Observers have varied opinions on how Canadians will use their hoarded funds
Canadians who were forced to stay home last year could have amassed as much as $100 billion in unspent assets, according to new data from CIBC.
“More and more money is being accumulated on the sidelines,” said Benjamin Tal, deputy chief economist of CIBC World Markets Inc. “The question is what people will do with it.”
They may keep this cash under lock and key, if a recent survey conducted by Nanos Research Group is any indication. The poll found that almost seven in 10 Canadians are expecting to maintain or increase their savings levels throughout 2021, while only 27% are anticipating lower savings.
Elevated household debt levels will significantly influence these hoarders, despite the federal government’s pandemic financial assistance.
“Canadians will look over their shoulders at the mountain of debt and say, ‘Maybe I should use that extra money to pay down the debt burden rather than spend more,’” David Tulk, portfolio manager at Fidelity Investments, told Bloomberg. “It takes a bit away from the cyclical recovery.”
However, Tal has a more positive outlook, predicting that Canadians will use up their stockpiles rapidly once economic recovery reaches a point where the majority of the population can safely go out and spend again.
“This money would be coming from checking, savings accounts… and it will go where?” Tal said. “To the service sector, exactly where you need the jobs. That’s a win-win situation and that’s why we are very optimistic about the second half of the year.”
Tal projected that revitalized economic activity could stimulate annualized GDP growth of around 7% in 2021.
