B6| REPORTONBUSINESS O THEGLOBEANDMAIL| FRIDAY, MARCH 27, 2020
“Much as the downturn is like
nothing we’ve seen before, I sus-
pect the recovery is going to be
like nothing we’ve seen before,”
said Bank of Montreal chief
economist Doug Porter, whose
new forecasts, to be released Fri-
day, predict about a 25-per-cent
annualized rate of contraction in
the second quarter, followed by a
30-per-cent bounce-back from
those depths in the third quarter.
“Because we’ve made much
more dramatic assumptions in
terms of the shutoff, we also
think that the restart will be al-
most as dramatic the other way.”
But economists say that even
a strong recovery in the second
half of the year won’t be enough
to reverse all of the damage in-
flicted by COVID-19, which is
widely expected to send the en-
tire global economy into reces-
sion this year.
The banks predict that GDP
will shrink by anywhere from 2.5
per cent to 5 per cent for 2020 as
a whole, before returning to
growth of about 3 per cent to 5
per cent in 2021.
The optimism for the rapid
third-quarter bounce-back –
what economists call a V-shaped
recovery, describing the shape of
the line on a chart of the quarter-
by-quarter economic growth pat-
tern – hinges on the COVID-19
measures being lifted or at least
significantly eased in the next
couple of months. Should the
enforced shutdowns continue
much beyond that, they say, the
prospects for recovery will face
more serious obstacles.
“The longer you shut down
the economy, the more likely
you are to see the permanent de-
struction of capacity,” said Sté-
fane Marion, chief economist at
National Bank of Canada, as
many businesses may not sur-
vive a long-term closing.
On Thursday, National Bank
released the most dire second-
quarter forecast to date amongthe Canadian banks, projecting a
32-per-cent annualized rate of
contraction. On a non-annual-
ized basis, that’s an 8-per-cent
slump from the first quarter to
the second – nearly quadruple
the worst quarter of the 2009
Great Recession.
Mr. Marion said the dismal
outlook stemmed significantly
from Ontario and Quebec orders
to shut down businesses deemed
nonessential – which detailed
which sectors would be forced to
go idle in the country’s two big-
gest provinces.
“We’ve never seen a shock of
this magnitude,” he said.
“This is not your usual reces-
sion, where every industry is op-
erating at some capacity. Right
now, there are some industries
operating at zero.”
With the shutdowns already
resulting in nearly a million new
filings for Employment Insur-
ance benefits as of the beginning
of the week, economists are
bracing for a spike in unemploy-
ment to go along with the dra-
matic slump in economic activ-
ity.
The Canadian Centre for Pol-
icy Alternatives predicted that
the unemployment rate is likely
headed for about 14 per cent,
from 5.9 per cent in February,
based on the number of workers
its research has identified as ei-
ther already laid off or “at imme-
diate risk.”Again, economists see jobs
coming back as businesses are
restarted, with unemployment
projected to drop to between 6
per cent and 7 per cent later in
the year.
The rapid changes in the CO-
VID-19 situation, andin govern-
ment responses both on the
health front and in terms of aid
programs, have forced econo-
mists to tear up and rewrite their
forecasts at an unheard-of pace
this month, with forecasts often
looking outdated after only a few
days.
“The kind of changes we’re
talking about on a week-by-week
basis are probably bigger than
we would make in a year,” BMO’s
Mr. Porter
“The reality is that the infor-
mation was changing on a day-
by-day basis. Each time we
would adjust the forecast in a
week, we’d probably absorb
about five different major
events.”
The key to how well these lat-
est forecasts hold up now lies in
how long the enforced shut-
downs last – whether it’s several
weeks or, as some still fear, sev-
eral months.
