{"id":7941,"date":"2021-03-11T22:59:53","date_gmt":"2021-03-11T22:59:53","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2021\/03\/11\/bank-of-canada-sees-possible-positive-spending-surprise-but-ongoing-need-for-stimulus\/"},"modified":"2021-03-11T22:59:53","modified_gmt":"2021-03-11T22:59:53","slug":"bank-of-canada-sees-possible-positive-spending-surprise-but-ongoing-need-for-stimulus","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2021\/03\/11\/bank-of-canada-sees-possible-positive-spending-surprise-but-ongoing-need-for-stimulus\/","title":{"rendered":"Bank of Canada sees possible &#8216;positive&#8217; spending surprise, but ongoing need for stimulus"},"content":{"rendered":"<div style=\"text-align:center\"><\/div><p> \n<\/p>\n<div id=\"\">\n<header aria-label=\"Beginning of Article\" class=\"article-header\">\n<nav aria-label=\"Breadcrumb\" class=\"breadcrumbs\">\n<h2 class=\"visually-hidden\">Breadcrumb Trail Links<\/h2>\n<ol class=\"breadcrumbs__items list-unstyled\">\n<li class=\"breadcrumbs__item\"> News <\/li>\n<li class=\"breadcrumbs__item\"> Economy <\/li>\n<\/ol>\n<\/nav>\n<p class=\"article-subtitle\"> In one scenario outlined by the deputy governor, spending ticks up even further and Canadians dip into about 15 per cent of their extra savings <\/p>\n<div class=\"article-meta\">\n<div class=\"published-by\">\n<p>Author of the article:<\/p>\n<p> <span class=\"published-by__author\">Geoff Zochodne<\/span> <\/div><\/div>\n<figure class=\"featured-image\"><picture class=\"featured-image__ratio featured-image-category__economy\"><\/picture><figcaption class=\"featured-image__caption image-caption\"><span class=\"caption\">Lawrence Schembri, deputy governor at the Bank of Canada, is seen on a laptop computer as he speaks during a video conference in Ottawa on June. 18, 2020.<\/span> <span class=\"credit\">Photo by David Kawai\/Bloomberg\/File<\/span> <\/figcaption><\/figure>\n<\/header>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>The Bank of Canada sees the potential for a pleasant surprise from savings-fuelled household spending, but also that monetary stimulus will continue to be required for some time as the economy gradually recovers from the COVID-19 pandemic and is reshaped somewhat in its wake.<\/p>\n<p>Bank of Canada Deputy Governor Lawrence Schembri on Thursday said that while many people have lost their jobs and taken hits to their finances during the pandemic, \u201cforced and precautionary\u201d savings have added up to an estimated $180 billion or so.<\/p>\n<p>Schembri said those funds were built up because the disposable income of the average Canadian increased by an extra $1,800 in 2020, helped by government support programs. Meanwhile, their spending fell by about $4,000, as the pandemic and restrictions meant to curb it affected businesses where disposable income could be spent, such as restaurants and bars.<\/p>\n<p>Although the Bank of Canada\u2019s research suggests around 40 per cent of the extra savings ended up in the hands of high-income households, the money overall is enough to \u201cmeaningfully affect\u201d the economy\u2019s trajectory, the deputy governor said.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-1\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>\u201cIf Canadians spend more than we expect, it would strengthen the recovery in consumption and employment,\u201d he added during a virtual speech to industry group Restaurants Canada.<\/p>\n<section aria-labelledby=\"moreTopicLabel1380676603926512346928740569726301\" class=\"more-topic\" data-carousel-icon-button=\"\" data-carousel-type=\"list\"><button aria-hidden=\"true\" class=\"more-topic__button-prev\" data-carousel-prev=\"\" tabindex=\"-1\" title=\"previous\" type=\"button\"\/><\/p>\n<ol class=\"more-topic__items list-unstyled\" data-carousel-slide-list=\"\" tabindex=\"0\">\n<li class=\"more-topic__item\" data-carousel-item=\"\"><picture class=\"more-topic__item-image\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"Bank of Canada Governor Tiff Macklem.\" class=\"lazyload\" fifu-data-src=\"https:\/\/i0.wp.com\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80&ssl=1\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=96&strip=all&quality=80,\n                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=192&strip=all&quality=80 2x,\n                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0310macklem.jpg?h=288&strip=all&quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"><span class=\"more-topic__item-text-clamp\"> Bank of Canada keeps its foot on the gas, but hints at changes to come <\/span><\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\"><picture class=\"more-topic__item-image\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/ywAAAAAAQABAAACAUwAOw==\" fifu-lazy=\"1\" fifu-data-sizes=\"auto\" fifu-data-srcset=\"https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=75&resize=75&ssl=1 75w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=100&resize=100&ssl=1 100w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=150&resize=150&ssl=1 150w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=240&resize=240&ssl=1 240w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=320&resize=320&ssl=1 320w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=500&resize=500&ssl=1 500w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=640&resize=640&ssl=1 640w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=800&resize=800&ssl=1 800w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=1024&resize=1024&ssl=1 1024w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=1280&resize=1280&ssl=1 1280w, https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1&w=1600&resize=1600&ssl=1 1600w\" alt=\"\u201cThis is the first recession that income is actually rising,\u201d one expert notes, \u201creflecting the fact that government transfers were actually larger than the amount of money lost in the labour market.\u201d\" class=\"lazyload\" fifu-data-src=\"https:\/\/i2.wp.com\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80&ssl=1\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=96&strip=all&quality=80,\n                                    https:\/\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=192&strip=all&quality=80 2x,\n                                    https:\/\/smartcdn.prod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2020\/11\/savings-1.png?h=288&strip=all&quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"><span class=\"more-topic__item-text-clamp\"> Household savings in Canada skyrocket during pandemic as Ottawa doles out billions in emergency benefits <\/span><\/h3>\n<\/li>\n<\/ol>\n<p><button aria-hidden=\"true\" class=\"more-topic__button-next\" data-carousel-next=\"\" tabindex=\"-1\" title=\"next\" type=\"button\"\/><\/section>\n<p>A \u201cpositive surprise\u201d from spending is possible, Schembri said, particularly if the pandemic is tamed and households grow more confident in the recovery.<\/p>\n<p>In one scenario outlined by the deputy governor, spending ticks up even further and Canadians dip into about 15 per cent of their extra savings. On average, the bank estimates this would help boost employment by an additional 30,000 jobs per year over its projection in each of the next three years.<\/p>\n<p>Yet the deputy governor also noted that there are risks to the economic recovery still looming, such as another wave of infections and lockdowns. Changes in consumer behaviour could also force companies to rejig their operations, which may have negative effects for workers and a job market that is still about 850,000 positions short of where it was a year ago.<\/p>\n<p>\u201cWhile new firms may be established, and workers retrained, this will take time,\u201d Schembri said. \u201cMonetary policy stimulus will be needed for an extended period to mitigate these risks and support both the restructuring and the recovery of our economy.\u201d<\/p>\n<p>Schembri\u2019s comments came after the Bank of Canada said Wednesday that it would keep its key policy rate unchanged at 0.25 per cent, the level to which it had been slashed in response to the pandemic. The bank also said again that it aims to keep the rate that low until its two per cent inflation target is \u201csustainably achieved,\u201d something it projected in January won\u2019t happen until into 2023.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-2\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>Furthermore, the central bank said it was still buying at least $4 billion of Government of Canada bonds per week to push down borrowing costs. It added that it plans to keep buying those bonds until the economic recovery is \u201cwell underway,\u201d although the amount will be adjusted depending on the strength of the rebound.<\/p>\n<p>Those commitments have not been enough to wipe out speculation that the economy could run so hot it may prompt a withdrawal of at least some monetary stimulus. Even in announcing it would hold its policy rate steady, the Bank of Canada also said the country\u2019s gross domestic product is now forecast to grow in the first quarter of 2021, rather than its earlier prediction that it would contract.<\/p>\n<p>Schembri said on Thursday that the bank sees inflation rising to around the top of its one to three per cent target band in the next few months, but the increase would not be sustained and would eventually moderate.