Wary Canadians start spending as COVID-19 restrictions ease, boosting economy

OTTAWA (Reuters) - The Canadian economy is showing green shoots with data on home sales, consumer spending and new job postings trending upwards after the coronavirus pandemic forced shutdowns and caused a record plunge in economic activity.

FILE PHOTO: An employee at Zara puts up a sign during a phased reopening from the coronavirus disease (COVID-19) restrictions in Toronto, Ontario, Canada May 19, 2020. REUTERS/Carlos Osorio/File Photo

The Bank of Canada held its key interest rate steady on Wednesday, noting the impact of COVID-19 appears to have peaked and saying it now expects the Canadian economy to resume growth in the third quarter.

The bank’s more positive tone boosted the Canadian dollar to a three-month high against its U.S. counterpart on Wednesday, while Canada’s main stock index has rebounded nearly 40% from its March low as investors bet on economic recovery.

Canada’s 13 provinces and territories have been gradually reopening their economies in recent weeks, and while the pandemic continues to weigh heavily, the picture is not as dire as it was even a few weeks ago.

Furthermore, the spread of the novel coronavirus in Canada has slowed significantly, the Public Health Agency said on Thursday.

Housing sales in Toronto, Canada’s biggest city, jumped by 55% in May from April and the average selling price gained 4.6%, though sales and listings remained well below last year’s levels. Bidding wars, too, have returned to hot neighborhoods.

Home buyer Ashleigh Patterson lost out on one Toronto home in a bidding war in late May. Two days later she snapped up another. Now she is preparing to sell her townhouse and hoping the economic rebound means it, too, will attract multiple offers.

“If you had told me two months ago you’re going to sell your home during a pandemic, I would have told you you were absolutely bonkers,” Patterson said.

Compared with late March, Canadians started spending again in May on things like rounds of golf and clothes, and they began driving more, according to an RBC economics report released this week.

There have been huge line-ups outside stores like TJX-owned Winners and Inditex-owned Zara, which recently reopened in Canada’s most populous province of Ontario, according to social media posts.

Spending on home and lifestyle products has boomed, said Karl Littler, senior vice president of public affairs at the Retail Council of Canada.

“Consumers have not been on vacation. They’re not paying commuting costs. ... And so for quite a number of Canadians there is some more disposable income in play,” he said.

Commercial transport trucks crossing into Canada from the United States each week jumped 15.6% in the third week of May from a low in early April, though volumes are still down 25% from a year earlier, according to Canadian Border Services Agency data.

New job postings were up 20% on May 29 compared with May 3, according to Indeed Hiring Lab Canada, though trends are subdued compared with last year.

The country lost a record-breaking 2 million jobs in April and the unemployment rate surged to 13% amid coronavirus shutdowns. The May jobs report is due on Friday.

Reporting by Julie Gordon; additional reporting by Fergal Smith in Toronto; editing by Steve Scherer, Chris Reese and Leslie Adler