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Uncertainty and Risk Ahead Despite Recovering Economy

Uncertainty and Risk Ahead Despite Recovering Economy

August 6, 2020

Consumer spending critical to country’s overall well-being, but it could hurt many Canadians in the long run, writes Peter Watson.

June numbers indicate the Canadian economy may be recovering. Continued consumer spending is critical, but will the spending hurt the financial well-being of Canadians?

Our COVID-19 weak economy got some good news.

Retail sales rebounded 18 per cent in May, as reported by CBC in July.

Despite the rebound, retail sales are still 20 per cent below the prior COVID-19 level.

After the Canadian economy suddenly went from on to off, these rebound numbers are a good sign the economic recovery may have started.

All indications are the June numbers will reflect continued recovery.

That does not mean all retailers will regain the same level of financial strength they had going into this economic slowdown. The trend now is for major retailers to announce they will close some bricks and mortar locations or shut down entirely.

Even though the Canadians have shifted their shopping patterns to be more online, there is still a rough future ahead of the retail sector.

The largest component of the Canadian economy is driven by consumer spending. When we spend the economy does well.

Add in employment uncertainty and we can see how economically challenging the future is.

If we spend our way to an economic recovery the carnage that could remain is Canadians spending their savings or adding personal debt.

And what are the implications if there is a second wave of COVID-19 infections in Canada? All previous pandemics have had a second wave.

For many, the economic future is a balancing act. We all have basic requirements like food and shelter that must be purchased, but our ongoing employment uncertainty may cause pause before we spend.

And many are tired of the self isolating times and want to regain the social and entertainment side of life.

Our future is both uncertain and challenging. Decisions we make now could affect us for many years to come. We encourage everyone to manage their finances carefully.

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com