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Following an economic bounce back, Canada faces a number of headwinds going forward - including the COVID-19 second wave, sluggish global economic growth and a roll back of household financial support. RBC Chief Economist Craig Wright shares his view of the road ahead.

The Economic Pulse is a new monthly series that will provide macroeconomic insight and analysis from RBC’s Chief Economist Craig Wright and Deputy Economist Dawn Desjardins. In this first edition, Wright discusses the economic outlook for Q4 and into 2021.

First, the Good News

The good news is, economic recovery has already begun in Canada, and that trend is expected to continue through to the end of this year and into 2021. The power of reopening businesses in particular contributed to a noticeable bounce back.

The challenges ahead

Reopening gave us a quick win, and with the easy lifting behind us, Canada faces a number of headwinds that will result in more modest growth in the near future.

The evolution of the COVID-19 crisis plays a crucial role. While broad based restrictions aren’t expected, tactical shut downs will have a negative impact on certain businesses as well as overall economic growth.

Also, an expected decline in the global economy and ongoing protectionist sentiment in the U.S. (regardless of the election outcome) will contribute to weaker export volumes and opportunities — a challenge for businesses who rely on global trade.

The Canadian consumer is key to growth

As the government rolls back financial support, consumer spending will need to be driven by job gains. While unemployment is still higher than it was in February, two thirds of workers who had lost their jobs were back at work in August, and the unemployment rate is expected to keep falling. This is positive news as we need consumers ready to spend and help grow the economy going forward.

Watch Craig Wright’s discussion about the headwinds facing the economy and the predicted impacts to Canada, its businesses and consumers.