The emergence of COVID-19 has had far-reaching and wide-ranging impacts on the Canadian economy. Seventeen months into the pandemic, Equifax has a depth of data on the unique ways that Canadians, from individual households to entire industries, have been affected by and are responding to these uncertain circumstances. I talk with Becky Oakes, Assistant VP of Advanced Analytics at Equifax Canada, to unpack the latest research on the matter. We talk about Canadian K-Shaped Recovery, stimulus strategies, and economic forecasting in unprecedented times.
Welcome to the The Voice of Retail , I’m your host Michael LeBlanc, and this podcast is brought to you in conjunction with Retail Council of Canada.
The emergence of COVID-19 has had far-reaching and wide-ranging impacts on the Canadian economy.
Seventeen months into the pandemic, Equifax has a depth of data on the unique ways that Canadians, from individual households to entire industries, have been affected by and are responding to these uncertain circumstances.
I talk with Becky Oakes, Assistant VP of Advanced Analytics at Equifax Canada, to unpack the latest research on the matter. We talk about Canadian K-Shaped Recovery, stimulus strategies, and economic forecasting in unprecedented times.
Visit equifax.ca to read their recent reports.
Thanks for tuning into today’s episode of The Voice of Retail. Be sure to subscribe to the podcast so you don’t miss out on the latest episodes, industry news, and insights. If you enjoyed this episode please consider leaving a rating and review, as it really helps us grow so that we can continue getting amazing guests on the show.
I’m your host Michael LeBlanc, President of M.E. LeBlanc & Company, and if you’re looking for more content, or want to chat follow me on LinkedIn, or visit my website meleblanc.co!
Until next time, stay safe and have a great week!
Michael LeBlanc
Welcome to The Voice of Retail. I'm your host Michael LeBlanc. This podcast is brought to you in conjunction with Retail Council of Canada.
The emergence of COVID-19 has had far reaching and wide-ranging impacts on the Canadian economy. Seventeen months into the pandemic, Equifax has a depth of data on the unique ways that Canadians, from individual households to entire industries, have been affected by, and are responding to, these uncertain circumstances.
I talk with Becky Oakes, Assistant Vice President of Advanced Analytics at Equifax Canada, to unpack the latest research on the matter. We talk about the Canadian K-shaped recovery, stimulus strategies, and economic forecasting in unprecedented times.
Becky Oakes
So, I mean, one of the biggest shifts, I guess, we've seen really is reduced activity. If you think about how many businesses operate, you know, they often have supplier relationships they might be using financial credit as well. Just in their day-to-day activities. You know, if you, if you, say you’re a restaurant, you need to buy your goods from somewhere to kind of make your meals from or, you know, there's kind of that, that ongoing credit relationship and what we've seen is just far less demand for new supply relationships, for new financial lending.
Michael LeBlanc
Let's listen in now.
Becky, welcome to The Voice of Retail podcast. How are you doing this morning?
Becky Oakes
I'm good. Thank you.
Michael LeBlanc
Thank you so much for joining me. I was looking at your background and I actually was, and spent some time, not so far from where you went to university. I was in Newcastle upon Tyne up in northern England. I think you may, may know of it or you may be from that region, is that, am I, am I in the ballpark there?
Becky Oakes
So, I'm originally from Yorkshire actually, which is a bit further south Newcastle. But yeah, I did my undergraduate degree from Newcastle, so I know it well.
Michael LeBlanc
Yeah, fantastic. I traveled all over, I went to a wedding there and then traveled all over England and up to Scotland. And so, it was a wonderful, just such a wonderful place. Little hard, little hard on the rental car though, that wrong side of the road driving, that was a little hard for me on the wrong side of the road.
Alright, well listen, let's jump in, I've kind of already jumped in. But let's talk a little bit first of all, about you, what you do, who you are, we're how you came to do, what you do and exactly what you do at Equifax.
Becky Oakes
Sure, so, as you, as you mentioned, I'm originally from England, which you can probably hear from my accent. So, my family and I moved over to Canada, we kind of middle of 2017. And that was actually for the role here at Equifax. So, my background, I've always been in data and analytics, primarily in the credit and finance industry. Although I've worked with kind of government agencies, and telcos, utility companies as well.
