Embracing Uncertainty

We continue to exist in a state of change as we live with the ongoing impacts of the COVID-19 pandemic.   A lot of unknowns remain regarding how the economy will recover, which is evident when considering several key economic indicators.  Here are three important statistics that will highlight this recovery and the state of our economic health. 

Canada’s unemployment rate reached an all-time high of 13.7% in May 2020 as the pandemic swept across the country and businesses shut down.   A higher unemployment rate means that Canadians have less income for spending and borrowing activities in order to support economic growth.  It also means that for most businesses, this will result in lower revenues as people spend less.  As restrictions put in place to slow the pandemic are being rolled back, the unemployment rate has decreased to 7.5%, however we have still not fully reached pre-pandemic levels. 

To support economic growth during COVID-19, the Bank of Canada reduced its overnight interest rate a number of times in an effort to increase spending and borrowing.   Interest rates impact the rates that Canadians receive on lending products, like mortgages, as well as what is earned on deposits.  As interest rates decrease, the cost of borrowing becomes less expensive, creating greater demand.   

Official data shows the inflation rate is currently at its highest level in a decade at 3.7%.   The Bank of Canada has indicated this is a “transitory” spike, triggered by the COVID recovery and that once things recalibrate from the impact of the pandemic, we will see it return to its 1-2% target level.   When inflation rises, prices rise, which results in a decrease of consumer purchasing power; in other words, you’ll find that your dollar won’t go as far.  It’s been over two decades since we have seen the inflation rate over 3%, and therefore, it hasn’t been top of mind for Canadians.  At a time when businesses are still in a fragile state of recovery and their revenue base is stagnant at best, businesses will be negatively impacted by the increased cost of supplies and materials. 

Every economic indicator affects us one way or another, and just as we watch for signs of economic health, it’s also important to observe our own financial health.   CUA’s Financial Health Index uses eight indicators to help you understand where you are financially.   We recommend checking your financial health on a regular basis, particularly when your circumstances change or there are changes in the economy.   Improving your own financial well-being can play a role in supporting the broader economy.   To encourage getting into the habit of monitoring your financial health, anyone who completes the Quiz before August 16th will be automatically entered to win a prize package valued at $2,500 

It can be difficult to plan ahead in an environment which we have never experienced before, and it is important to be aware of changes and how they impact each of us.  No matter what financial questions you have, better answers start with better conversations.   If you’d like to start that conversation, reach out to us at 902.492.6500 or info@cua.com.

Your CEO,

Marie Mullally
President & CEO
Email Marie

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