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COVID-19 roundup: Canada’s economic contraction exceeds U.S.’s

Skyscrapers in downtown Toronto’s Financial District. Shutterstock/Ken Felepchuk
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It’s day 80 since Canada’s 100th coronavirus case. The number of cases is 89,388 as of publication time, up 876 since yesterday—a 12 per cent decrease from the seven-day prior average of new cases. The seven-day average of new cases in the country has dropped below 1,000 for the first time in two months (March 29). 

On their respective 80th day, U.S. daily new cases were up 21 per cent from the seven-day prior average; the U.K. was up one per cent in daily new cases from the seven-day prior; and in Italy, new cases were up 25 per cent.*

India is emerging as a new hotspot as its coronavirus death toll surpasses China’s. 

GDP shock: Canada’s economy contracted an annualized 8.2 per cent in the first three months of the year as consumers, governments and purchasers of Canadian exports all bought less, Statistics Canada data shows. Pandemic-related shutdowns in March contributed to the largest drop since the first quarter of 2009. Canadian GDP fell much faster than the five per cent annualized drop in the United States. Still, it did better than economists’ consensus prediction of a 10 per cent decline.

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Household spending dropped 2.3 per cent in the quarter, the largest reduction StatCan has ever measured, as consumers spent less on big-ticket items like cars and renovations, and even clothes and footwear (down 16.4 per cent), while expenditures on food and non-alcoholic beverages rose 7.2 per cent. Businesses also bought less machinery and equipment (down 3.5 per cent), but investment in intellectual property products remained almost flat. 

Almost every sector saw output decline in March, a separate StatCan release shows. Manufacturing GDP fell 6.5 per cent, with trade-focused firms like motor-vehicle and -parts makers—down 35.2 per cent and 27.7 per cent, respectively—particularly affected. Retail fell 9.6 per cent, the largest decline since the agency began measuring it in 1961. R&D services firms saw a 2.3 per cent output increase, bucking a wider 8.6 per cent increase across the professional services sector. 

In the markets: The TSX and Dow Jones closed down today after U.S. President Donald Trump announced his country was pulling out of the World Health Organization, suspending entry to certain Chinese foreign nationals and ending nearly all of the legal and trade benefits the U.S. offered Hong Kong. The announcement, which came late in the afternoon, slowed the rise of the S&P 500 and the Nasdaq, but both ended the day in positive territory. 

The charter price for vessels transporting crude oil dropped 77 per cent, a sign that the supply glut is easing. U.S. consumer spending fell 13.6 per cent in April, the sharpest drop since at least 1959, but there are some signs May spending is increasing. In the first quarter, Sweden’s GDP rose 0.1 per cent quarter over quarter as it opted for a softer lockdown resulting in a higher death rate than many other countries. 

The euro hit a two-month high against the U.S. dollar on Friday on investor confidence about European nations reopening plans. The Canadian dollar rose slightly, up 0.06 per cent in late afternoon trading to 72.64 cents U.S. 

“When life is good again, it’s going to be better than it ever was”: When the lockdowns began, singer Dolly Parton launched a weekly YouTube series called “Goodnight with Dolly,” where she reads a children’s book live. Now she’s writing songs about a hopeful post-pandemic future. 

Cross-country checkup: Nova Scotia reported no cases of COVID-19 among the 1,034 tests conducted on Thursday, a milestone for the province. Ontario Premier Doug Ford said the province is considering a regional approach to reopening, on the recommendation of health officials. Courts in the province plan to resume some in-person proceedings starting July 6, but they don’t expect to be back to normal until there’s a vaccine. Alberta lifted its ban on evictions at the end of April. The Alberta government is distributing 20 million masks via fast-food drive-throughs, including at Tim Hortons, McDonald’s and A&W. The COVID-19 death rate in Montreal—the epicentre of the virus in Canada—is higher than most U.S. states. 

Bay Street to Main Street: Boston Consulting Group met with about eight federal ministers this week to discuss an economic recovery strategy for Canada. Three ministers promoting “green stimulus” as part of the recovery—Environment Minister Jonathan Wilkinson, Infrastructure Minister Catherine McKenna and Heritage Minister Steven Guilbeault—were all in attendance. Deputy Prime Minister Chrystia Freeland, who chairs the COVID-19 cabinet committee, sent a representative in her place. The meeting comes as cabinet ministers are jockeying behind the scenes to have their preferred type of stimulus rolled out, with Freeland, for example, reportedly urging caution on new spending that focuses on emissions reduction. 

  • The Big Six banks have collectively deferred more than $200 billion in loan payments. 
  • Tim Hortons’ sales are down about 25 per cent, as opposed to 30 per cent from earlier in the pandemic, due to the strength of the coffee chain’s home-delivery service. 
  • Canadian National Railway has laid off 5,800 workers, or 21 per cent of its workforce, in recent months. The cuts are due to falling rail traffic and economic demand. 
  • Ottawa projected that the Canada Emergency Response Benefit will cost $60 billion, up from its initial estimate of $35 billion. It estimated the Canada Emergency Wage Subsidy will drop to $45 billion from its $73-billion estimate two weeks ago. 
  • Winnipeg-based SkipTheDishes has seen an 89 per cent rise in the number of restaurants joining its food-delivery service since the pandemic started. 
  • SaskTel will start charging customers for data overages on June 9 after waiving the fees since March. 
  • Artificial intelligence supercluster Scale AI is spending $10 million to establish at least 10 university chairs in AI. 
  • Ryerson University’s Brookfield Institute predicted that 15 per cent of Canadians are in jobs that will become less common over the next decade, with those in manufacturing and utilities particularly at risk. 
  • Laurentian Bank cut its quarterly dividend by 40 per cent after a 79 per cent drop in second-quarter net income. It’s the first dividend cut by a major Canadian lender since 1992.