I guess background wise, as a child, I always loved numbers and puzzles. So, I've always been a bit of a math geek. That's the best way of describing it. So, my role within Equifax is that I head up our analytics and data science team. And that's kind of sounds like quite a fancy title. But, what it really means is we take data and we turn that into insights and solutions to help both consumers and businesses kind of with their decisioning. And that's, that's really what we do day to day.
Michael LeBlanc
And, and when you came over from it, was that a similar, what brought you to Canada? What, was that just a natural career progression? Or did you always want to go to a cold climate? What is it that attracted you to the Canadian opportunity?
Becky Oakes
Do you know what, the summers here are really hot. So, we always wanted to kind of work abroad. So, what you know, classic in England, people tend to look at Canada and Australia. Australia has far too many spiders for my liking. So,
Michael LeBlanc
That's true.
Becky Oakes
Canada, Canada, we came over in 2016 and just fell in love with the country. So, that's really what, what kind of brought us here.
Michael LeBlanc
Well, let's talk about Equifax. I mean, it's certainly a familiar name, to the listeners, to the retailers listening. But you know, like many things, you may know the name but not know the full scope and scale and everything. So, unpack for a few minutes all about Equifax and what it does, and the global footprint and all those great things,
Becky Oakes
Sure, so here in Canada, I guess people will know us has been one of the two credit bureaus. So, that's kind of what most people think of when they think of Equifax, they think of credit scores in particular. But actually, our reach is kind of far greater than that. So, we are a global data analytics and technology company. And, we really play an essential role in the global economy by helping financial institutions, companies, employers, government agencies to make kind of those critical decisions with, with greater confidence. So, we're headquartered in Atlanta, in the US. But globally, we have kind of 11,000 employees. We're in 24 countries, you know, it's quite a big organization.
Michael LeBlanc
Yeah, I had no idea. So that's why I love answering that question. Because I think of Equifax, I knew of it in one dimension, but I had no idea was so big and so global and, and all that and all that stuff. I did know it was in based in, in Atlanta because I know your Chief Security Officer, he came from Home Depot, Jamil, came from Home Depot.
Becky Oakes
Oh, of course.
Michael LeBlanc
I have a bit of a connection there. He spoke at a loss prevention conference up here, in Toronto, a couple years ago.
All right, so you've just put this study out. And, there's a lot to unpack here. So, let's, let's get started. I mean, first of all, I mean, you, you describe the K economy. I'm familiar with what the K recovery, K shaped recovery looks like. But maybe not all listeners are. So, why don't you talk about what a K recovery, from an economics perspective, looks at. And then we'll start peeling back the onion, so to speak, and get into the, to the survey.
Becky Oakes
Sure, so, put really simply, a K shaped recovery is something that can occur after a recession or some large event in an economy. And, it basically just means that there are parts of it, which recover quicker or slower than others. So, in some areas, you may find they could recover very quickly, and see growth very quickly. And things kind of get back to normal, or even, even, you know, a faster growth than before. And, for others, it can take a lot longer, perhaps you see some decline initially, or it's flat for a while before that recovery really starts to come through. And that's where the name comes from. If you think about the shape of the letter K, it's kind of that splitting of recovery. And that's kind of what it means.
Michael LeBlanc
Interesting. And, I've also talked about it in the context of almost a bifurcation and who recovers.
Becky Oakes
Yeah.
Michael LeBlanc
Because the, the, perhaps a unique element of the COVID crisis, is it's really divided, you know, for household income levels. A 70,000 and above, to pick a kind of generally random and not specifically random number, they're doing better, because they're not in the service sector. And the service sector is really, really being punished. I mean, it's, in retail, some retailers are doing fantastic, others not so much. But, in the service sector, like restaurants and hotels, it's uniformly not great, right. I mean, that, that's also the characteristic you think of when I think of the K recovery, do you concur? Do you think of it that way as well?
Becky Oakes
No, absolutely. I think what's really interesting since COVID, obviously started last year and all kind of the last 12 month period. You know, even when we look at kind of the data that we see on the, on the, you know, more on the credit side, you start to see that there are pockets where historically these consumers, or these businesses, have been really strong from a credit standpoint, and all of a sudden, it's a complete shift.
Michael LeBlanc
Right.
