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COVID-19 roundup: Has the pandemic’s economic impact peaked?

A runner passes the Bank of Canada in Ottawa in May 2020. The Canadian Press/Adrian Wyld
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It’s day 85 since Canada’s 100th coronavirus case. The number of cases is 93,042 as of publication time, up 632 since yesterday—a 21 per cent decrease from the seven-day prior average of new cases and the lowest number of new cases in 66 days (March 29). On their respective 85th day, U.S. daily new cases were down 15 per cent from the seven-day prior average; the U.K. was down 22 per cent in daily new cases from the seven-day prior; and in Italy, new cases were down 27 per cent.*

Tiff’s first day: “The severe impact of the COVID-19 pandemic on the global economy … appears to have peaked,” the Bank of Canada said Wednesday, maintaining its overnight rate at 0.25 per cent. Canada’s first-quarter GDP performance fell in the middle of the central bank’s projections, and while it’s predicting a 10 to 20 per cent decline between April and June, it expects growth to pick up again after that. “Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery,” the country’s monetary policy authority said. Tiff Macklem takes over as governor today. 

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While the BoC believes the worst may be over globally, the International Monetary Fund chief economist Gita Gopinath said Canada’s economy is likely to do worse than the organization expected. In April, the IMF predicted a 6.2 per cent decline in GDP in 2020.

Slowly does it: The federal government is planning to spend $2.97 billion on the Canada Emergency Commercial Rent Assistance (CECRA) program, but has received landlord applications for just $65 million in subsidies for 16,000 qualifying small businesses. The money will flow through the Canada Mortgage Housing Corporation; Parliament will vote on the supplementary estimates, which include the CECRA funding and were tabled Tuesday, on June 17.   

In the markets: All major North American indices closed up Wednesday as a number of governments announced new stimulus programs or indicated an interest in doing so soon. The U.S. Federal Reserve said it would expand the number of local governments it’s buying debt from as part of a US$35-billion plan to backstop municipal debt. South Korea proposed expanding its fiscal spending. Some analysts expect the European Central Bank to increase its stimulus program later this week, with one suggesting the €750-billion program could have €500 billion more added. 

In May, 2.76 million non-farm private-sector workers lost their jobs, a smaller drop than anticipated. In early trading Brent crude futures exceeded US$40 a barrel for the first time since March on signs of increased demand and hopes that OPEC+ nations would maintain production cuts. Saudi Arabia and Russia have reached a deal on the cuts, but other nations have not yet done so, making it unclear if Thursday’s OPEC+ meeting will go ahead. 

The Canadian dollar reached 74.05 cents U.S. in late afternoon trading. 

“If we were to encounter the same illness with the same knowledge that we have today, I think our response would land somewhere in between what Sweden did and what the rest of the world has done”: As Sweden wrestles with one of the highest per-capita mortality rates in the world and heads into its worst recession since the Second World War, Anders Tegnell, the country’s top epidemiologist, admitted his strategy to opt against a lockdown and encourage mindful civic behaviour has failed. 

Cross-country checkup: Just a third of students have returned to classes in B.C., despite public health officials insisting schools are taking appropriate measures to keep kids safe. Students are expected to return part time in September, but Education Minister Rob Fleming said full-time in-class teaching won’t resume until there’s a widely available vaccine. The federal government released a report outlining $87 billion in planned spending for measures announced since its main spending estimate in February. Because the government has sweeping spending powers during the pandemic, MPs only have to approve $6 billion of the supplementary spending; they will have just four hours to debate and approve the spending when they meet on June 17.  

