COVID-19 slams businesses and consumer sentiment: Bank of Canada

Jessy Bains
·3 min read

Even as economies across Canada gradually reopen, Canadian consumers and businesses worry about the effects of COVID-19.

The Bank of Canada’s Canadian Survey of Consumer Expectations (CSCE) was conducted between May 11 to June 1 and asked for views on inflation, the labour market, and household finances.

“The perceived probability of losing one’s job rose to its highest level in the CSCE, and respondents anticipated having greater difficulty finding new employment if they were to lose their current job.” said the Bank of Canada in a release.

Barring a second wave, restrictions have eased since the survey was conducted. So the outlook could be getting more optimistic.

“Although most provinces were reopening during this time period, we would hope that the further removal of social distancing measures following the survey period would provide at least modestly better results for job prospects if it were conducted today,” said CIBC economists Andrew Grantham and Katherine Judge, in a note.

Compared to the previous CSCE in April for the first quarter, expectations for wage growth and household income growth eased. Plans for spending tumbled, with households focusing on essential products and services.

Survey respondents also said they excepted a pause for real estate prices for the next 12 months.

“Overall, consumer expectations for house price growth in Canada dropped to zero. The decline was widespread across provinces. Expectations in Alberta, Saskatchewan and British Columbia were negative,” said the Bank of Canada.

Respondents said they expect inflation to remain near the Bank of Canada’s target range of between 1 and 3 per cent.

Sour business outlook

The Bank of Canada also released its Business Outlook Survey, which found business sentiment is negative in all regions and all sectors due to COVID-19.

“Businesses in most regions and sectors intend to significantly cut their investment spending. Hiring plans are muted, although a quarter of firms plan to refill some positions after recent layoffs,” said the Bank of Canada.

The Business Outlook Survey found labour shortages are easing. But credit conditions are tightening, although government measures have helped offset the situation.

The survey was conducted from mid-May to early June.

“The composite indicator fell to -7 in Q2, from -0.5 in the prior quarter, and a level close to the lowest reading seen during the 2008/09 financial crisis,” said CIBC’s Grantham and Judge.

“The headline reading probably could have been even worse if the survey had been conducted a month earlier, as the mid-May to early June survey period coincided with provincial governments reopening their economies but came before we had seen the spike in Covid-19 case counts in the US.”

Nearly a third of businesses said the Canada Emergency Wage Subsidy (CEWS) helped avoid layoffs.

Respondents said the labour pool was vast enough to hire workers if they had to ramp up.

“However, a few businesses noted that the Canadian Emergency Response Benefit has made it difficult to retain current workers or hire new staff.”

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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