Becky Oakes
Whereas on the other side, you're seeing some areas that actually historically were struggling, and actually, you know, some of the support programs, and we can go into some more detail, they've actually really helped and actually done the opposite and made those people in a much better situation. So, it's a really interesting period where things are moving in ways which perhaps we haven't seen historically.
Michael LeBlanc
Well, and it's so interesting, because you bring in government subsidies, which of course here go to the (inuadible), you know, go into wage subsidies and, and then in America right, they're getting $1600 cheques at their front door. It's a very interesting time, as you say.
So, let's focus on consumers, and, and because you do talk about both consumers and businesses, let's start talking about consumers. I mean, it, what's interesting to me, as I've been watching things like the savings rate, which is a bit enforced, right, I can't travel, so my savings rate goes up. It looks to me, like Canadians are kind of divided, but mostly writing down household debt, maybe writing down credit card debt, so leaving some open to buy, which is probably good news for retailers. Is that what you're seeing in behind the mass of analytics?
Becky Oakes
Yeah, absolutely. So, I mean, this really started last year back in April time, that first big wave of lockdowns, that's when we really saw the biggest drop in spend on credit cards. We did see drop in payments as well at that at that point. But obviously, with all of those lockdowns, people weren't going out to restaurants, they weren't going out and kind of buying the things they did, traditionally. They weren't going out and buying new cars. There was a period where demand for credit was, was really low. And if you combine that, again, with some of the support mechanisms that came in quite quickly, so some of the lenders were offering payment deferrals on things like the mortgages, you had some of the, some of the government supports like CERB and things like that, that came into play. As you mentioned, those savings started to increase. And what we saw was a flip in that actually, consumers were paying off more than they were spending. And that had a real positive impact in terms of the unsecured household debt. That definitely started to come down. And it has been coming down for several months.
I mean, from a retail standpoint, I guess the good news is we are seeing that credit card spend start to creep back up again. It's still below the levels it was at. But again, the payments are really coming through. So, in January, for every $10 of credit card spend $11 was paid off of credit card debt. So, we're still seeing people overpaying in compared to what they're spending,
Michael LeBlanc
Which, which, you know, lays a nice groundwork, I think, for future growth because it creates just as I said, open to buy on the credit card, right. As opposed to a maxed out or, you know, big, big balance on the credit card.
Are you seeing, and how did you see it, there, I talked to other providers more on the you know, more on the credit card payments side, who from a security perspective, and they're seeing such unusual behavior, that it threw all their algorithms off in terms of security, right. Suddenly, people were buying, you know, $500 online purchases where they'd never bought before. Any of that noise find its way into your data, or is that kind of just factored in from your perspective?
Becky Oakes
Yeah, I mean, the data that we see tends to be more the month-to-month behavior of how a consumer is paying,
Michael LeBlanc
Right
Becky Oakes
Down. So, we're not,
Michael LeBlanc
Right.
Becky Oakes
Looking at the individual basket level transactions necessarily that, that kind of are occurring. I mean, but again, we are seeing some, some different switches. So, we're seeing more consumers that are paying off their credit card in full, which is a real positive. You know, less people are revolving a balance. So, it all sounds good news on that front. But again, it's a K curve, recovery.
And what we are seeing are both the vast majority, and we're seeing overall, it looks like a positive picture. When you start to peel the onion, as you called it, and you start to look at are there some additional pockets where consumers are still really struggling, there are some. And you know, again, they may not historically have been in financial difficulty. They have been leveraging some of these support mechanisms. But yeah, as they're starting to end, things like deferral program starting to end, we're seeing some consumers are unable to keep making those, those payment commitments.
Michael LeBlanc
Yeah, it's, it's that characteristic of the K. Now, let's talk about, let's switch the, the conversation a little bit over to small business and medium sized business and what you're seeing on that side, because I read with great interest, your perspectives on that. Share that, a little bit of that with us.
Becky Oakes
So, I mean, one of the biggest shifts, I guess, we've seen really is reduced activity. If you think about how many businesses operate, you know, they often have supplier relationships, they might be using financial credit as well, just in their day-to-day activities. You know, if you, if you say you're a restaurant, you need to buy your goods from somewhere to kind of make your meals from. Or, you know, there's kind of that that ongoing credit relationship. And what we've seen is just far less demand for new supply relationships, for new financial lending. We're seeing less activity in terms of you know, that the balance, the spend, on some of those trades come through.
