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COVID-19 roundup: The Canadian economy’s Polaroid moment

Minister of Finance Bill Morneau rises in the House of Commons on Parliament Hill in Ottawa, as Parliament was recalled for the consideration of measures related to the COVID-19 pandemic in April 2020. The Canadian Press/Justin Tang
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It’s day 120 since Canada’s 100th coronavirus case. The number of cases is 106,367 as of publication time, up 201 since yesterday—a 16 per cent decrease from the seven-day prior average of 238 new cases. At its peak on May 3, the seven-day average was 1,603 new cases a day. 

The “lipstick index”—the idea that, during economic downturns, consumers turn to affordable pick-me-ups like a new lipstick—may be over in the age of face masks. The pandemic has instead given way to “the nail polish effect.” 

The cost of a crisis: Finance Minister Bill Morneau’s “snapshot” suggests the federal government believes it has kept the economy afloat through the COVID-19 crisis. But Ottawa is looking to employers to fuel the post-pandemic economic recovery, signalling an expansion to its wage subsidy program to incentivize hiring as the deficit climbs to near-record levels.

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The update claims the federal government’s $212 billion in direct support measures—worth 14 per cent of GDP—compares favourably against Canada’s advanced economy peers, and highlights positive signs including low numbers of bankruptcies and the Canada Emergency Response Benefit’s near-total replacement of pandemic-lost employment income. The cost of those programs and others—as well as economy-wide declines—is a $343-billion deficit in 2020–2021, up from $34.4 billion last fiscal year.

Private-sector economists are forecasting an average 5.5 per cent increase in real GDP in 2021, a significant improvement from the estimated 6.8 per cent drop this year. Ottawa appears to be looking to employers to drive that turnaround, boosting the projected cost of the Canada Emergency Wage Subsidy (CEWS) from $45 billion at last count to $82.3 billion in Wednesday’s update. The program has paid out just $18 billion so far. “We encourage businesses to take advantage of the program and hire more workers,” Morneau said in the House of Commons.

In June, Prime Minister Justin Trudeau promised changes to the eligibility requirements for the CEWS, including reconsidering the requirement that firms show significant revenue losses due to the pandemic. That could allow high-growth startups and companies with software-as-a-service business models who have thus far been shut out to access the program, whose main beneficiaries so far have been small businesses. Ottawa will “soon” unveil those changes, which it hopes will “stimulate rehiring, provide support to businesses during reopening and help them adapt to the new normal,” the update states.

Some business groups expressed concern about the long-term fiscal effects of Ottawa’s pandemic spending, and called for a new approach. “Recovery must start along the Main Streets of this country,” Canadian Chamber of Commerce president Perrin Beatty said. He said the country needs to “to transition from a subsidy-based crisis response toward restoring economic growth and getting Canadians safely back to work.”

In the markets: The TSX closed up 0.22 per cent after the federal government unveiled its fiscal snapshot. The Canadian dollar rose 0.69 per cent in late afternoon trading to reach 73.98 cents U.S. 

All major U.S. indices closed up, despite the country recording 60,000 new coronavirus infections on Tuesday, a new one-day record. Gold tested a nine-year high, up nearly 20 per cent for the year as investors seek a safe haven from volatile markets. Investors put US$39.5 billion into gold-backed exchange-traded funds in the first half of 2020, topping the previous annual record set in 2016. 

“Please scream inside your heart”: That’s the advice one recently reopened Japanese amusement park is giving to visitors. 

Cross-country checkup: In her first look at Ottawa’s COVID-19 response, Canada’s auditor general will investigate the federal government’s support for temporary foreign workers and its handling of personal protective equipment. Ontario unveiled its economic recovery legislation, which formally creates a new agency called Invest Ontario to attract investments in advanced manufacturing, life sciences and technology. Eighteen health leaders have written to Trudeau asking him to move away from complete containment of the virus to a “balanced approach” that allows a return to normal life. New Brunswick is asking restaurants, venues and anyone hosting a gathering of over 50 people to collect the personal information of any visiting customers. Manitoba has reported no new cases for eight consecutive days. 

Bay Street to Main Street: The first new high-speed grain-export terminal in Vancouver to be built since the 1960s opened this week. Canadian firm G3 Global Holdings is hoping the terminal will let it transport massive amounts of grain from the Prairies to China and Indonesia. The new terminal is the latest sign that Canadian agriculture exports to China remain steady despite rising diplomatic tensions. “We assume China is going to be in the market for the foreseeable future, notwithstanding any hiccups that happen from time to time,” said G3 CEO Don Chapman. The new terminal significantly increases the port of Vancouver’s export capacity, with the potential for eight million tons of crops annually. In the 2018–19 season, 23.5 million tons were exported at the port. 

  • Nearly 40 per cent of Canadian workers do not feel safe returning to work, a new Statistics Canada survey found
  • Fifty-three per cent of Canadian small businesses will need over six months to return to normal profitability, according to a survey by the Canadian Federation of Independent Business. 
  • The Ontario-based manufacturing supercluster announced a $28.8-million investment in nine projects. 
  • Air Canada is assessing whether to use Spartan Bioscience’s COVID-19 testing kits. 
  • David’s Tea is filing for creditor protection, reducing the number of physical stores and shifting to online selling. 
  • Rogers is partnering with smart-city firm bciti and is looking to sell services including real-time communication with citizens to municipalities. 
  • Three Irving Shipyard executives travelled to the U.S. and were granted an exemption from isolating for 14 days upon their return to Canada. 

Drinking from the firehose: 

  • Rendered idle because of COVID-19, hundreds of cruise ships are suffering the ravages of rust, humidity and a distinct lack of parking space.
  • Sadly for private equity funds, 31 per cent fewer of them reached their final closing in the first half of 2020 compared to the same period last year.
  • Sadly for New Zealand lobsters, exports of the Kiwi crustaceans are up 53 per cent over the same month last year, largely thanks to eager Chinese palates.   
  • Centuries-old haberdashery Brooks Brothers has filed for bankruptcy…
  • …while uncertainty over the next school year has left school supplies retailers in a lurch.
  • Microsoft will introduce features allowing users to point at each other and make eye contact, in a bid to make online meetings less excruciating. 
  • Apple stores are a pretty good barometer of how states are coping with COVID-19.

Around the world: Harvard and MIT are suing to block a federal guideline that would deport international students from U.S. universities if their courses move fully online. The U.S. hit a new daily record for new cases, reporting over 60,000 on Tuesday. Nearly 1 out of every 100 residents in Florida is infected with the virus. As part of a £30-billion stimulus package, the U.K. is giving everyone a 50 per cent discount on restaurant meals for the summer in a scheme called “eat out to help out.” Japan’s supercomputer has determined that opening windows on commuter trains can reduce infection spread. A man in New Zealand faces up to six months in jail or a NZ$4,000 (US$2,619.20) fine for escaping his quarantine home for a smoke and supermarket run.

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Distanced by 24 yards of fabric: Giant, voluminous summer dresses are the fashion world’s latest response to the pandemic, harkening back to the large underskirts worn by women in the 1800s to create “barriers” against male advances.

* 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.

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