“A shift of one quarter in the
resumption of normal operating
conditions can have a large im-
pact on growth outcomes,” Bank
of Nova Scotia chief economist
Jean-François Perrault said in a
research note.Outlook:‘Thisisnotyourusualrecession,’NationalBankchiefeconomistsays
ECONOMIC FORECASTS FROM CANADIAN BANKSJOHN SOPINSKI/THEGLOBE ANDMAIL, SOURCE:THEBANKS* PReliminaRy.BankofMontReal WillpubliSh itS foRmal ReviSed foRecaStSon MaRch 27Bank Q1 Q2 Q3 Q4 2020 2021 FoKecastBMO*GDPpRojectionS, quaRteR-oveR-quaRteRpeRcentage changeS, annualized-6.5-25. 030. 04 .1 -3. 03 .53-27-20National - 12 .0 -32. 042. 07 .0-5. 04. 8 3-26-20Scotia -3.4-28.1 12. 3 15 .8-4.1 5 .1 3-25-20TD -4.4-24. 89. 98 .7-4. 23 .63-25-20RBC -3.0- 18. 09. 08 .0-2. 52 .93-24-20CIBC -1.7- 18. 45. 97 .3- 2. 64 .1 3-23-20AveKage -5.2% -24.4% 18.2% 8.5% -3.6% 4.0%FROM B1NationalBank
released the most
dire second-quarter
forecast to date
among theCanadian
banks, projecting
a 32-per-cent
annualized rate
of contraction.TD would ordinarily expect to
field 40 to 50 calls a day from
customers looking for relief on
loan payments, usually for rea-
sons such as losing a job or ill-
ness. The relief offered would be
tailored to each applicant based
on their situation. During more
localized crises, such as the wild-
fires of 2016 in Fort McMurray,
Alta., lenders might have asked
for statements of the borrower’s
assets, liabilities and available
cash.
Since the new deferral pro-
gram was launched, TD has field-
ed thousands of calls some days,
and that has prompted a search
for a less customized approvals
process that can be applied to
large numbers of people con-
fronting hardship from the same
health crisis. TD asks just a few
questions about the reason for
an applicant’s financial difficul-
ties, starting with an automated
form. So far, TD’s approval rate
for deferrals is well above 90 per
cent, Mr. French said.
“We’re trying to get a sense of
how COVID-19 has impacted
their lives, and then document
it,“ he said.
Even so, TD had to update its
systems to broaden the approval
criteria in the filters it uses to
sort applicants so that some can
be approved using a self-serve
online option, while others are
put through to a staff member in
a call centre.
Bank of Montreal is adding re-
sources to process applications
for relief as fast as possible, and
has launched a self-serve online
tool to help, a spokesperson said.
And the Bank of Nova Scotia said
in a statement that it is also
launching an online form for
customers to request a mortgage
payment deferral without visit-
ing a branch or calling the bank.
The Canadian Imperial Bank
of Commerce has provided relief
to “tens of thousands” of clients,
and continues to receive high
volumes of requests, although it
has seen “some reduction in new
requests in recent days,” Laura
Dottori-Attanasio, group head of
personal and business banking
for Canada, said in a statement.
The bank has introduced digital
tools to process relief needs, in-
creased outreach by advisers and
added call centre staff. “We are
doing everything we can to help
our clients through this,” she
said.Some customers have been
upset to learn that the deferrals
are not a true payment holiday,
and that the banks continue to
add interest to the loan’s princi-
pal through the relief period. But
bankers point out that the pro-
gram is designed to help custom-
ers with their cash flow in a time
of crisis, not to save them mon-
ey.
And banks must pay interest
on deposits, bonds and other fi-
nancial instruments used to
raise the funds that are loaned
out as mortgages, and have to
match those liabilities with inter-
est coming in.
“We also want to make sure
that we have the opportunity to
talk to customers to say, ‘You
should understand how this
works and if it makes sense for
you financially,’ ” Mr. French
said. “We’re trying to give them
liquidity to make it through the
heart of the crisis.”Mortgages:Banksworking
tosmoothapprovalsprocess
FROM B1Bankers point out that
[payment deferrals are]
designed to help
customers with their
cash flow in a time of
crisis, not to save them
money.Metro has seen delivery windows fill up within
10 minutes of being posted online. “Before, we
could deliver the same day, within a window of
maybe six hours, or the very next day. We’re ve-
ry far from there.”
Loblaw Cos. Ltd. has seen online orders more
than double in recent weeks for its PC Express
business – which has dropped the fees on click-
and-collect grocery pickup – and has also hired
more staff. Pickup windows have been delayed
in many markets.
“We’re also trying new approaches,” spokes-
person Catherine Thomas said in a statement.
For example, Loblaw is ex-
ploring the option of closing
one of its stores and dedicat-
ing staff entirely to online or-
ders and pickups. Ms. Thomas
did not specify when or where
that would occur. “It’s a test
that would address social dis-
tancing and the growing de-
mand for our PC Express ser-
vice.”
Loblaw’s home delivery
service is provided through
Instacart, a separate company
that has drivers who shop a
variety of stores on customers’
behalf. Instacart is now plan-
ning to hire 30,000 more
shoppers in Canada. Order
volume across North America
has spiked 150 per cent in the
past few weeks, and custom-
ers on average are buying 15
per cent more an order.