<\/p>\n<p>\u201cFollowing this speech, we believe the Bank has succeeded in maintaining a high degree of flexibility as they approach the April meeting,\u201d strategists from TD Securities wrote in a note to clients on Thursday. \u201cWe continue to look for the BoC to reduce weekly bond purchases in April while increasing average duration.\u201d<\/p>\n<p data-async=\"\"><em>\u2022 Email: gzochodne@nationalpost.com | Twitter: <a class=\"twitter-follow-button\" data-evt=\"click\" data-evt-typ=\"User Interaction Click\" data-evt-val=\"{\" control_fields=\"\" source=\"\" type=\"\" name=\"\" target=\"\" url=\"\" vertical=\"\" position=\"\" pixels=\"\" link=\"\" href=\"https:\/\/twitter.com\/geoffzochodne\" rel=\"noopener nofollow\">GeoffZochodne<\/a><\/em><\/p>\n<\/section>\n<section class=\"article-content__share-group article-delimiter\" data-evt=\"beforeunload\" data-evt-typ=\"scroll-depth\" data-evt-val=\"{\" control_fields=\"\" of=\"\" page=\"\" viewed=\"\" story=\"\">\n<h2 class=\"visually-hidden\">Share this article in your social network<\/h2>\n<\/section>\n<div class=\"widget article-content__widget-group article-content__widget-group--slot1\">\n<section aria-labelledby=\"TheLogic7672348552934430197385054530021405\" class=\"feed-section feed-section--partner-story list-widget--partner-story the-logic\" data-async=\"\">\n<div class=\"widget-title widget-title--partner-story flex-align-center row row--no-padding--left row--no-padding--right\">\n<p> In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post. <\/p>\n<\/p><\/div>\n<\/section>\n<\/div>\n<div class=\"widget article-content__widget-group article-content__widget-group--slot2\">\n<section aria-labelledby=\"TopStoriesNewsletter9178588067259887995291855925255213\" class=\"newsletter-widget\" data-account-id=\"b9d3df2fccd108b5eff3c44f573b2cd6\" data-target-list=\"FP_HeadlineNews\" data-widget=\"newsletter\">\n<div class=\"newsletter-widget__body\">\n<h2 id=\"TopStoriesNewsletter9178588067259887995291855925255213\">Top Stories Newsletter<\/h2>\n<p class=\"newsletter-widget__text\">Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.<\/p>\n<div aria-hidden=\"false\" class=\"newsletter-widget__bottom js-form-main\">  <small> By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300 <\/small> <\/div>\n<div aria-hidden=\"true\" class=\"hidden js-submit-success\" id=\"submitSuccessFP_HeadlineNews\">\n<h2 class=\"newsletter__feedback--heading\">Thanks for signing up!<\/h2>\n<p class=\"newsletter-widget__text\">A welcome email is on its way. If you don&#8217;t see it please check your junk folder.<\/p>\n<p class=\"newsletter-widget__text newsletter__feedback--last\">The next issue of Top Stories Newsletter will soon be in your inbox.<\/p>\n<\/p><\/div>\n<p aria-hidden=\"true\" class=\"newsletter-widget__text newsletter__feedback--error hidden js-submit-error\" id=\"submitErrorFP_HeadlineNews\"> We encountered an issue signing you up. Please try again <\/p>\n<\/p><\/div>\n<\/section>\n<\/div>\n<footer aria-label=\"Article Comments\" class=\"article-footer\">\n<section class=\"comments__section\" id=\"comments\">\n<h3 class=\"widget-title comments-anchor\" id=\"comments-area\">Comments<\/h3>\n<p class=\"comments__section-disclaimer\"> Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications\u2014you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings. <\/p>\n<\/section>\n<\/footer>\n<\/div>\n<p><script async src=\"\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><br \/>\n<br \/>\n<br \/>Bank of Canada sees possible &#8216;positive&#8217; spending surprise, but ongoing need for stimulus<\/a><br \/>\n<br \/>2021-03-11 22:59:53<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Breadcrumb Trail Links News Economy In one scenario outlined by the deputy governor, spending ticks up even further and Canadians dip into about 15 per cent of their extra savings&#8230;<\/p>\n","protected":false},"author":2,"featured_media":7942,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/Lawrence-Schembri-1.png?quality=90&strip=all&w=288","fifu_image_alt":"","footnotes":""},"categories":[31],"tags":[],"class_list":["post-7941","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy"],"_links":{"self":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/7941","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/comments?post=7941"}],"version-history":[{"count":0,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/7941\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media\/7942"}],"wp:attachment":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media?parent=7941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/categories?post=7941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/tags?post=7941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}