Bay Street to Main Street: The total number of insolvencies in Canada dropped 38.7 per cent in April compared with March, with bankruptcies down 41.5 per cent and proposals down 37.2 per cent. The decrease is due to government financial assistance and deferrals from banks and insurance brokers and leasing companies, according to Lou Brzezinski, a partner at Toronto-based law firm Blaney McMurtry. The Big Six banks offered deferrals on more than $180 billion in mortgages in the first quarter. Car insurance and leasing firms have deferred or decreased payments for customers, and some businesses, like telecoms and banks are not pursuing certain customers that aren’t paying their bills. “The bank’s general attitude towards defaulting loans….is essentially to not take any action for the time being,” said Brzezinski. When these programs end, though, some businesses will have a harder time paying their bills. “This is temporary only. The only question is timing,” he said. 

  • Manulife CEO Roy Gori said longer-term low interest rates are challenging for the insurance firm, adding that his firm has done more to digitally adapt in the past five months than it has in the past five years. 
  • Saudi Arabia’s sovereign wealth fund purchased stakes in Suncor and Canadian Natural Resources in March, when plunging oil prices significantly reduced the two firms’ value.
  • Canada Goose is looking for $90 million in cost savings as it increases its focus on e-commerce and its own branded retail stores after reporting that sales in the current quarter will be “negligible.”
  • Toronto-based fashion startup BlackCart raised $2 million in a round led by Struck Capital. 
  • Telus is building an office in Victoria, B.C. for 250 employees.
  • Ontario is investing $150 million to improve rural internet service in the province. 
  • Mortgage-financing startup Nesto raised $11.5 million led by Investissement Québec and Diagram Ventures. The firm seeks to “simplify” the mortgage industry with its technology.

Crowdsourcing the crisis: Codecademy is offering 1,000 furloughed or unemployed Toronto-area workers free access to its platform as part of a national effort to help 100,000 such workers access its training material.

In the lab: The U.S. has reportedly selected five companies as leading contenders to produce a COVID-19 vaccine: Moderna, AstraZeneca, Pfizer, Merck and Johnson & Johnson. Here is a breakdown of their vaccine development programs. Meanwhile, U.K scientists are testing if ibuprofen can help COVID-19 patients avoid respiratory failure and the need for ventilators. Some 2,000 people in Brazil will participate in a trial to test a vaccine being developed by researchers at the University of Oxford and AstraZeneca. There are now 124 vaccines in development worldwide.

Drinking from the firehose: 

  • App-based grocery-delivery firm Instacart is loosening eligibility requirements for sick leave for shoppers under an agreement with the Washington, D.C. attorney general. It’s also launching a telemedicine pilot in that area to remotely diagnose shoppers who might be sick, and provide child-care assistance pay to workers while schools are closed.
  • Lyft rides were up 26 per cent in May compared to the month before, according to the company; year over year, however, rides were down 70 per cent. 
  • AMC Theatres, the world’s biggest movie-theatre chain, said it has “substantial doubt” it will be able to stay in business after closing its locations because of the pandemic and losing between US$2.1 billion and US$2.4 billion in the first quarter.
  • Zoom Video Communications nearly doubled its anticipated sales for the year, driven by the surge of remote work during global lockdowns. Its expenses also surged, dragging down its gross margin to 68.4 per cent from 80.2 per cent a year earlier. 

Around the world: Singapore and China have established a bilateral travel arrangement, marking the first step in reopening the city state’s borders. Air pollution in China has returned to pre-pandemic levels. Germany will lift its travel ban on June 15. The volume of waste produced in the U.K. has plummeted during the coronavirus lockdown. British universities are looking to create “social bubbles” when they reopen in September to contain the spread of the virus. A Guardian investigation has found that the World Health Organization (WHO) and several governments changed their COVID-19 policies based on flawed data from Surgisphere, a U.S. health-care analytics company whose employees include a science-fiction writer and an adult-content model. The WHO said it has received reports of 100,000 new cases every day for the past five days.

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“The gift came and it was a moment of light”: If the pandemic hadn’t cancelled the sale of a Bartholomeus Spranger’s “Body of Christ Supported by Angels,” a 16th-century painting, Amsterdam’s Rijksmuseum wouldn’t have been able to buy it and put it on display in time for this week’s reopening.

* 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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