BoC surveys show economic recovery will take time – RBC

The Bank of Canada published the second quarter Business Outlook Survey and the Canadian Survey of Consumer Expectations. Nathan Janzen, Senior Economist at RBC Economics points out both reiterated that the economic recovery from an unprecedented economic pullback over March and April will take time.

Key Quotes:

“The Q2 survey was conducted after the easing in virus containment measures had already begun in most regions. And there were corresponding green-shoots in business expectations. Employment growth is still expected to be positive over the next year - although significantly less-so than in early quarters.  About 40% expected sales to be at to pre-shock sales levels by next year and another 15% expected sales to "mostly recover" by that time.”

“Still that leaves almost half of businesses expecting at best a partial recovery. Unsurprisingly, a lot of the more pessimistic businesses are in the services-sector, and particularly tourism-dependent industries that will probably see virus containment measures last longer, as well as energy companies. Concerns were not so much on businesses' ability to produce (most reported they could return to pre-shock production levels within a month once restrictions are lifted), but more that demand will be weak even as social/physical distancing measures are relaxed.”

“We continue to expect a partial bounce-back in economic activity in the third quarter - provided virus spread remains contained in Canada. But that will still leave the level of activity well-below pre-shock levels at the end of this year, and remaining under-performance is unlikely to be fully unwound at least until there is a vaccine or more effective treatment widely available.”