Dark headlines about the collapse of the Canadian economy, which saw its worst setback since the record began, may have masked startling new evidence of a strong rebound.
As we reported on Tuesday, the impact of the COVID-19 pandemic has plummeted the Canadian economy, causing 2020 the worst year on record, with a gross domestic product down 5.4%.
But other data released this week, some of which buried in the midst of these last gloomy GDP figures, tells another story. It shows that high levels of savings and public income support have enhanced the economic well-being of households, especially among the younger and lower-income groups.
At the same time, a new measure of consumer confidence shows that Canadians are more willing to go out and spend than at any time since 2018.
All of this adds a bit more evidence to the widely touted theory that, just like after the 1918 influenza pandemic, the Canadian economy is heading into something like the Roaring Twenties – a time of economic, social and artistic innovation. as people exit the cabin. fever mode.
Relentless joie de vivre
“What usually happens is people become less religious. They will relentlessly seek out social interactions in nightclubs and restaurants, sporting events and political gatherings,” said Dr. Nicholas Christakis, sociologist. medical and physician from Yale University, on CBC Radio. White Coat Black Art earlier this year.
“There will be sexual debauchery. People will start spending their money after they save it. There will be joy in life and a kind of risk taking, a kind of efflorescence of the arts, I think,” he said. Christakis told host Dr Brian Goldman.
Like many others, Christakis predicted in January that the impact of the coronavirus would persist until 2021, as suggested by the World Health Organization. collective immunity has remained far. But despite fears of more insidious variants, with a new flow of vaccines and signs of a sharp drop in cases south of the border, others have expressed greater optimism.
“By the time we get to summer, we’ll be in a different place,” BC Provincial Health Officer Dr. Bonnie Henry said last week. “In the months to come, we’re going to be able to do all of these things that we missed last year.”
Bank of Canada Governor Tiff Macklem also spoke out in favor of a rebound from this year. Tuesday’s GDP figures showed the economy was already starting to recover in the last three months of 2020, but that was before the most recent lockdown.
Although he started the year “in a deeper hole,” Macklem predicted a strong recovery in 2021 that would continue into next year, bolstered by the COVID-19 vaccine and low interest rates.
Not just for the rich
One criticism of the idea of the Roaring Twenties was that poorer households whose jobs were hit hardest by the pandemic would be left behind. But a Statistics Canada report released on Monday allayed some of those fears, showing that the gap between the richest and the poorest has actually narrowed in the first nine months of last year.
“Although the day-to-day experiences of some households may have differed, on average, the gap in household disposable income between the lowest and highest incomes has narrowed,” Statistics Canada Report noted.
In fact, the data showed that “disposable income for households with the lowest incomes increased by 36.8%, more than for any other household”. Canada’s youngest households saw their net worth increase by 10%. This can be a good sign for the economy once restrictions are reduced, because unlike the rich or the old, poorer and younger households are in a phase of life that requires them to spend more and save less. , by recirculating their money in the economy.
Besides government income support programs, another reason for the increase in well-being is that families across Canada who already owned real estate have seen their wealth increase, even though the amount they owe has remained. the same.
Some studies have shown that the “wealth effect” – in other words, the feeling of being richer – can make people spend more, but if people are content to sit on their savings, worried about it. in the future, it will not help the consumer. economy driven.
That’s why other sets of data released this week showing increased willingness to spend add a little more momentum to the Roaring Twenties argument.
Consumer confidence measures use different methodologies to derive their results. The Conference Board of Canada – while see his index go up for February – still sees some way to go before reaching pre-pandemic levels.
But a weekly index released by Bloomberg and Nanos Research appears to show consumers are ready to shop as confidence soars to levels not seen since 2018.
“The anticipation of a vaccination rollout, while not perfect, can have a halo effect on consumer mood,” company boss Nik Nanos said in a statement on Monday. of its latest data. “Consumer confidence, as measured by the Bloomberg Nanos Canadian Confidence Index, continues on a positive trajectory and has peaked in three years.”
Even if Canadians remain smaller than in the post-pandemic recovery of the 1920s, a new urge to get out and spend will spread the wealth, helping the economy get back on track.
Follow Don Pittis on Twitter: @don_pittis
“Evil alcohol lover. Twitter junkie. Future teen idol. Reader. Food aficionado. Introvert. Coffee evangelist. Typical bacon enthusiast.”