Economist Avery Shenfeld says that there is more pain ahead. Meanwhile BMO's measure of business activity has gained again
Reopening the economy has been a priority since the spring lockdown but the tough times are far from over.
While there are glimmers of hope from news that Pfizer and others are increasingly confident of a vaccine in the coming months – possibly as soon as the end of this year – the Canadian economy will remain under pressure in the meantime.
CIBC Economics’ Avery Shenfeld believes that longer lockdowns may still be necessary and says that government support will be essential.
In a report published Friday, he says that the commonly heard trope of the need to “flatten the curve” of COVID-19 infections was not enough; “you need to smash the curve” before reopening venues that present greater risk of transmission.
That means gyms, bars, and restaurants all suffering from longer lockdowns and increased measures to mitigate infections once they reopen.
But Shenfeld acknowledges that this will necessitate targeted support from government to protect businesses and jobs.
He suggests going further than rent relief for shuttered businesses, perhaps tax free sales for take-out food and alcohol.
Continued growth
Despite the challenges, Canadian business continues to show improvement according to data from BMO.
The banking group’s Canadian Business Activity Index rose 2.6% in August and for September, a 1.7% gain is expected.
"This would mark five consecutive months of growth from the pandemic low set in April, leaving the index 3% below February's peak," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Looking at it another way, about 87% of the economic hole caused by the pandemic has been filled back up."
Hours worked, jobs market, and housing market factors all gained but manufacturing sales fell and business credit growth was soft.
"The Canadian economic recovery continues, with business activity improving again in August," noted Mr. Kavcic. "But, momentum is fading, as suggested by some of the early September data, and we continue to believe the task of filling the remaining COVID hole will be much, much tougher than it was to this point. That is, some industries are still a long way from returning to any semblance of normal, while a second wave of cases is prompting some localized restrictions of activity as we head deeper into the fall."
