ECONOMY AWAITS SPENDING SPREE.

Big boost likely once Canadians dip into savings

Consumers are expected to cause a significant rebound in the economy as Canadians return to normal and begin spending a hoard of cash.

Bank of Canada Governor Tiff Macklem said Wednesday he believed the economy can expect a boost from Canadians dipping into extra savings they have accumulated during the pandemic.

Reduced spending and collecting money from government support programs has resulted in Canadians saving a record amount. But Canadians have also seen their wealth increase by investing more and because of a big rise in house prices.

Last month Statistics Canada said Canadian households had accumulated more than $200 billion in cash in 2020. Households were also registering record net purchases of mutual funds — more than $33.5 billion in the first quarter of this year.

Statistics Canada said since the start of 2020, household sector net worth — the value of all assets less liabilities — meant Canadians had added over $2 trillion in wealth “despite turbulent markets at the outset of the pandemic.”

“Strong rebounds and further gains in financial markets coupled with a blistering housing market have fuelled this dramatic rise,” the government agency said.

CONSUMER CONFIDENCE HAS RETURNED TO PRE-PANDEMIC LEVELS.

Those gains are now expected to fuel a growing economy.

“Thanks to the resilience and ingenuity of Canadian households and businesses, and exceptional fiscal and monetary policy support, the economy has continued to grow. It has been choppy and very uneven, and everyone has had to cope with a lot of uncertainty. But the economy has proven to be impressively resilient,” said Macklem.

“Consumer confidence has returned to pre-pandemic levels, and a high share of the eligible population is vaccinated,” said the Boc's Monetary Policy Report Wednesday. “As the economy reopens, consumption is expected to lead the rebound with an increase in spending on services such as transportation, recreation, and food and accommodation.”

Macklem cautioned that a complete recovery had some way to go and the rebound would be at different speeds across sectors.