Now, whereas on the consumer side, that's, that's really positive for business, that potentially is a negative thing, because it means that if they got reduce activity, are they you know, managing to get the revenue still? Potentially not. So, that's kind of the biggest shift that we've seen is that, is that lack of demand for credit, reduced activity.
We've also seen some of the areas where perhaps we've seen a higher percentage of businesses going bankrupt. So, Quebec is one where we saw that actually there was a, since April last year, they've had one of the highest bankruptcy rates across the country. And then we're also monitoring quite closely some of the areas that potentially have some additional risk going forward over the next 12 months. So, for example, Alberta is always one where we see quite a volatile economy. That's one that we're kind of watching quite closely.
Michael LeBlanc
Well, since you brought it up, are you seeing any regional differences or sectorial differences that you might comment on, you've already kind of commented on Quebec and Alberta, anything else jumped out at you?
Becky Oakes
I mean, I mean, retail is a big one, service industry, hospitality, tourism, you know, even construction. I mean, we've all seen kind of some of the lumber prices, that they've been kind of battling on the construction side right now. And that's obviously having an impact on that industry. So, you know, there are some that are continuing to be in difficulty and retail is quite broad. As you mentioned yourself, there were some retailers that are doing very well in this,
Michael LeBlanc
Yeah.
Becky Oakes
Period, but there were a whole pile of others that are really struggling. And, it's really important because these businesses feed jobs and they you know, they employ,
Michael LeBlanc
Yeah.
Becky Oakes
A lot of people.
Michael LeBlanc
Yeah, sure do.
Becky Oakes
So, it's, it's, it has an impact across the economy if, if those start to fail,
Michael LeBlanc
How do your colleagues on the other side of the building, so to speak, we're all working at home, but on the other side, who do credit analysis. Like, typically for small business, the cycle of using credit, paying off credit, using credit, builds up a credit rating, in the past year there's, there's been a lot less of that, how do they see that? Do they take that into account as they, you know, you would establish your credit rating through a service like Equifax or, you know, they would come to understand either your sector or your business specifically based on your, you know, your, your, your expenses, and you're paying, and you're paying back, is that being factored into the big models? And how do you look at that in terms of how to project to help them help us?
Becky Oakes
Yeah, and it's a really challenging one, because, again, some of, I think, more so on the commercial side, some of those traditional risk scores, they, they, they still do a very good job is still very predictive, they rank order the right way. But, as you mentioned, there were some behaviors where historically is really, it could be seen more positively, like low balanced debt, things like that, were actually that could be an indicator of the opposite now.
So, you know, our, what we've been trying to do is work more closely with some of those businesses to try to help them understand their portfolio, understand who they're lending money to, or they have trade relationships with and see, know what kind of is a more holistic view other than just relying on kind of a credit risk score or something like that. I think that's kind of the way you need to think about it, is trying to really understand the geographical differences,
Michael LeBlanc
Right.
Becky Oakes
the senatorial differences right now. And that's kind of what our advice has been for many businesses.
Michael LeBlanc
So, it's made everyone's job at your shop a little more complicated. But I guess, I guess for someone who grew up with an abacus, probably looking up from the crib, you're loving it, because it's complicated. And it's not by rote, right. That, I'm sure you've thrown out a few models and recreated a few others, right?
Becky Oakes
Yeah, absolutely. I'm not sure I'm old enough for an abacus. But,
Michael LeBlanc
Well, you know, it makes for a good toy.
Let's talk about the future. So, turning our minds to, you know, coming out of the COVID era, which, you know, thankfully, the, we're moving a pace not quite as fast as your home country, but we're kind of moving a pace in terms of coming out of it from a vaccine perspective. What's, you know, what's your forecast for the future? What do you see in the short, medium and long term? And do you think there'll be a pent-up demand, and this open to buy, as I've said, a couple times will, will, you know, release the crack and then suddenly, the economy will flourish? Or is, there must be, there's inflationary pressures, you've mentioned that too, how do you put this all together and think about what's to come for the rest of the year and, and even with a lens into the next 12 months?
