OTTAWA — The national statistics office will say this morning how much Canada’s domestic economy bounced back in the third quarter of the year.
The Canadian economy suffered its worst three-month stretch on record in the second quarter as the economy came to a near halt in April before starting to recover in May and June.
Expressed at an annualized rate, real gross domestic product fell 38.7 per cent in the second quarter, the worst posting on record.
The rebound is expected to be equally sharp in the ensuing three-month stretch over July, August and September.
Financial data firm Refinitiv says the average economist estimate is for an annualized growth rate of 47.6 per cent for the quarter.
The firm also says the average economist estimate is for a 0.9 per cent increase in real GDP for September, which Statistics Canada will also unveil this morning.
This report by The Canadian Press was first published Dec. 1, 2020.
Banks well-armed for uncertain economy: DBRS – Investment Executive
Total credit loss provisioning rose sharply to $23.7 billion in 2020, up from $8.9 billion recorded in the prior year. Yet most of this came on performing loans, it reported.
Gross impaired loans rose in 2020 too, largely driven by credit impairments in sectors most directly affected by the pandemic, DBRS said, particularly the oil and gas, retail, and hospitality sectors.
Nonetheless, the banks also generated still-solid loan growth of 5% year over year, it said.
Loan growth was largely powered by residential mortgage lending, amid low mortgage rates and strong housing markets.
“Conversely, other personal lending growth was muted during [fiscal 2020], with aggregate credit card balances declining a significant 13% year over year as consumers remained cautious and economic activity was muted,” said DBRS.
As well, commercial loan growth slowed to 5% from double-digit growth in prior years.
Looking ahead, gross impaired loans are expected to rise in 2021 as loan deferrals that were implemented in the face of the pandemic have since expired.
DBRS said the outlook for future loan loss provisioning “will largely be a function of loan growth and credit migration.”
The underlying economic outlook remains uncertain too, particularly in the short term.
Under its moderate scenario, DBRS forecast that Canadian GDP contracted by 5.5% in 2020. GDP is expected to by 5.0% in 2021, followed by 2.5% growth in 2022.
“The near-term economic outlook remains troubling and recovery prospects will likely depend on the severity and duration of the current coronavirus resurgence; however, we expect the outlook to brighten by mid-year as vaccines become more widely available,” said Robert Colangelo, senior vice president, global financial institutions group at DBRS Morningstar.
Given the uncertain economic outlook, DBRS said it expects “the earnings power of banks to continue to be constrained; however, their highly diversified franchises and demonstrated abilities to manage expenses should provide an offset.”
Additionally, the banks’ capital and liquidity levels will remain elevated and well above the regulatory minimums, it said.
The banks’ aggregate tier one capital ratio rose by 80 basis points in fiscal 2020 to 12.3% “largely driven by internal capital generation,” DBRS said. “This high level of capital provides these banks with a significant capital buffer to absorb higher credit losses.”
“Restrictions on dividend increases and share buybacks may be lifted once the path to economic recovery becomes clearer,” it said.
For now, DBRS has a stable outlook on the banks’ credit ratings. Upgrades remain unlikely due to the operating environment, whereas negative rating pressure could materialize if the banks “experience a sustained deterioration in asset quality or a significant weakening of profitability,” it said.
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Another recession looms for UK economy as lockdowns bite – 570 News
LONDON — The British economy looks set to fall back into recession after official figures on Friday showed that it shrank by 2.6% month-on-month in November, when much of the country was in a second coronavirus lockdown.
The Office for National Statistics said that as a result of the fall, the economy is 8.5% smaller than its pre-pandemic peak. When the pandemic struck last spring, the economy contracted by up to a fifth over the first half of the year, before a summer easing of restrictions saw the economy recover a chunk of those losses.
Because of the November fall, the economy is set to contract again in the fourth quarter.
With most of the U.K. in an even tighter lockdown at the start of 2021 following a spike in new cases that has been blamed on a new variant of the virus in London and southeast England, it looks inevitable that the economy will shrink further in the first quarter of the year. That means it will have contracted for two consecutive quarters, the technical definition of a recession.
“It’s clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face,” said Britain’s Treasury chief Rishi Sunak.
The November decline was not as bad as some economists feared, an indication that firms have managed to work out ways of selling their goods even when their doors are closed through online services.
The services sector was hit hard in November, shrinking by 3.4% as rafts of hospitality and leisure firms were forced to shut. The sector is now 9.9% smaller than it was in February 2020, before the impact of the pandemic was first fully felt.
“The economy took a hit from restrictions put in place to contain the pandemic during November, with pubs and hairdressers seeing the biggest impact,” said Darren Morgan, director for economic statistics. “However, many businesses adjusted to the new working conditions during the pandemic.”
The hope is that the rollout of coronavirus vaccines — the U.K. is ahead of many other countries — will see a pick-up in activity later this year.
“While the economic story today is of only the second-ever double-dip recession on record, the story of the year will be a vaccine-driven bounce back in economic activity for sectors like hospitality and leisure,” said James Smith, research director of the Resolution Foundation.
Follow AP coverage of the coronavirus pandemic at:
Pan Pylas, The Associated Press
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