The Canadian Economy
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Introduction
One of the major implications of any pandemic in its negative effects on the economic welfare of the country affected. COVID-19 pandemic has done to economies what would be said to be more than what would have been anticipated. Some of the reasons why the pandemic has hit such much are because it has persisted over a longer period than anyone could have anticipated. As a result of the pandemic, the world has witnessed numerous economic downgrades across the globe, with International Monetary Fund referring to the current times as the recession cycle of economies. It is from this perception that Canadians feel that the economic situation in the country has risen, and without an increase in their level of income, their consumption bundle has been forced to reduce due to decreased purchasing power.
From an economic point of view, a sudden increase in the prices of commodities in a given period is what is commonly referred to as inflation. From the consumers’ claims, there has been a significant increase in the prices of commodities during the pandemic period; this is contrary to what the Central Bank of Canada (CBC) has suggested. According to CBK, there is a deflation of 0.1 percent in the economy, which suggests that the prices are not even rising; they are actually falling. This paper will try to figure out the real situation in the Canadian economy and whether Canadians should be concerned about rising prices.
Analysis
Economically, the situation in Canada is that which is in every other economy in the globe; the country has been in a deep recession period following the government restrictions to combat the spread of the pandemic, which led to a reduction in the level of GNP. Consumer Price Index is one of the methods one can use to measure inflation. From the national statistics, there has been an increase in the CPI level in august 2020 (0.1 percent increase) and another increase of one percent in September the same year (Statistics Canada, 2020). To calculate the Consumer Price Index, the CBC takes into consideration the costs of commodities such as food, shelter, transportation, medical and personal care, and household expenses, among others (Ipsos, 2020). Such a figure of CPI indicates that the prices of commodities in the economy have generally increased by 0.1 percent on average. This is valid proof that inflation is actually present in the economy.
The housing part of the Canadian economy has its implications on the economy’s inflation. According to the existing data, the price of housing has increased immensely, due to this fact, houses have recorded an increase in the rate of vacancies. For example, a firm that paid rents during the lockdown period could not afford to continue paying, and also that one that recorded a rent increase became expensive to live. In recent days, especially the month of October, numerous privately initiate department structures recorded increased cases of vacancies day-in day out. The exact example from the data is the 18th and 19th of October, where cases of vacancy increased thoroughly, from a general point of view. Such behavior may prove that the inflation of the economy is present and rising.
Across different households, research to prove whether the charges per house has increased. The following shows the average rent of a two-bedroom in two days in the economy between different residents.
From the graph, it can be said that within a day or two, the rent can shift very high due to its flexibility upwards and express a lagged decrease due to the inflexibility of prices downwards. The table shows that the average rent of a two-bedroom increase daily, and therefore the level of inflation is increasing.
According to Canadians, the price of food has really gone up. Through lockdown, it is evident that the country’s production was affected, and people no longer able to work and earn to incur any rise in the prices of food. Countries, too, could not transact in the international arena due to closure of the boundaries and suspension of trading activities between nations to combat the spread of the virus. Due to such hardships, the cost of production went much higher, and therefore the prices of commodities increased as expected. According to research, Canadians are straining to afford the basket of goods they could afford way back before the inversion of the COVID-19 pandemic at the beginning of 2020 (Rajeshni, 2020). Some of them thought that government should work very hard to ensure that inflation in the economy does not affect them much. Although the prices of other products have gone up, the locals feel much affected by the increase in prices of food and shelter as they are basic needs.
Conclusion
The concluding bid of very paper is always very crucial as it summarizes what has been discussed in the paper throughout. It must be agreed that every economy in the globe was negatively affected by the pandemic; the affected economies experienced a recession through increased unemployment and reduction in Gross Domestic Product. With a reduced number of cases, economies are now healing bit by bit, and within no time, most of them will soon move back to the peak. From the evidence of existing data and the current situation in Canada, it is incorrect to conclude that there is inflation in the economy. Despite the claims by the CBK about deflation, there is an increase in prices of commodities and especially food and other basic needs such as housing.
During tough economic times, such a behavior can be anticipated because the government seeks to collect huge amounts of cash from the public to cater for the economic damage. The action increases the burden of production, and therefore the prices of commodities shoot immensely. From the above case, CBK should not deny the availability of inflation; instead, it should use the expansionary monetary policies to cure inflation and settle down the general price level in the economy. The expansionary fiscal policies by the government are also encouraged to increase the efficiency of price stability.
References
Ipsos Reid (1 July 2020). Cost of living: Majority say cost of food, goods and services have increased since COVID-19 began. https://www.ipsos.com/en-be/cost-living-majority-say-cost-food-goods-andservices-have-increased-covid-19-began
Rajeshni N. G, (2020). COST OF LIVING AMID COVID-19. Retrieved from https://www.ipsos.com/sites/default/files/ct/news/documents/2020-07/cost-of-living-deck-ipsos.pdf. Accessed at 1st July 2020.
Statistics Canada (16 September 2020). Consumer price index, August 2020. https://www150.statcan.gc.ca/n1/daily-quotidien/200916/dq200916a-eng.htm