Tracking Canada’s economic recovery from COVID-19

Canada’s economic recovery has levelled off in negative territory

Following the initial plunge in economic activity back in spring 2020, Canadian businesses and consumers appear to have adjusted their operations and habits with each successive wave of COVID-19 cases. These outbreaks and related concerns have been replaced by new risks, like inflation and lower growth prospects. Canadians are still experiencing the effects of prolonged supply chain issues and tighter monetary policy.

As of Nov. 18, the CERT sits at 5% below pre-pandemic levels.

Transportation and mobility keep index from further deterioration

Since the October CERT release, new weekly COVID-19 cases have trended downward with hospitalizations low in Canada. Most restrictions have been lifted across the country, but the seasonal increase in respiratory viruses this fall could lead to an increase in cases as some provinces discuss potentially bringing back mask usage.

Financial markets continue to be extremely volatile amid tightening monetary policy in response to record inflation. The TSX further declined since our last release. The Canadian price of oil (Western Canada Select) declined further as demand softens and oil is released from the U.S. Strategic Petroleum Reserve. The WCS price now hovers at US$56 a barrel. 

The transportation and mobility index further improved. Workplace activity showed slight signs of improvement while most other mobility indicators showed little changes. Freight activity was the largest contributor to this component as it now reaches above pre-pandemic levels. Flight activity is still somewhat suppressed, but domestic air travel continued to near pre-pandemic levels.

Business and consumer sentiments continue to weaken as monetary policy tightens and geopolitical tensions remain high. Inflation remains elevated, with further rate hikes expected, and short-term global growth prospects are lower. More specifically, consumer confidence dropped to its lowest levels since June 2020. Businesses are less optimistic with expectations of weaker orders.

Housing, spending and employment* indicators improved slightly. Growth of online job postings slightly rose. Hours worked has remained at their previous levels. As the Bank of Canada rapidly increases interest rates, housing market activity is slowing, which now sits at 22.3% below pre-pandemic levels. Mobility activity across retail and recreation centres remains above pre-pandemic levels and shows signs of improvement.

*Note: The housing, spending and employment component formerly included a consumer spending series, which has been substituted with a targeted mobility index. The transportation and mobility index has been adjusted accordingly.