Spending is Up Despite Covid-19, but Some Challenges Remain
By Shaadie Musleh
As the old adage goes “you have to spend money to make money.” More accurately from an economic perspective, “you have to spend money to make someone else money.” This is an important driver of our economy, which is why consumer spending has been such an important metric to watch as we move through recovery.
As different regions across Canada move through their stages of reopening, there are still many questions around consumer spending and how it will respond to this new normal. Do people feel safe enough to go out and spend money? How will new physical distancing guidelines affect what and how people buy? Will those who are still unable to return to work even have disposable income to spend? While many cities are grappling with these questions, we are beginning to see some answers.
Homes, Cars, and Retail Recovery
One of the key indicators of spending in the economy is the purchase of new cars. In Saskatchewan, vehicle sales hit an all-time low in April, dropping 60% to 1,800 units. In contrast, June sales jumped back to 3,600. This is still around 1,000 down from sales this time last year, but it’s an encouraging sign that consumers appear to be coming around to the idea of making large-scale purchases again.
Speaking of large-scale purchases, pent up demand in housing sales continues to drive sales. Residential real estate sales are up 56% compared to July of 2019, which is quite remarkable given the circumstances. Moreover, the Saskatchewan Realtors Association estimates that every home sold in Saskatchewan results in an average of $54,000 in economic spinoff on things like repairs, appliances, moving costs, etc.
And consumers aren’t just buying the big things. A slight lowering of the unemployment rate this month means, at least, some people are returning to work. We are also seeing a spike in retail sales across the province. Saskatchewan’s unadjusted retail sales in June 2020 increased by 11.4% as compared to June 2019. This is the second-highest percentage increase among the provinces. For context, over the same period, national retail sales increased by 4.8%.
Challenges Remain for Tourism and Events Sectors
It’s important to note that this growth in spending doesn’t hold true across the board. Sectors which rely on travel and tourism remain at risk, and it’s more important than ever that they continue to receive support, both from locals and from government. The Government of Saskatchewan recently announced $35 million in support for the province’s hard-hit tourism and hospitality sector, which is certainly a good start. Regardless, businesses in these sectors are among the hardest hit and will take the longest to recover.
There are still a great many challenges ahead of us (particularly current unemployment), but if metrics like consumer spending continue to grow, we will have reason to be optimistic. While this is one of many steps towards recovery, each step brings us a little closer to economic stability – and that’s definitely positive.
Read the full August Economic Report Card here.
*A special thanks to Praxis Consulting Ltd. for compiling key numbers for this report
