No major economic releases today. The important releases this week will be: the Federal Reserve announcement on Wednesday—no new stimulus is expected to be announced; the US advance real GDP report for first quarter release on Thursday—the consensus is for a contraction of 3.9 percent annualized (I think the risk is for a larger decline); and Canadian and US purchasing manager reports (PMI) on Friday—both likely to fall to record lows, as they did in the Europe last week.
Oil prices declined again today. In late afternoon trading, the price of West Texas Intermediate crude oil was down close to US$4 per barrel to fluctuate around US$13. The decline reflected continued concern over excess supply and limited storage capacity. It may also reflect a shift of investors away from June oil contracts to avoid the dramatic experience last week of negative prices.
At his daily media announcement, Prime Minister Trudeau said that 10,000 businesses applied for the 75 percent wage subsidy program since the portal opened early this morning. There will be a strong demand for this program.
I found it interesting that the Prime Minister noted that workers cannot receive the Canada Emergency Response Benefit (CERB) and the wage subsidy. He stressed that if you get one you have to pay back the other. I assume that means if you get the CERB payments and end up being employed and paid the wage subsidy, you are on the hook to repay the former. This is a good example on how messy the post-pandemic environment will be. The government will be reviewing the finances of individual and business recipients to find out who received benefits that shouldn’t have.
The Canadian Federation of Independent Business (CFIB) has raised an interesting issue. It believes that individual employers may be eligible to receive the wage subsidy themselves if they were paid as an employee of their incorporated business prior to March 15. If they paid themselves dividends, they are likely not eligible.
Ontario announced its phased approach to reopening the province but did not provide any timeline:
Stage 1: Open select workplaces and allow some small gatherings. Opening select workplaces that can immediately modify operations to meet public health guidance. Opening some outdoor spaces like parks and allowing for a greater number of individuals to attend some events. Hospitals would also begin to offer some non-urgent and scheduled surgeries, and other health care services.
Stage 2: Open more workplaces and outdoor spaces and allow some larger gatherings. Opening more workplaces, based on risk assessments, which may include some service industries and additional office and retail workplaces. Some larger public gatherings would be allowed, and more outdoor spaces would open.
Stage 3: Further relax restrictions on public gatherings and open all workplaces "responsibly." Progressing through these stages will depend on a consistent two-to-four week drop in new daily COVID-19 cases, a decrease in cases not traced to a source, and a decrease in new hospitalizations.
Quebec announced that elementary schools and daycares will begin reopening on May 11 outside of Montreal and on May 19 on the island of Montreal. All other schools, high schools, colleges, and universities won't reopen until late August. In my opinion, having required childcare is an important ingredient to reopening the economy as it can relieve parents, better enabling them to work.
Both Ontario and Quebec were clear that the timeline will depend on the evolution of health statistics.
Looking internationally, the German economy is reopening, but the preliminary evidence suggests retail activity is very weak. In Berlin and Munich, retail foot traffic is low, with the latter being around 13 percent of the normal level. This is similar to the experience in China immediately after containment was lifted—providing a potential window into what we can expect in Canada as restrictions lift over time.
Craig Alexander is the first Chief Economist at Deloitte Canada. He has over twenty years of experience in the private sector as a senior executive and leading economist in applied economics and forecasting. He performed macroeconomic research, regional and sector analysis, and fiscal market forecasting and modelling. Craig is a passionate public speaker and holds a graduate degree in Economics from the University of Toronto.