With our world today being filled with misinformation and fake news, it’s refreshing to gain some quality insight into the economic impact of COVID-19 on the Canadian consumer.
Benjamin Tal, Deputy Chief Economist, CIBC Capital Markets provides a great overview of our current situation and illustrates the future impact of COVID-19 on Canadians.
Highlights of this report were noted as follows:
- While many talk about the current situation as being equivalent to the Great Depression of 1929, there is one significant difference. The COVID-19 crisis has an endgame. That endgame is a vaccine.
- The consensus is that an effective and tested vaccine will be available within 12-18 months.
- The household sector was not ready for COVID-19. Elevated debt levels, a high debt service ratio, and a low savings rate, worked to increase households’ sensitivity to economic shocks. While for years that sensitivity was masked by low interest rates, the current crisis is exposing this vulnerability.
- Zooming in on the resale [real estate] market, up until early last week, it was relatively active, but in the past few days, things have changed. In many ways, the market is frozen. With demand and supply frozen, prices are also frozen. That is very different from any “typical” recession when reduced demand leads to fall in prices. We expect the market to remain frozen in the coming months.
- The main impact will be felt in the new construction market. While many low-rise units in the major centres will be able to close transactions, the situation in the highrise segment is more complex. 2020 was supposed to be a record year for completions, mainly in centres such as Toronto and Montreal. But there is now a significant question mark around the ability of developers to deliver, given reduced productivity as sites try to cope with the impact of the virus. It is very reasonable to assume that in the very near future, most construction activity will come to an end.
An insightful article, the full report and additional insight can be found in the link noted below where you can download and read further.
Full Article: CIBC COVID-19: Economic Perspective