believe it will be hard to get most people to spend again.

Many, he said, have saved during the pandemic and others are anxious to spend on favourite pastimes they’ve missed or on something other than goods.

“You only need so many Peloton bikes,” he joked.

Mendes had similar predictions.

“I expect that there will be some indulging, some going out for dinner more often or going out for maybe more expensive dinners,” he said.

“Maybe even going on a vacation that is a little bit more expensive, or maybe going on a few more vacations over the next 12 months.”

When vacations are safe and permitted, he said the key will be encouraging people to travel within Canada.

“Keeping that money within the borders will help the economy recover at a faster pace.”

Mendes’ remarks echoed a recent call by Destination Canada, a crown tourism corporation, for Canadians to consider domestic travel before flying abroad.  The company recently said that if enough Canadians shift their international travel plans to focus on domestic destinations, it could speed up recovery for the tourism sector by up to one year.

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Economy

Canada to go big on budget spending as pandemic lingers, election looms

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By Julie Gordon

OTTAWA (Reuters) – Canada‘s Liberal government will deliver on its promise to spend big when it presents its first budget in two years next week amid a fast-rising third wave of COVID-19 infections and ahead of an election expected in coming months.

Finance Minister Chrystia Freeland has pledged to do “whatever it takes” to support Canadians, and in November promised up to C$100 billion ($79.8 billion) in stimulus over three years to “jump-start” an economic recovery in what is likely to be a crucial year for her party.

Prime Minister Justin Trudeau’s Liberals depend on the support of at least one opposition group to pass laws, and senior party members have said an election is likely within months as it seeks a clear majority and a free hand to legislate.

Furthermore, by September, all Canadians who want to be vaccinated will be, Trudeau has said.

Freeland has said the pandemic created a “window” of opportunity for a national childcare plan, and that will be reflected in next Monday’s budget along with spending to accelerate Canada‘s shift toward a more sustainable economy.

“It will be a green and innovative recovery plan aimed at creating jobs,” said a government source who declined to comment on specific measures. The budget will aim to help those “who have suffered most” the effects of the pandemic, the source said.

Critics say the government would be better to hold off on blockbuster spending because the economy has shown it is poised to bounce back, and to prevent the country from racking up too much debt.

“Clearly a garden-variety stimulus package is the last thing we need. This is pile-on debt,” said Don Drummond, an economist at Ontario’s Queen’s University.

“The risk is that at some point interest rates are going to go up and we’re going to be in trouble,” he said, pointing to the mid-1990s when Canada‘s debt-to-GDP ratio skyrocketed, leading to rating agency downgrades and years of austerity.

The Bank of Canada cut its benchmark interest rate to 0.25% to counter the economic fallout of the COVID-19 crisis and has said rates will not rise until labor market slack is absorbed, currently forecast for into 2023. That may change when it releases new projections on April 21.

EXPANDING ECONOMY

More than 3 million Canadians lost their jobs to the pandemic. As of March, before a third wave forced new lockdowns, only 296,000 remained unemployed because of COVID.

Despite still-high unemployment levels in hard-hit service sectors, the economy has expanded for nine straight months even as provinces have adjusted health restrictions to counter waves of infections.

“Once we see sustained reopening, we do think that the recovery will have quite a bit of momentum on its own,” said Josh Nye, a senior economist at RBC Economics.

“We think Canada‘s economy will be operating pretty close to full capacity by this time next year,” he said.

Economists surveyed by Reuters expect Freeland to project a deficit in the range of C$133 billion to C$175 billion for fiscal 2021/22, up from the C$121.2 billion ($96.7 billion)

deficit forecast in November. https://tmsnrt.rs/3wSJPcm

The deficit for fiscal 2020/21 ended in March is forecast by the government to top a historic C$381.6 billion ($304.5 billion).

Canada announced on Monday a C$5.9 billion ($4.7 billion) aid package for the country’s largest airline carrier, Air Canada, and said talks were ongoing with No. 2 carrier WestJet Airlines Ltd and others.

 

(Reporting by Julie Gordon in Ottawa; Additional reporting by Fergal Smith in Toronto; Editing by Steve Scherer and Peter Cooney)

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Economy

CANADA STOCKS – TSX ends flat at 19,228.03

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* 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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Economy

Canadian dollar outshines G10 peers, boosted by jobs surge

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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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