Benjamin Tal -- CIBC's Deputy Chief Economist -- is seemingly everywhere. And earlier today, he was delivering an annual economic update at an online event hosted by Brattys LLP (our condo lawyers) in partnership with CIBC. Below are a handful of slides that I found interesting and that I tweeted out during the event.
All of our personal risk curves changed during this pandemic. When the first wave hit, we all had no idea how bad this was going to be and what to expect. And so we all stayed home and washed our hands and our groceries. That changed with each subsequent wave. And now we're all ready and anxious to be done with this.
Tal referred to this as one of the most unequal recessions we've ever seen. If you had a high paying job, you probably kept it. And after you stopped spending money on eating out, entertainment, travel, and watching the Leafs lose in person, you likely had a meaningfully higher savings rate. That has created some $100 billion of "excess cash" sitting on the sidelines.
This cash wants to be spent and I think we're going to see it flying out the door in the second half of this year. Much of it will also flow into services, which should help to prop up the hardest hit segments of the economy. So while there has been some real pain, many are expecting the economy to snap back pretty quickly. Get ready for some euphoria in the second half of this year.
This last slide is particularly relevant to the kind of things we often talk about on this blog. It is essentially showing the increased demand for housing outside of the city during this pandemic (as of Q4 2020).
A flatter line (Vancouver, Calgary) indicates that year-over-year price growth was less affected by "distance from the city center." On the other hand, a steeper line (Toronto, Ottawa) indicates that price growth was stronger the more you moved outward from the core. In the case of Toronto, it was nearly 20% YoY when you got about 60-70 kilometers out of the city.
But it's important to keep in mind that the core of Toronto still grew at about 5% year-over-year. About the same as in Vancouver. And in the case of Ottawa, the number looks to be about 17.5% in the city center. These are meaningful numbers and not the kind of symptoms you would expect to see from downtowns in the middle of a death spiral.
I would argue, as I have many times before, that this last chart is the result of short-term phenomena. I bet we'll see a number of these pitches reverse by the time Q4 2021 arrives.
Just over a month ago, as North America was beginning its lockdown, the Europeans were the ones showing us how to stay sane in quarantine through balcony orchestras and viral internet videos. Now we're looking to them for how best to reopen the economy and minimize the number of fits and starts.
This morning Spain recorded its lowest daily death rate from the coronavirus. It is beginning to prepare for a phased relaxation of its lockdown rules. Things will not return to normal overnight. [Financial Times]
Spain allowed construction activity and manufacturing to resume this past week. As a reminder, Spain's strict lockdown started on March 14. [New York Times]
Bookstores are open in Venice, but that's about it. Customers have to enter one at a time, or schedule an appointment. Hotels, restaurants, and cafes remain shuttered. It is believed that at least 1/6th of all Italian restaurants and bars will not survive. Reopening is not happening uniformly across Italy's 20 regions. [Wall Street Journal]
Last week, Denmark became the first country in the Western world to reopen elementary schools. The desks are far apart and teaching outside is being maximized, but some/many are concerned that this is too soon. Are we prioritizing the economy (i.e. free up the parents) over the health of our children? [New York Times]
The Czech Republic currently has one of the lowest number of cases on the continent. But hardware stores and bike shops are some of the only nonessential businesses that are allowed to be open. The Easter weekend saw an over 60% increase in year-over-year sales. Biking is something to do right now. [Wall Street Journal]
Photo by Grant Lemons on Unsplash
The UK is not yet considering a relaxation of its lockdown. As of Sunday, the situation remains "deeply worrying." The UK currently has the 5th highest national death toll. [Globe and Mail]
On April 13, Emmanuel Macron announced that France would begin a phased reopening of its economy -- schools and some businesses -- starting on May 11. This is a unique approach. He gave a firm date, well into the future. What if this doesn't make sense when the time comes? Clearly the government felt that the psychological benefits of a firm date outweighed the potential risks. Minimize uncertainty during an uncertain time. [Le Monde]
Lots of discussion around the porosity of borders. Logically, there's a view that unless there's a common strategy, it's better to keep borders closed. But what are the economic implications of doing that? [New York Times]
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