Burning Questions: Will Canadians spend their mountain of saved cash to rescue the economy?
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Furthermore, the largesse of the federal government might have helped many Canadians from packing on more debt, but any savings could be used to pay those liabilities down.
CIBC on Dec. 29 released the findings of a survey that found paying down debt was the top financial priority for Canadians for the 11th straight year, at 20 per cent, with “keeping up with bills/getting by” coming a close second, at 18 per cent.
A spending boom driven by savings could also have consequences beyond the immediate gains realized by certain businesses, such as an increase in prices.
Pedro Antunes, chief economist at the Conference Board of Canada, likened the increase in disposable income to a “slingshot” that’s being pulled back. Some of that money will be saved and some of it will be spent elsewhere, he said, since travel restrictions remain in place and COVID-19-caused economic uncertainty lingers.
Yet when the world changes, so, too, will people’s spending plans. This could boost some businesses, such as those in the travel industry, but weigh on others that have gained from the stay-at-home trend, like those specializing in home renovations.
“But nonetheless … that slingshot that’s been pulled back, there’s a lot of capacity for continuing to spend into 2021, and even in the year after,” Antunes said in an interview. “As things normalize, people are going to, I think, open their wallets a little bit more.”
The federal government certainly wants Canadians to spend some of their savings, as part of its intention to pump $100 billion in stimulus money over three years into the economy.
