TEC Canada is pleased to provide the Andersen Monthly Economic Report exclusively to our members. The former assistant chief of the Bank of Canada’s research department, Dr. Peter Andersen provides valuable economic insight to help you make better business decisions.
It is time to look ahead. The economic numbers from April describe what severe social distancing does to shutdown an economy are not as important as the path forward. More people will begin going back to work in the coming weeks – there will be a ‘recovery’ from April’s low point, though that is reliant on governments’ hesitance on the emergence of a second wave of the virus. The U.S. recession will technically end this summer – the staying power of the stock market will be helpful for the economic start up coming in the months ahead. Canada faces a steeper uphill battle as their household debt and reliance on oil as a key economic driver make it harder to stabilize Canada’s economy and banking system. In the end, the key to opening economies and thriving is in the virus curve.
- Canadians have gone deeply into debt since the last recession; this is in contrast to the U.S. where household debt relative to GDP has declined steadily since 2009
- Given the different approach to public health risks, easing restrictions could lag behind the U.S. 2-3 months. Similarly, Canada’s economic policy response is behind the U.S. in terms of speed, scope and scale
- The U.S. economy can begin to grow again before a vaccine, though the risk of a second wave of the virus would cause a W-shaped recovery
- Construction will be the first to rebound; construction has much better fundamentals now than in the aftermath of the last recession
- The collapse in global oil demand is putting extreme downward pressure on global and North American oil prices; there is little to no relief in sight even with countries beginning to open their economies
- The COVID-19 economic shock is expected to be the deepest global recession of our lifetime