Households see fortunes grow despite economic plunge

The economic calamity that followed the Covid-19 outbreak is unusual in that many households actually saw their wealth rise, says National Bank Financial Inc. (NBF) in a new report.

Initially, the market collapse that accompanied the global pandemic appeared destined to weigh heavily on household finances, as is typical during economic decline.

“Usually during a recession, a negative wealth effect occurs and erodes consumer confidence and hampers the economic recovery,” NBF said.

Yet, this hasn’t been the case for the 2020 recession.

“For the first time ever, Canadians actually enjoyed an improvement in their balance sheet during the initial year of a recession,” NBF said.

It found that the rebound in financial markets and ongoing strength in real estate “suggest a positive wealth effect of 9.6% for a representative Canadian household.”

The boost stemmed from major fiscal and monetary policy interventions designed to support the economy through the pandemic-driven disruption.

“This unprecedented development should help sustain the economic recovery in 2021,” NBF said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.