Just a month into 2021, and the year ahead brings with it less of the renewal that many expected, although there is a notable sense of hope that the Covid-19 pandemic will be dealt with this year. Rather, the beginning of 2021 has brought with it a renewed sense of exhaustion with the pandemic and the prospect of a noticeable uptick in volatility.
In Canada, as in many other countries, this is true both for the national economy and the outlook for businesses that continue to seek ways to adjust to on-again off-again business environments. Lockdowns, border closures, stay-at-home orders and all the other side effects of the pandemic now seem destined to stretch out at least for the remainder of this year.
Now for the hard part
We are perhaps halfway through this pandemic. If this were a marathon, the hard part is only now beginning. In early January, cases were rising in several provinces and dozens of states south of the Canadian border. Ontario and Quebec have imposed stay-at-home orders and curfews.
On the positive side, vaccinations have started across the country and the speed of vaccination will likely pick up over the next few months. At least in Canada, the federal government has said time and again that everyone will have access to a shot by September. This is driving up hopes of a return to normality, at least domestically.
Like the marathon, dealing with the pandemic has become a tiring grind, but the only way we’ll get to the other side is to keep at it, one step at a time.
Also on the positive side, most businesses feel better now about capital expenditures and intend to hire more staff. The 63,000 people who lost their jobs in December, in the first decline in employment since April, will be hoping the hiring drives get started soon. According to Statistics Canada, the unemployment rate ticked up from 8.5% to 8.6% in December. That, though, does not include all the people who have simply stopped searching for a job. When they are added in, the unemployment rate jumps up to a whopping 10.9%.
In the negative column is the grinding reality that the vaccination programme will take months to complete in Canada and even longer in other countries.
Making the outlook bleaker, particularly for small businesses that make up such a big portion of the economy, is the reality that consumer spending is not really coming back. Interest rates will remain low over time, but the extra supports that have helped people pay the rent and shore up their savings will begin to fade.
Rough ride
As long as the pandemic continues, the economy will remain in recovery mode. This recovery, says the Bank of Canada, will follow a ‘choppy trajectory’.
In its winter business outlook survey, done through mid-November and early December and released on 11 January 2021, the Bank of Canada found that business sentiment had improved following the lows of the summer and autumn of 2020. Even so, about half of all companies surveyed said sales remained stuck at pre-pandemic levels, even if they all expected increases over the next 12 months.
The exception is businesses that provide high-contact services, such as restaurants, hotels and airlines. These businesses do not expect a return to pre-pandemic levels this year. To make matters worse, costs – notably freight costs – are getting higher.
All in all, the good news is coming but it is not here yet, and the timeline seems to stretch out further and further into the future.
Like the marathon, dealing with the pandemic has become a tiring grind, but the only way we’ll get to the other side is to keep at it, one step at a time.
