That pandemic-saved income is expected to lead recovery

Pent-up demand for travel and more are forecast to drive Canadian economy

In most recessions, household savings take a hit.

But during 2020, as COVID-19 ravaged the economy, Canadians saved a greater chunk of their income than they had in three and a half decades.

Now, as the end of the global pandemic beckons, Canadian households are poised to lead the recovery by spending some of those savings, according to the Conference Board of Canada. Experts say they’ll be shelling out on everything from restaurants and bars, to travel, and even making their homes more visitor-friendly.

“Consumer spending is going to be significant in terms of the economic recovery,” said Pedro Antunes, chief economist at the Conference Board, which released its two-year forecast Tuesday. The Canadian economy, according to the forecast, will grow by 5.8 per cent this year and 4.0 per cent in 2022, with much of the increase spurred by consumer spending.

The forecast also pointed out that Canadians had saved 14.8 per cent of their income last year, the highest savings

rate in 35 years. It translates into an average of $5,000 per person in extra money onhand.

“People weren’t able to spend on a lot of things they normally can, because of the lockdowns. And in some cases, they chose not to spend,” said Antunes, who admitted that the savings probably weren’t evenly distributed, given the recession’s disproportionately harsh impact on lower-income serviceindustry workers.

“It’s fair to assume that a greater proportion of the savings increase came from people in higher income brackets,” said Antunes.

As COVID-related restrictions gradually lift along with the increasing number of people getting vaccinated, Canadians will start consuming goods and services they’ve been denied, said Antunes.

“Accommodations, and food services are going to be big. There will certainly be a ‘woohoo, we can do this again,’ factor,” Antunes predicted.

Miranda Goode, an assistant professor at Western University’s Ivey School of Business who specializes in consumer behaviour, doesn’t believe Canadians will get particularly extravagant with their spending. She says the money will be focused on ways that let them feel more connected to each other again.

“Accommodations and food services are going to be big. There will certainly be a ‘woo-hoo, we can do this again,’ factor.”

PEDRO ANTUNES

CHIEF ECONOMIST AT THE CONFERENCE BOARD

“I think there will be a lot of spending on things that allow people to be more social, even if it’s for the home. Things like a pool, or patio chairs. People have missed being social,” said Goode, who holds Ivey’s StarTech Professorship in Customer Insights.

Goode, though, suggested Canadians would be better off paying down some of their debt, rather than going on any kind of spending spree: “I take issue with the idea that this money is savings, because people are still sitting on a pile of consumer debt.”

Retail analyst Lisa Hutcheson believes Canadians will be boosting their outlays on new work clothes, dining out and travel.

“People miss getting dressed up and going out … Travel will be very big. Mostly domestically for now, but once borders open up more, people will travel wherever they can,” said Hutcheson, managing partner at retail consultancy J.C. Williams Group.

Still, the surge in demand for restaurants, bars and apparel won’t be evenly distributed across the country, Hutcheson said.

“It will be very regional in nature. Because some areas simply haven’t been locked down as much, so there won’t be as much pent-up demand.”