At Walmart Canada, online
orders have quadrupled since March 12.
“Obviously we were not fully prepared for
that,” said Walmart Canada’s executive vice-
president of e-commerce, Alexis Lanternier.
Orders have been 10 per cent to 20 per cent
larger – even though Walmart has instituted
limits on purchases such as toilet paper, eggs
and milk.
Walmart has had delays but has been work-
ing to add more delivery slots. It plans to hire
10,000 more staff in Canada largely dedicated
to e-commerce.
The company has also reallocated some staffwho were focused on other store operations to
help with online orders. In addition to its own
trucks, it also partnered with companies such
as Instacart (which lists Walmart stores on its
own platform as well) and restaurant delivery
service DoorDash to help fulfill orders from the
Walmart website.
Online grocer Fresh City Farms, which serves
the Toronto area and buys from many smaller
local suppliers, had its supply chain over-
whelmed by the growth.
“It’s this compounding complexity of more
customers, more deliveries, larger order sizes,”
said Fresh City chief marketing officer Jenn
Hay. “Customers are understandably frustrated
when something they’ve or-
dered is either no longer avail-
able or doesn’t show up in
their order, and it’s simply be-
cause the volumes are just so
staggering. It threw all inven-
tory projections out the win-
dow.”
Fresh City has begun sourc-
ing products from wholesalers
such as 100km Foods Inc. that
usually sell to the restaurant
industry, which has ground to
a halt. Even so, it had to stop
accepting new customers last
Thursday; more than 2,000
people have signed up for its
waiting list.
Many of its customers are
weekly subscribers who on av-
erage spend about $70 to $100
an order; in the past two weeks
the company has seen orders
as large as $1,000. The compa-
ny also owns the Healthy
Butcher, whose e-commerce business has
surged.
Metro is working on expanding delivery but
simply can’t accommodate current order lev-
els, Ms. Bacon said. “Even if we increase the ca-
pacity, even if we hire more people ... the de-
mand has increased too much, too quickly.”
Metro is now appealing to customers not to
use its e-commerce unless they are experienc-
ing symptoms, or are in high-risk groups.
“We just have to make sure that we’re able to
provide the service to the ones who really need
it,” Ms. Bacon said.Barb Richard stands on the balcony of her Toronto condo on Thursday. Ms. Richard has been trying to
prevent the spread of COVID-19 by remaining inside her home and staying away from stores, but is
running out of groceries because she can’t book a delivery time slot.FrEDLUM/THEGLOBEANDMAILGroceries:Loblawconsideringclosing
oneofitsstores,dedicatingstaffentirely
toonlineordersandpickups
FROM B1Customers are
understandably
frustrated when
something they’ve
ordered is either no
longer available or
doesn’t show up in
their order, and it’s
simply because the
volumes are just so
staggering.It threw
all inventory
projections out
the window.JENN HAY
FrEsHCITYCHIEF
MArKETINGOFFICErCanada Mortgage and Housing
Corp. is tripling the size of its pro-
gram to buy insured mortgage
pools to $150-billion, more than
double the amount the Crown
corporation bought during the
2008 financial crisis.
The ramp-up of mortgage pur-
chases by CMHC is one of a slew of
moves by the federal govern-
ment, along with the Bank of
Canada and the Office of the Su-
perintendent of Financial Institu-
tions, to shore up financial liquid-
ity as the fight against the coro-
navirus delivers a severe econom-
ic shock.
CMHC’s purchase of mortgage
securities will expand funding for
lenders in the hope that money
keeps flowing to consumers and
businesses. In a statement, CMHC
said it made its first purchase of
insured mortgage securities on
Tuesday, in the amount of $5-bil-
lion. The Crown corporation said
the Finance Ministry authorized
the expansion on Wednesday.
The Crown corporation is also
expanding its issuance of Canada
Mortgage Bonds by $10-billion to
$60-billion, even as the Bank of
Canada steps up its purchases of
those securities. Since March 17,
the bank has bought $851-million
in bonds in four transactions.
And CMHC said it has suspended
its dividend payment to conserve
its financial resources, adding
that it had $3-billion in excess
capital as of Dec. 31, 2019. It paid
out a $505-million dividend in
December to thegovernment, its
sole shareholder.
During the financial crisis 12
years ago, CMHC bought $69-bil-
lion in mortgage pools.with a report from reutersCMHCboostssize
ofmortgage-purchase
programto$150-billion
PATRICK BRETHOUR