This morning Prime Minister Trudeau announced further measures intended to support Canadian businesses affected by the COVID-19 economic lockdown. The government has introduced the Large Employer Emergency Financing Facility (LEEFF) that will provide firms with access to liquidity. The program will be available to most non-financial firms with revenues exceeding $300M that have never been convicted of tax evasion. The loans, which be at least $60M, come with various terms and conditions, and are intended to help finance operations, retain workers and prevent bankruptcy. Eligible firms need to have a “significant” presence in Canada, demonstrate some commitment to environmental protection, and agree to report their climate and sustainability objectives on an annual basis for the duration of the loan. Additionally, the government will require firms limit executive pay and share buybacks, while adhering to pension obligations and collective bargaining agreements. Mid-sized firms, with revenues exceeding $100M, may be eligible for loans between $12.5M and $60M, and guarantees up to $80M through an expanded Business Credit Availability Program (BCAP).
Meanwhile, the exact magnitude of the economic impact is beginning to crystallize with the release of early-spring economic data with a few notable releases on deck later this week. On Thursday, Statistics Canada will release manufacturing sales figures for the month of March. The release should reveal the extent of the downturn in the sector and highlight which industries were hardest hit. We expect a sizeable decline in the headline figure, to the tune of -6.5 percent, with particular weakness across durable-goods producers including automotive, aerospace, and machinery, while chemicals and medical supplies manufacturers should fare much better.
Later on Thursday morning the Bank of Canada will release the results of its Financial System Review which outlines the potential risks and vulnerabilities in the Canadian financial system. The release will be followed by a press conference during which Governor Poloz will speak and take questions from the media, alongside Senior Deputy Governor Wilkins. The Bank will release the Senior Loan Officer Survey the following day, which should shed some light on the flow of credit to households and businesses in the first quarter of 2020. Friday will also bring about data on the Canadian housing market, with the Canadian Real Estate Association publishing sales and price statistics for the month of April—the first full month of the lockdown. We expect sales will decline sharply but prices should remain supported by a sizeable reduction in for-sale inventory.
There will also be notable releases south of the border with tomorrow’s inflation data expected to show sizeable price declines last month as oil prices collapsed further. April retail sales and industrial production figures will be published on Friday with both likely to see double digit percent declines. The releases will also uncover important information as to which stores and industrial sectors were hardest hit. The week will also be full of Federal Open Market Committee speeches, as Federal Reserve officials communicate the central bank’s policy actions and emergency tools to the public.
The international docket is also busy with April data releases. Chinese data on fixed asset investment and industrial production, published on Thursday, is expected to show a turning point as the economy began to open up. The same cannot be said of the Eurozone figures however, with industrial production expected to have declined by more than 10 percent in March. The European Statistical Agency will also publish GDP figures for the first quarter on Friday, with economic activity expected to have shrunk by nearly 15 percent in the common-currency area.
