Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Canadians amassed a huge amount of additional savings last year, but the Bank of Canada expects only a portion of this to be spent in the coming years, tempering expectations for a consumer-driven recovery.

Household savings increased by $180-billion last year, or about $5,800 a person, as many Canadians spent less and pocketed generous support cheques from the federal government. These “forced” or “precautionary” savings could provide considerable preloaded stimulus for the economy if people turn on the spending taps later this year, Bank of Canada deputy governor Lawrence Schembri said in a speech on Thursday.

At the same time, a release of pent up household savings is not a sure thing, Mr. Schembri said. Most of the additional savings last year were the result of spending less on services such as hospitality, transportation and tourism. It’s unclear how much extra household savings can realistically be spent on meals, vacations and haircuts once COVID-19 immunization becomes widespread.

Story continues below advertisement

“Comparisons are sometimes made with what happened during and after World War II. But during the war years, it was spending on durable goods – not services – that was suppressed. Such a dramatic reversal of spending is unlikely to occur now, since the purchase of goods has been much less restricted,” he said.

Mr. Schembri’s virtual speech to Restaurants Canada came a day after the Bank of Canada decided to leave its benchmark interest rate at 0.25 per cent and continue buying $4-billion worth of government of Canada bonds each week. The Wednesday rate decision walked a fine line between acknowledging that the Canadian economy made it through the second wave of the pandemic better than expected and continuing to warn of a protracted labour market recovery and uncertainty about the evolution of the virus that causes COVID-19.

“As we prepared for the decision, my colleagues on Governing Council spent a lot of time considering the signals in the latest economic data … [and] economic growth in the fourth quarter was stronger than anticipated,” he said.

“At the same time, Governing Council considered the recent rise in unemployment, the very uneven impacts of the job losses and the growth in long-term unemployment. There are now about twice as many job losses as there were at the height of the Great Recession a decade ago,” he added.

Much of Mr. Schembri’s speech focused on the bank’s outlook from the perspective of savings and potential spending.

Canadians on average spent around $4,000 less last year, largely because of reductions in “high-contact” service industries. Savings also increased as a drop in disposable income (around $1,600 on average) was more than offset by government support programs (around $3,400 per Canadian over the age of 15).

“There is much uncertainty about what Canadians will do with these savings. This is important because these savings are large enough to meaningfully affect the trajectory of the economy. If Canadians spend more than we expect, it would strengthen the recovery in consumption and employment,” Mr. Schembri said.

Story continues below advertisement

Spending has rebounded much faster on goods such as cars, furniture and houses than on services. If people moderate their purchases of durable goods in favour of services, then aggregate spending will not necessarily take a large upswing.

A bank survey conducted in November found that only 5 per cent of respondents planned to spend most of their additional savings in 2021 and 2022, while another 14 per cent said they would spend some.

However, Mr. Schembri said, “a positive surprise could still occur if households in Canada continue to buy houses and goods at a similar pace as in recent quarters and also dip into savings to increase their spending on services.”

The Bank of Canada modelled a scenario where Canadians spend around 15 per cent of their additional savings, which would amount to about $25-billion worth of expenditure over the next three years. Much of this would likely go toward high-contact services, such as transportation, accommodation and restaurants, Mr. Schembri said. The bank estimates this additional spending could boost employment by about 30,000 jobs a year.

“That would essentially bring the recovery forward somewhat,” Mr. Schembri said in a news conference after the speech.

“I mean, $25-billion over three years is not a lot of additional spending, but it does have the impact of bringing the recovery sooner,” he said. He added that higher consumer spending is an upside risk to the bank’s economic forecast, and could result in the output gap – the difference between what the economy can produce and what it does produce – closing sooner than the bank predicted in January.

Story continues below advertisement

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies