Business sentiment in Canada and the U.S.

Oct 23, 2020 | Elinesky Schuett Private Wealth Management


Our latest economic commentary focuses on the global pandemic and provides insight into the weak, but improving, business sentiment.

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Your weekly economic update

Volatility crept higher this week as global COVID cases and uncertainty on U.S. stimulus negotiations weighed on investor sentiment. Investors were treated to a more orderly debate between President Donald Trump and former Vice President and Democratic nominee Joe Biden. The takeaway appears to be that both candidates did well enough, and it may have little impact on the election which is just over a week away. It’s also worth noting that millions of ballots have already been cast. This week, we provide an update on the global pandemic and discuss the business sentiment that is weak but showing signs of improvement.

Coronavirus update

It was a week of record breaking figures across Europe. Italy, Spain, Germany, France, Poland, Croatia, the Netherlands, and the Czech Republic are among many of the countries that reported new daily highs in infections.

Unfortunately, it was also a record breaking week for Canada as it reported nearly 2,800 new daily infections recently. However, the pace at which the virus is spreading has shown signs of moderating. The seven-day moving average now stands at over 2,400 new cases per day, just 100 higher than the level from a week ago. While Quebec and Ontario stand out for their relatively high case numbers, their average figures were stable, if not lower, over the past week. The East Coast appears to have contained an outbreak that emerged in New Brunswick as its figures moved lower. British Columbia, Alberta, Saskatchewan, and Manitoba all saw meaningful acceleration in infections, suggesting the pandemic in Canada is now fairly broad and not necessarily isolated to the two largest provinces.

The United States continues to see its situation worsen as well, with new daily infections that have surpassed 60,000. As with Canada and Europe, this recent wave is fairly broad-based and not specific to any one region.

We continue to believe that these trends increase the likelihood of more restrictive containment policies that could limit the trajectory of the economy and earnings heading into 2021.

Business sentiment weak but improving

The third quarter earnings season is well underway and, while still early, the trend has been positive thus far with the degree of the year-over-year earnings decline coming in meaningfully less than expected.

This “weak but improving” story was echoed by results from the Bank of Canada’s recent quarterly Business Outlook Survey, which summarizes the outlooks of business leaders from about a hundred firms across the country. This survey was completed between late August and September. In a nutshell, business sentiment remains negative but has trended positively across all regions in Canada. Nearly two thirds of businesses, linked primarily to household spending, real estate, natural resources, and infrastructure, suggested that sales have recovered, are anticipated to recover, have been unaffected, or even increased during this year. The remaining one third of firms either believe that sales are unlikely to rebound or are uncertain if they will over the next year. These businesses are generally tied to areas like tourism, leisure, travel, and hospitality. Some other key takeaways included an improvement in credit conditions, modest hiring plans, meaningful supply constraints that may be transitory in nature, and investment plans that are unsurprisingly mixed.

Meanwhile, in the U.S., cautious optimism seemed to be a key theme we gleaned from the Federal Reserve’s Beige Book. The U.S. central bank publishes this document eight times a year and it tracks activity and commentary from a variety of business leaders and professionals over the period of late August through to the beginning of October. Similar to Canada, the U.S. economic recovery appears to be advancing on a few separate tracks, with some industries seeing a rebound in growth (manufacturing and banking for example), others dealing with supply issues (auto and housing), and a few that remain under stress (travel and entertainment).

Interestingly, management teams from a number of U.S. banks indicated that the period of building loan loss reserves in anticipation of future credit losses may now be behind them. That’s not to say the challenges facing businesses and households have diminished. Rather, it suggests that banks feel they have adequately prepared for future losses given the billions of dollars they have set aside on their balance sheets. Nevertheless, some of the commentary from U.S. banks does illustrate that the outlook is improving. For example, several management teams implied that the debt deferral story may now be behind us as most customers have exited emergency loan relief programs and are maintaining current payments on their debt. Overall, they felt households were in better shape today than earlier this year, with higher savings and lower debt.

We are encouraged by some of the anecdotal evidence and commentary from businesses across North America that suggest a weak but improving business climate. Our hope is that the combination of time, government aid, and innovation on the health care front can continue to nurture a backdrop that eventually helps lead to a broader and more sustainable recovery for businesses and households in the year ahead.

Vetting different COVID-19 strategies

Chief Economist Eric Lascelles provides an overview of the latest virus data, comparing the situation in emerging markets to developed markets. He looks at the best practices of Germany and France in containing the virus, and shares his thoughts on the feasibility of The Great Barrington Declaration.



Real-Life Stories of Cyber Crime. Podcast 1: Online Extortion

Woman in a grey sweater looking at a laptopProtecting your business from fraud and theft has always been a challenge – there have always been criminals looking for ways to steal money and information for their own gains. Even as security advances, so do scams, and online attacks have resulted in the loss of millions of dollars by Canadian businesses every year.

In the first episode of our podcast series: Real-Life Cyber Crime Stories, RBC Director of Awareness and Education Denise Pratt sits down with Detective Alpha Chan from the Toronto Police Services Cyber Crime Unit to talk about cyber fraud.

Listen to the podcast for Detective Chan’s stories, warnings and tips that can help protect your business from online extortion scams: Podcast 1: Online Extortion

Leadercast: Ripple Effect

We are thrilled to partner with the Guelph Chamber of Commerce to bring Leadercast: Ripple Effect to our community. This full-day event features six globally influential leaders discussing how you can discover and leverage your influence to create positive impacts!

Are you interested, but not sure you can attend for the entire day? Although this is a full day conference, you will be able to access the content online for up to five days after the event.

Leadercast Ripple Effect

Date: Thursday, November 5, 2020
Time: 8:30 a.m. – 4:30 p.m.
Registration Fee: $55 + HST using promo code ElineskySchuett20 at checkout.  
Use this link for more information or to register: Leadercast Ripple Effect.

Community Corner

Each week, we like to end our posts with a few good news stories from in and around the community. We hope that they brighten your day!

As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or