Canadians sitting on the biggest cash hoard on record: CIBC

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The COVID-19 pandemic has pushed Canadians to rack up the largest amount of money on record, according to a new CIBC report released on Tuesday.Canadian households and businesses keep more than $ 170 billion in excess cash, the report estimates. Households rely on $ 90 billion, which equates to 4% of consumer spending, while businesses keep as much as $ 80 billion.

“We are seeing a situation where the savings rate is going up, spending has gone down dramatically, but income has actually gone up due to government support and the fact that many people have not seen their income decrease,” he said. said Benjamin Tal, deputy at CIBC. chief economist and co-author of the report, in an interview Monday.

“We are in a very strange situation where the economy is down, but the level of liquidity in the economy is increasing.”

The report also says the household savings rate was likely around 13% in the third quarter, up from around 3.6% before the pandemic.

Tal also expects household cash reserves to increase further. The report says consumer spending is expected to slow over the next four to five months, with the pandemic overlapping with flu season.

” Perhaps [a vaccine] will be the go-ahead for people to actually start redeploying the mountain of money they’re sitting on, ”Tal said.

Meanwhile, Canadian businesses are increasing their liquidity by nearly 15% year over year, according to the report. The Government of Canada’s Emergency Business Account loan program also increases businesses’ cash reserves, with many businesses keeping the money in deposit accounts and possibly using it as insurance.

“I think a lot of this cash is held by companies and sectors that are not directly affected by the crisis. In fact, they’re taking advantage of it, ”Tal said.

“At the same time, they’re not in the mood to invest when the economy is down, so they’re sitting on that money – waiting, looking for direction – and that money will be used as soon as they see the light because it’s really sub-optimal for them… not to invest. “



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