If there is a day that will go down in history for Canadian consumer spending it may be March 12.
That was the day Prime Minister Justin Trudeau went into self-isolation after his wife Sophie Grégoire was diagnosed with COVID-19. That news and a eye-popping plunge in the stock market served “as a one-two gut punch to Canadian consumers struggling to absorb a spike in pandemic-related developments,” says a report by RBC economists Colin Guldimann and Carrie Freestone.
Data have become a crucial commodity these days as policy makers and politicians scramble to assess the impact of what may be the most rapid economic crisis in history.
This week Statistics Canada for the first time released GDP numbers for March early in what it called a “Nowcast,” acknowledging the “demand for trusted information on the aggregate impact of this health crisis on the economy.” Normally the agency releases GDP data two months after.
The numbers were grim. Canada’s economy shrank by 9% in March, the biggest monthly decline on record.
Since the last financial crisis, Canadian consumers have been an major engine of growth and tracking their spending is an important indicator of the state of the economy.
Rather than rely on lagging retail sales data, RBC economists are using the banks’ proprietary spending data to provide a timely look at how the virus and shutdown have altered consumer consumption.
Highlights of key dates in the coronavirus crisis:
• Canadian spent 13% more on March 12 than a year earlier, mainly on groceries
• Spending on dining plunged 29% and transportation dropped 9% when Ottawa announced on March 16 that it would close borders to most non-citizens. Spending on groceries shot up 125%
• Ontarians and Quebecers increased shopping by almost half on the day that business closures were announced
• Card spending fell 60% in the week ending March 30 from the year before
Some of the economists’ other findings:
‘Baking, not bistros’
Grocery shopping spiked 80% from the year before in the week ending March 17 as Trudeau began self-isolating, and stayed high for two weeks as anxious Canadians filled their pantries. That spending levelled off by the end of the month, but restaurant spending, which fell almost 80% during the same period, has not recovered, despite takeout and delivery.
’Software, not streetwear’
Canadians spent 88% less on clothing, gifts and jewellery in the week ending March 30. After a brief spike in shopping at big box stores, department store sales declined 40% from the year before.
Software and data sales, on the other hand, saw the biggest growth in discretionary spending, as Canadians kitted themselves out to work at home.
‘Streaming, not screenings’
Spending on movie theatres and art galleries was already falling before official social distancing measures were evoked, but bottomed out in the last two weeks of March. Spending on books and music, including streaming, has seen little decline.
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POULTRY PROBLEM Chicken farmers in Canada are cutting how many chicks they raise between May and July by 12.6%, as demand drops because of mass restaurant closures and COVID-19 outbreaks at Canadian meat processing plants slow production. Jake Edmiston reports on this and other food supply problems during the coronavirus crisis. GREG SOUTHAM / POSTMEDIA
- Today’s data: Canadian international transactions in securities, U.S. leading indicator, China GDP, industrial production, retail sales (check)
- Notable earnings: Procter & Gamble Co, Schlumberger
A record 22 million Americans have claimed jobless benefits over the past month as the coronavirus shuts down the economy. This unprecedented surge of unemployment has now almost wiped out all the job gains since the Great Recession. The figure is shocking but economists say the good news is it appears the U.S. layoffs have peaked. Initial jobless claims for last week totalled 5.25 million, 1.4 million fewer than the week before. After reaching a record two weeks ago, jobless claims have registered two consecutive declines which suggests that the peak in layoffs is likely behind us, says Oxford Economics. Oxford expects 24 million jobs will be lost in April, the jobless rate will spike to 14% and the participation rate will drop below 60%. While some jobs will be restored when activity picks up again, the economists don’t expect employment to reach the levels seen in February 2020 until early 2022.
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