E Canada's Personal Savings Rate Has Soared

The Canadian economy, in step with the other industrial countries, is experiencing extraordinary times. 

However, for the first time since the pandemic shuttered the economy eight months ago, an end to the recession is actually in sight. Economic growth will return next year, but the recovery will be uneven between sectors, and of course will affect the labour market very unevenly. 

In fact, the recent start of the vaccine distribution means that it is now possible to envision a post-COVID-19 economy arriving by next fall. 

As one of the following charts illustrates, during the worst of pandemic downturn in March and April, the negative impacts on the Canadian economy was very uneven. 

Since May, however, the economy has been in a rebound phase. Spending on consumer goods and residential construction has been relatively strong, while spending on services has been extremely weak. 

Indeed, because service occupations have been so adversely affected compared to goods production, the pandemic recession has been described as a She Recession. (In typical recessions male incomes and jobs are damaged much more severely than female income and employment.) 

Nonetheless, Canada’s generous (mostly federal) government programs designed to support families has markedly supported personal disposable income, even though the personal savings rate escalated at the same time. 

In terms of recent developments, Canada’s real GDP rebounded at an astoundingly fast 40.5% annual rate in the third quarter of this year, a post-war record quarterly high growth rate. In the second quarter, the economy declined at a 38.1% annual pace, also representing the worst performance since data was recorded. 

According to the latest Fall Fiscal Statement from the federal Minister of Finance, the Canadian economy is expected to shrink 5.8% this year and then rebound by about 4.8% in 2022. Historically the largest yearly decline in Canada’s economy was a drop of 3.2% in 1982, so the projected 4.8% rebound next year would be the strongest since 1984.

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