When the COVID-19 pandemic was first declared and the shutdowns were first implemented back in the spring Canadians started stockpiling. They cleared store shelves of everything from canned foods to cleaning products to, famously, toilet paper.
Turns out they have also been hoarding cash.
A new report by prominent economists Katherine Judge and Benjamin Tal estimates Canadian households have amassed a collective $90 billion in savings, above and beyond what they would have banked without the influence of the pandemic. It is the largest accumulation of cash ever recorded. The savings rate in Canada shot up to 28.2% in the second quarter of this year, compared to just 3.6% in Q1. Using U.S. figures as a guide the economists estimate the rate currently stands at 13%.
Unfortunately, COVID has not led to universally healthier Canadian bank accounts. While government aid programs supported incomes for millions of Canadians, Tal and Judge believe most of the money that has ended up in chequing and saving accounts has come from reduced spending. Based on the U.S. statistics used by the economists, spending less is an option that favours mid to high income households. Low income households, that have been hit hardest by pandemic restrictions and lockdowns, still have to spend a larger proportion of their income on necessities.
Judge and Tal do not foresee these savings pouring back into the economy anytime soon. They expect the second wave of the pandemic and the imminent flu season will keep spending in check well into the first quarter of next year.