The Federal government has reassured Canadians that the economy will come roaring back once COVID-19 restrictions are lifted. Despite this optimism, a number of worrying cracks are appearing in the Canadian economy that could undermine that growth.
How Is the Canadian Economy Doing?
In January 2021, the Canadian economy grew 0.7%; a big jump from 0.1% in December 2020. This was the ninth consecutive monthly increase since the Canadian economy tanked last March and April. Good news indeed, but there is more to the Canadian economy than what those numbers suggest.
While the Canadian economy is throwing up solid numbers, it’s because the country is rebounding from the worst economic crisis in decades. In 2020, Canada’s gross domestic product (GDP) fell 5.4%, more than in 2009 (Great Recession) and 1982 (stagflation).
First, the number of COVID-19 cases in Canada are surging. In fact, Canada recently overtook the U.S. in new per capita COVID-19 cases for the first time.
Ontario entered its third lockdown, Alberta has imposed stricter restrictions, B.C. is looking at doing the same, the number of municipalities in Quebec entering lockdown is on the rise, as is the number of cases in Atlantic Canada.
The pandemic and economic lockdown is hurting Canadians more than ever with 53% of Canadians admitting they are $200 or less away from not being able to pay their monthly bills and debt obligations.
That represents a five-year high and a 10-point increase from December 2020. That number also includes 30% of those who said they were already insolvent. More Canadians could be in the same boat when interest rates rise as the economy rebounds.
Incredibly, despite the fact that the majority of Canadians are on the brink of insolvency, 59% say that because interest rates are low it’s a great time to buy items that they wouldn’t otherwise be able to afford.
This highlights some of the unique ways the pandemic undermined the Canadian economy. Recessions typically force automakers to stop production, which in turn, idles their suppliers. But other sectors carry on until the economy recovers; people still get their hair done, go to restaurants, and shop. Not as much as before, but they still get out.
The coronavirus pandemic was different. COVID-19 decimated restaurants, entertainment, and tourism; sectors that normally avoid the worst during a recession and do well when the economy reopens. Not this time, the production side of the Canadian economy did ok.
Ottawa sending out $2,000 unemployment cheques and subsidizing Canadian companies to keep their employees on the payroll was the right thing to do, but it was a sign of weakness, not strength. COVID-19 exposed weaknesses in the Canadian economy.
To combat this, the Bank of Canada is keeping its overnight lending rate near record lows, which could result in inflation. This could hurt Canadian bank accounts even further and send the jobless rate lower than its pre-pandemic levels.
Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses
While the Canadian economy is sending out some positive economic data, there are other issues exposing cracks in the Canadian system—all of which could threated the country’s post-pandemic growth and hurt Bay Street. Despite this uncertainty, the trading professionals at Learn-To-Trade.com can show you how to make money no matter what the stock market is doing.
Learn-To-Trade.com is Canada’s oldest and leading provider of stock market trading courses. Over the years, the trading experts at Learn-To-Trade.com have taught tens of thousands of investors, of every skill level, how to trade more confidently and profit more consistently.
At Learn-To-Trade.com, we understand that investors have different needs. That’s why we provide a unique, Lifetime Membership that allows you to re-attend any part of the comprehensive program as often as you’d like.
To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.
