“Increased household savings linked to pandemic add up to around C$180 billion, or about c$5,800 per person,” Lawrence Schembri, Deputy Governor of the Bank of Canada (BoC), said on Thursday, as reported by Reuters.
Additional takeaways
“If Canadians spend more of their pandemic savings than expected, it would strengthen recovery in consumption and employment.”
“Canadians on average spent about C$4,000 less in 2020 because of the pandemic.”
“There is much uncertainty over what Canadians will do with these savings, which are large enough to meaningfully affect the trajectory of the economy.”
“BoC scenario shows if Canadians spend 15% of those savings from Q2 2021 to end-2023, nominal household spending growth in 2021 would rise to 5.0% from 4.3% forecast in January’s report.”
“In this scenario, much of the extra savings would be spent on transport, accommodation and food services, boosting employment more than projected.”
“Downside near-term risks include another wave of infections, delayed vaccine rollout or vaccines being less effective against variants.”
“Downside medium-term risks include businesses facing increasing financial stress, could see more firms close as recovery progresses slowly and economy restructures.”
“In January, BoC projected that the economy would not fully absorb slack until some time in 2023, we will update our forecast in April”
“Governing council spent a lot of time considering signals in the latest data; noted 2020 Q4 growth was stronger than anticipated, also noted growth in long-term unemployment.”
“Overall level of economic activity at end-2020 was almost 1% higher than we had anticipated but labor market remains a long way from full recovery.”
“Large house price increases in some markets will warrant close monitoring for speculative activity.”
Market reaction
The USD/CAD pair largely ignored these comments and was last seen losing 0.52% on the day at 1.2551.
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