written on behalf of Feigenbaum Law
As the COVID-19 pandemic began to largely shut down the Canadian and American economies in the Spring of 2020, governments on both sides of the border acted quickly to help individuals and businesses survive the economic impacts they were experiencing. This week, as Canadian businesses and individuals prepare to see many benefits end, we wanted to check in on the health of the economy.
Benefits set to expire
After being extended many times since their implementation in 2020, both the Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS) are set to expire at the end of the month. This is in addition to the planned wrap up of the Canada Emergency Recovery Benefit (CERB), Canada Recovery Caregiver Benefit (CRCB) and the Canada Recovery Sickness Benefit (CRSB). While all these benefits can be extended until the end of November, the government has not yet indicated it will do so.
A story published by CTV reported that over 200,000 business owners relied on CERS for help with rent, while over 450,000 people received wage top ups from CEWS. This is in addition to the 700,000 people who applied for CRSB and 450,000 who applied for CRCB.
However, a survey conducted by Restaurants Canada, which advocates on behalf of the industry, reported that 80% of restaurants told them they will need some kind of assistance in order to survive the fall and winter months. The organization’s president, Toff Barclay, said
“Most have been losing money or barely breaking even since coming out of initial lockdown last year, and at least 10,000 establishments have already closed. The rest need government support to help them survive the fall and winter so they can continue feeding our recovery.”
The report went on to state that 80% of restaurants have been scraping by with a profit margin of about 2% throughout the pandemic and that 70% of restaurants are still receiving and are dependent on assistance.
It should be noted that while the government can extend benefits once again, they will only be able to create an extension that lasts until November 20 at the latest. New legislation will need to be created in order to extend benefits beyond that date. Normally this might be a problem, but one that can be worked through. However, Parliament is not sitting at this time and is not scheduled to return to the House of Commons until November 22, two days after the furthest extension available. While it’s likely that the government can get legislation together rather quickly, it would still leave a gap.
Canada’s Inflation Rate Jumps to 18-Year-High
At the same time, news was reported just this week that Canada’s inflation rate jumped to an 18-year high of 4.4% in September, with transportation, shelter, and food experiencing the largest jumps.
The story, published by the CBC, reported that gasoline prices went up by 33% over the past year, while the price for new car rose by 7.2%. Meanwhile, shelter costs went up by 4.8% and food increased by 3.9%. These types of increases in essential items are likely difficult to manage for many people also relying on government assistance during the pandemic as they are forced to do more with less.
In the meantime, the United States seems to be past its peak in terms of inflation. A story published
by Reuters states that August saw the slowest increase in consumer prices over a six-month period. Economists are waiting to see how the U.S. Central bank will respond.
Car Prices are Up, but Still Hard to Find
Despite the increase in car prices, a new vehicle can still be difficult to find. Drive past any car dealership and you’re likely to notice lots that are nearly empty. This is because when the COVID-19 pandemic first hit, car dealerships cancelled orders they had placed for many parts needed to make vehicles. Fast forward over a year later, and while car companies are ready to start making cars again, the suppliers responsible for semiconductor microchips are having a difficult time ramping up production to meet the demand. Rubbing salt in the wounds of car dealerships and manufacturers is that a microchip often costs as little as $1 but each car needs about a dozen to operate as designed.
The CBC reported that these shortages also impacted the availability of high-demand consumer items such as mobile phones, gaming consoles, and household appliances. Indeed, a story from CTV shared the experience of an Ottawa resident who described his local furniture and appliance store as being “quite empty in the warehouse for the furniture portion.” The consumer said that he was told by staff that it could be eight months to a year before a fridge is available. The story quoted the CEO of Lee Valley Tolls, who said,;
“I don’t think people understand how complex the supply chain is with every Canadian business…we are talking about everything that goes into a product. It can be something as small as a computer chip… where something as small as a missing element making it really tough to make raw materials.”
At Feigenbaum Consulting, we will continue to share stories on how the Canadian and US economies are recovering from COVID-19 related disruptions, paying particular attention to how things might impact people with personal or business interests on both sides of the border.
Contact Feigenbaum Consulting for Cross Border Tax Services and US Legal Solutions
Accountants and lawyers in both the US and Canada routinely seek assistance from Feigenbaum Consulting’s tax team on complicated tax compliance issues. We prepare personal tax returns for high net-worth individuals on both sides of the United States/Canada border. Our expertise in both countries allows us to manage the unique issues experienced by people who live or do business in both countries. As always, our services are confidential and customized to meet your situation. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll free at (877) 275-4792.