What Insiders Are Saying

So many people are trying to read the market conditions and restore a sense of certainty in their own minds, despite the current reality. Frankly, it’s hard to make sense of it all.

In an effort to gain greater insight, I’ve been in discussion with family offices, and attending invitation only meetings to get a reading on what some insiders are thinking.

On Tuesday evening I attended an invitation only session with John Stackhouse, Senior Vice President, RBC and Craig Wright, Senior Vice President & Chief Economist, RBC

In their remarks, they shared their perspective on what is happening in the economy. As Canada’s largest bank, they have direct visibility on what is happening since much of the cash in the economy flows through their bank accounts.

Examining the value of transactions for both Visa and Debit cards, the bank has observed that after the initial surge of buying at grocery stores subsided, the current dollar volume of Visa credit card and debit card transactions is down by 60% compared with normal for this time of year.

That’s at the consumer end of the market.

When the economics team at RBC plugged this into their model for the economy, it looks like a 32% drop in economic activity in about a month.

The RBC economics team sees a slow and gradual return to work. They don’t see the flash restart of the major sectors of the economy. Music festivals, crowded restaurants and bars, places of intense social interaction will be among some of the last to open up.

In the month of March, there were a number of notable, albeit predictable patterns in consumer spending.

1. Consumers spent 88% less on apparel, gifts, and jewelry in the week ended March 30.
2. For the last week in March, department store sales were down 40% versus a year earlier.
3. Spending on software and data was up 30% compared with a year earlier as people outfitted themselves to work from home.
4. After a brief 5% surge in household goods, these sales were off 53% in the last week of March.
5. Sales of books, subscription music and streaming content remained relatively flat compared with last year.
6. Naturally, sales of movies and other entertainment was down 79.8%.
7. Restaurant sales are down 75% as a handful of restaurants attempt to maintain some revenue with take-out meals.
8. Grocery store sales spiked in the middle of March, and by the end of March were down 11%.
9. In real estate home sales, prices were holding firm across Canada except in areas with high economic exposure to the oil and gas industry. Sales volumes were down 14.3% in March compared with February. A sneak peak at the first week of April results showed resales running at about half normal levels across Canada.

We expect both buyers and sellers to lay low while extraordinary containment measures are in place. This will maintain a certain balance in most markets and help home prices stay afloat. Inventories have grown in some markets, but not dramatically.

I don’t have the exact comparable data for the United States, but the shelter in place policies between Canada and the US are fairly similar and I would expect to see similar impacts in the US economy.