BCAP takes its time: Financial institutions had issued 23 loans with a total of $42.2 million guaranteed by Export Development Canada (EDC) as of May 25, the Crown corporation told The Logic. Under its $20-billion section of the federal Business Capital Availability Program (BCAP), the agency backstops up to 80 per cent of loans of $6.5 million. “Feedback from our partners indicates that many businesses are first exploring any available subsidies and waiting to see the pace of economic recovery before contemplating new debt,” said EDC spokesperson Victoria Marcantonio, adding that the financial institutions expect demand to increase in the summer and fall. EDC has extended the guarantee from one year to five, in response to feedback. Marcantonio noted that there’s a 45-day lag between firms receiving funds and EDC receiving reporting information, accounting for the low totals.

The Business Development Bank of Canada (BDC) is administering its own BCAP co-lending program, funding 80 per cent of loans up to $12.5 million. Earlier this month, the Crown corporation declined to disclose the number and total value of credit instruments issued to The Logic, saying they will be available in June. Opposition MPs repeatedly asked about the BCAP program’s progress at a parliamentary committee hearing on Thursday. “We will continue to be open and transparent as full and accurate information becomes available,” said Middle Class Prosperity Minister Mona Fortier; she did not provide any figures.

Small-business loan program keeps trucking: Financial institutions have approved 630,000 applications worth a total of $24.82 billion under the Canada Emergency Business Account as of May 25, which issues partially forgivable credit of up to $40,000. TD Bank led the pack, with more than 150,000 loans worth over $6 billion so far. RBC had issued 144,825 loans for $5.79 billion in capital. Scotiabank issued over 62,000 loans worth $2.5 billion. And National Bank, the smallest of the Big Six, processed 24,924 for $997 million in credit.

Crowdsourcing the crisis: Statistics Canada and the Canadian Chamber of Commerce have launched a second survey to assess the impact of COVID-19 on businesses. You can participate here.

Trace me on my cellphone: More than six million people in Australia, about a quarter of the population, have registered for the government’s contact-tracing app since it was released a month ago. Privacy glitches emerged on its first day and the government has flip-flopped on its public messaging: at first, it wanted 40 per cent of Australians to download the app, but it is now expecting 40 per cent of smartphone users to install it. France’s digital minister is confident that government’s app will be effective when it launches next week. The U.K. is launching its track-and-trace system tomorrow without an app, with the government silent on a date one might be rolled out. 

In the lab: AstraZeneca CEO Pascal Soriot said if coronavirus cases decline too quickly, “challenge studies will have to be considered,” referring to when healthy participants are intentionally injected with the virus. (You can read about how these studies work here). Meanwhile, investors don’t believe Moderna’s experimental vaccine will be enough to reset the economy, an Evercore ISI survey showed. (Here is how the company’s mRNA vaccine works.)

Drinking from the firehose: 

  • The Centers for Disease Control and Prevention issued guidance on how Americans can safely return to the office. Its recommendations include keeping desks six feet apart or erecting plastic shields around workspaces, banning seating in communal areas and wearing face coverings at all times. 
  • Google has rescinded more than 2,000 signed offers to temporary or contract workers as it lowers its hiring targets for the year amid a drop in advertising revenue due to COVID-19. 
  • A former Lyft driver based in Washington, D.C. has sued the ride-hailing company for allegedly violating the state’s sick-leave law during the pandemic. 
  • French car maker Renault is cutting 15,000 jobs worldwide as part of a US$2.2-billion restructuring plan after seeing sales plunge during the pandemic. 
  • Factory output in Japan dropped 9.1 per cent in April compared to March, the biggest monthly drop since the data was first recorded in 2013 and greater than the 5.1 per cent anticipated decline. 

Around the world: The United Nations’ climate summit has been pushed to November 2021 because of COVID-19. New York Mayor Bill de Blasio expects the city to begin reopening in two weeks. The U.K government is asking employers to cover workers’ pensions and social security costs from August; the government plans to end its furlough scheme by the end of October. Spain approved a €3-billion minimum basic income scheme. Friday prayers were held in Turkey for the first time in 74 days. Cyprus will cover vacation costs for infected tourists. Uruguay has turned its main airport into a drive-in cinema. A Romanian cobbler has created a European size 75 leather shoe to maintain social distancing. Namibia’s president held an illegal event to celebrate his political party’s 60th anniversary, and fined all the guests who attended. A mall in Thailand has replaced elevator buttons with foot pedals.

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Monkey business: A group of monkeys “grabbed and fled with the blood samples of four COVID-19 patients who are undergoing treatment” at an Indian hospital. In a video of the incident, one monkey can be seen sitting atop a tree chewing on surgical gloves. 

* We’re emphasizing new cases, rather than running totals, because “flattening the curve” is when each day’s new cases are fewer than those of the previous day. The percentage increase is determined based on how today’s cases compare to a rolling seven-day prior average. Numbers may also vary based on countries’ individual testing capacity and reporting.

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