TECHNOLOGY @ RBC
2020 Economic Outlook
Projected Economic Indicators for 2020(1)
GDP Growth
Inflation
Unemployment
Rate
Interest Rate
(3 mth T-bills)
Current Account
Balance/GDP(2)
Budget
Surplus/GDP(3)
Canada
(5.9%)
0.6%
9.5%
0.20%
(1.4%)
(19.9%)
U.S.
(3.4%)
1.2%
8.3%
0.15%
(3.2%)
(18.7%)
Euro Area
(9.1%)
NA
8.2%
NA
1.9%
(10.1)
Canada
U.S.
The Canadian economy is forecast to contract by 5.9% in 2020. GDP retraced three-quarters of the unprecedented 18%
decline over March and April as of August but was still almost 4% below year-ago levels in that month.
The early recovery has been propped up by a quick recovery in household spending on retail goods, as well as resurgent
housing markets. Household disposable incomes have been propped up by government support for unemployed and
interest rates are very low. Spending on services like air transportation, accommodation & food services, and recreation
continues to be restrained by virus containment measures. The initial bounce-back in economic activity has been stronger
than expected, but the economy is still expected to be running well-below capacity, and unemployment elevated, at the
end of the year.
The Bank of Canada is expected to hold the overnight rate at current near-zero levels for the foreseeable future.
The U.S. economy is expected to decline 3.4% in 2020. A 33% (annualized rate) increase in Q3 GDP retraced about two-
thirds of the unprecedented decline in output in the first half of 2020. Employment has retraced more than half of the 22
million losses in the spring but was still 10 million below pre-shock (February 2020) levels as of October.
Resurgent virus spread remains a significant near-term downside risk. Governments have been hesitant to re-impose
containment measures to-date. And federal government income supports for those losing work are set to continue to wind
down in December.
As in other regions, Euro area economies have partially recovered from unprecedented declines in the second quarter.
But reimplementation of containment measures will weigh on activity in Q4.
Euro Area
The Euro area composite PMI eased to 50.0 in October with ongoing improvement in the manufacturing sector offset by
deterioration in the service-sector. The U.K. PMI slipped to 52.1 in October from 56.5 in September.
Both the Euro area and the U.K. economies are expected to continue to run well-below pre-shock levels at the end of the
year.
(1) RBC Economics Research as of October 14, 2020 and reflect forecasts for calendar 2020. (2) RBC Economics Research, IMF WEO (October 2020). (3) Canada Department of Finance, Congressional Budget Office
49 | ECONOMIC BACKDROP
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