Canadian economy could have a 'rubber band' recovery: Royce Mendes
A wave of spending in essential services deferred due to the COVID-19 pandemic may help drive the Canadian economy into a “rubber band-type” rebound later this year, CIBC Capital Markets Senior Economist Royce Mendes said.
In a report published Thursday, Mendes said that while the Canadian economy is pulling back amid lockdowns and rising COVID-19 cases, mass-vaccination efforts could lead to a recovery that is atypically fast after a recession.
“If we base our outlook on what public policymakers are telling us about the vaccine rollout, we could start to see growth showing up in the not-so-distant future,” Mendes said in an interview.
“Maybe March we start to recover some jobs, in the second quarter of this year we start to build some momentum and see a quarterly growth rate in positive territory and then, by the second half of the year, we really get rolling.”
Mendes said recovery forecasts that rely on Canadians unleashing the massive piles of cash they’re accumulating focus too narrowly on discretionary spending. Instead, he said a lot of the existing pent-up demand is for essential or near-essential services, such as delayed medical procedures that aren’t paid out of pocket.
“Some of the bearish views on consumer behaviour are missing a lot of key points here,” Mendes said. “[The recovery] doesn’t rely on Canadians going out for dinner seven days a week.”
CIBC estimates that deferred spending on essential or near-essential services will reach $15 billion after the first quarter of 2021.
Mendes said some of the other areas where spending has been deferred due to the pandemic include surgeries, medical checkups, dental and eye care, home and car maintenance, and university courses.