Accelerated consumer spending once the coronavirus outbreak has become manageable will help stimulate a sharp economic recovery in 2021, according to various market observers.
“The best thing about the past year is that it’s over, and the year ahead could be one of the best since the start of the century,” BMO Capital Markets said in a recent report. “More fiscal juice should push the economy over the second-wave hump, while the vaccine rollout will speed up the recovery, though labour markets will take much longer to heal.”
Federal financial support programs kept a large portion of the consuming public afloat during the early phase of the COVID-19 pandemic, to the point where Canadians became significantly richer due to mounting savings and feverish home price growth.
Data from Statistics Canada showed that household net worth increased by more than $600 billion over the first six months of the pandemic.
“With this type of money going to households we avoided a wave of insolvencies and defaults that has characterized every recession in Canadian history,” said Stefane Marion, chief economist at National Bank of Canada.
A recent Bloomberg survey of economists indicated that this will set the stage for growth exceeding an annualized pace of 5% from Q2 to Q4 this year.
“During the first year of a recession there is just no precedent for a positive wealth effect,” Marion said. “This is crucial in helping sustain the resilience of the Canadian economy.”
Once most of Canada is vaccinated, a spending rush will almost certainly follow.
“Give us the vaccine and get out of the way because people are dying to go to restaurants again, they just aren’t willing to die to go to a restaurant,” said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce. “Once people have their vaccine, I think we will see a huge unleashing of pent-up demand.”