DLC Chief Economist Update – THRONE SPEECH: CANADA’S RESPONSE TO COVID-19

Federal deficit approaching $400 billion, there are growing calls to temper new spending.
Actual measures in the Throne Speech:
- Fight the pandemic and save lives
- Supporting Canadians Through this Crisis
- Build back better to create a more resilient Canada
- Stand up for who we are as Canadians–welcoming and fights discrimination
This is an ambitious agenda. Many of these proposals are sweeping commitments. Spending details will come later, likely in a fiscal update in November or December.
The speech did not extend the CERB, which the NDP said was a condition of support. Also, the NDP asked for paid sick leave, which was not mentioned.
Conservatives’ initial response was that they could not support this proposal.

DLC Chief Economist Update – Another Record-Setting Month for Canadian Housing

For August 2020, sales and new listings hitting their highest levels in 40 years of data.
National home sales rose a further 6.2$ on a month-over-month basis in August.
Actual (not seasonally adjusted) sales activity posted a 33.5% y-o-y gain in August.
The national sales-to-new listings ratio eased to 69.4% in August compared to 72.3% posted in July
The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose by 1.7% m-o-m in August 2020

The Bank held its target overnight rate at the effective lower bound of 25 basis points with the clear notion that negative policy rates are not in the cards.
The Bank will rely on large-scale asset purchases–quantitative easing (QE–of at least $5 billion per week of Government of Canada bonds.
In Canada, real GDP fell by 11.5% (39% annualized) in the second quarter, resulting in a decline of just over 13% in the first half of the year.
Housing activity has been particularly robust with substantial existing home sales in July and August.
The construction of new homes surged to the highest level in more than a decade in August following a sharp increase in July.