Canada’s growth slows to its weakest pace in almost four years as economic woes bite. Statistics Canada has now revised the third quarter annualized growth down to 1.1 per cent from an initial 1.3 per cent. In addition to recent rail and pipeline shutdowns and the slowdown in oil and gas and mining sectors, the Canadian economy is going to have to brace for the effects of COVID-19. For example, Chinese tourists to Canada accounted for 7.3 per cent of our tourism receipts. Exports of iron, copper, lobsters and lumber are also at risk due to weaker demand from China. No one knows for sure how long the COVID-19 outbreaks will last and how severe it will be in North America. Given China’s current COVID-19 closures, global supply chains are being seriously impacted here and in Europe. Like the SARS outbreaks in 2003, some experts expect that COVID-19 could last anywhere from seven to eight more months.
The immediate economic impact this week has been on the stock markets with the Canadian TSX and the U.S. Dow losing its greatest amounts in one week since the Great Recession of 2008. With trillions of dollars loss in one week, nothing like this has been seen before and we are no longer simply talking about the expected stock market correction in Canada and in the U.S.
Over the past year, I have been warning of a possible recession because the very weak underlying factors around manufacturing and consumer spending. Instead, corporations have been using profits to pay shareholders and buy back company shares, instead of reinvesting in capital, R & D and labour. Now, multinational enterprises like Apple, Hyundai and Samsung are seeing their Chinese supply chains shut down resulting in expected reduced future earnings.
The question for North American industries is what will happen should the COVID-19 virus spread to manufacturing plants and the service industries for example. COVID-19 is here and all one can do is to prepare for any possible pandemic. Remember that the only way to contain the virus is through quarantine and isolating affecting individuals. Should one employee test positive, an entire establishment may have to be closed and employees would be required to go into self-quarantine. No one wants to exaggerate the threats, but one has to realize that the economic situation in Canada is already weak. COVID-19 could be the one major event to trigger a major recession in the coming months. Both Canadians and Americans need to be prepared for such an outcome.