RBC is pleasantly surprised by improving household finances

According to RBC, federal measures have effectively improved household purchasing power during the previous several weeks, partially offsetting a strong economic influence of COVID-19.

In April, we’ve seen consumer activity reducing by 30% on a year-over-year basis. Meanwhile, due to gradual reopening of the national economy the drop was already 13% in the first half of June.

“We’re positively surprised by the pace of the first part of the V-shaped rebound,” – RBC CEO David McKay noted. “We didn’t anticipate such a fast recovery”.

The main reason of this recovery was the Canada Emergency Response Benefit (CERB), providing $2,000 over a four-week period to qualified Canadians who’ve faced work hours’ reduction or job loss because of the pandemic.

“CREB helps in stimulating the economy with additional cash flow and, from that point of view, we can see CERB recipients continuing to spend and not only save the money,” – McKay explained. “It’s very effective”.

In addition to it, the labour market started showing a steady recovery. According to the recent Bloomberg-Nanos poll, at the end of May, about 30% of respondents who’ve lost their jobs or had their work hours reduced, returned to their usual employment.

“Research shows that the first shock of job loss and fewer working hours is disappearing, and some Canadians see brighter job prospects already,” – noted Nik Nanos.

 

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