One of the major effects of the pandemic is how it is changing the way people deal with money, and people in Canada are spending way less.

A report from CIBC says that this has resulted in one of the largest cash hoards in history, with individuals and businesses sitting on at least $170 billion.

The authors note that labour income fell by over $100 billion in the second quarter, and that at the same time government transfers rose by nearly $225 billion.

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$170 billion

One of the largest cash hoards in history

Both of these also coincided with a drop in spending, which also saw the savings rate skyrocketing from just 3.6% all the way up to 28.2%.

According to the CIBC report, all of this money is unlikely to find its way back into the economy within the next few months.

This is due to a few factors, including the fear of going outside the home during a period of rising case numbers in a second wave combined with flu season.

There is also not as much panic-buying at this time, which back in March and April drove people to spend more on essential items (such as huge amounts of toilet paper).

While CIBC expects this hoarding to continue through the winter months, they also say that it is unsustainable and that the cash will find its way back into the economy by spring and summer.

 
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