Becky Oakes
Yeah, and I would love to have a magic ball right now. Obviously, this, this is unprecedented. So, we haven't been through a scenario like this historically. So, it's not something I can go back and say, let's analyze some data that's going to tell us what's going to happen.
Michael LeBlanc
Right.
Becky Oakes
I mean, ultimately, this is going to come down to consumer activity and consumer confidence. And, as you mentioned, you know, the good news is that there is an open to buy available. And there's different methods for consumers to buy now. There's buy now pay later come into the market. There's a whole lot of different mechanisms at play. And credit card spend is on the rise. It's not as high as it was, but it is going in the right direction.
The challenge that is probably going to be about that consumer confidence piece. And this is where I'm really keeping a close eye on what's happening in other geographies. And you mentioned the UK there where we saw, you know, classic, I'm British, so I can say this, you know, we all like to go out and have a drink. So,
Michael LeBlanc
Yes,
Becky Oakes
So, when in the bars and pubs reopened,
Michael LeBlanc
That was the big headline.
Becky Oakes
Yeah, everyone sat in the rain in the beer gardens, but that's what,
Michael LeBlanc
Yeah, wonderful.
Becky Oakes
We do. But, interestingly, when you see a few weeks later, when they started reopening some of the restaurants, you hear reports of these restaurants been empty. And in some cases they were, they were really struggling. And a lot of that came down to consumer confidence.
I was chatting to a colleague in Australia who said that their challenge right now is more the inner city business districts where workers, the commuting population, aren't going back to the office yet.
Michael LeBlanc
Right.
Becky Oakes
They're still working from home. And, and that's completely changing some of the, you know, economics in terms of, you know, all the support mechanisms, again, in those service areas for that population. So, I think, I think it's really about, about consumer confidence. I think the short term, there's still going to be those industries that are really going to struggle, because I don't think the return is going to be as quick. I hope it is. But I don't think it will be as quick for some, I think longer term, when you look at you know, consumers have been amassing more savings, they have reduced their household debt there is that potential for them to pick that spending up. I think the longer-term outlook is a bit more positive. But I think there may still be some, some challenges ahead.
Michael LeBlanc
Well, it’s interesting, we talk about England and Australia, one thing they have in common is they went to a voucher like system where they gave citizens $25 or whatever to go and enjoy a pint or and go and enjoy a meal. Do you think that's a good stimulus approach? And in Canada, it's very different, right, in Canada, the approach is more wage support for the businesses. And I think the theory there is, if you give $25 to people who don't need it, you're not really, you know, it's not really, give it to the restaurants and let them survive. Do you have any an opinion, I'm more in the opinion than an analyst, analyst here, but from an economic perspective, do you see pros and cons? Or if you were, let me ask the question differently, if you were sitting in in Ottawa and thinking about a stimulus package to make sure that we come out of this strong would you go one way or the other? Or any thoughts on that?
Becky Oakes
You know, I can only give my, my consumer personal view, which is, you know, if someone offered me that would, would that make me go to the restaurant? Answer is probably not. If I'm not feeling confident enough.
Michael LeBlanc
Right, you still need that confidence,
Becky Oakes
You still need that confidence back. I mean, I do think anything we can do to help these businesses right now is, is what we need to do. So, we know if you know, I think there needs to be some programs. We just need to make sure it's at the right time for the market for the consumers that you know underline it. Again, that's just my personal view.
Michael LeBlanc
Yeah, yeah.
Becky Oakes
Personally, I also can't wait to get back to restaurants and eat out again.
Michael LeBlanc
Right, right. It's kinda, it's kind of a Goldilocks moment, right. Give, give out some stimulus when people are ready to be stimulated, I guess, in, from a confidence perspective. Like too early is, won't be effective, and too late will be too late. I guess.
Becky Oakes
Yeah. I mean, one thing one, one thing we did to actually locally, this was just, you know, the local community I lived, I live in. We actually came together, and there's a program whereby restaurants, you can basically donate money, the restaurants will pull together package and give food to people who need it. So, that was one way that we were trying to help support. So, there's little things like that in the community that I think are really,
Michael LeBlanc
Yeah,
Becky Oakes
Helping. But again, I think there is a bigger program that needs to potentially be put in place. But what that is, I'm unfortunately the expert on that.
Michael LeBlanc
Yeah, yeah. Last economic question, pulling back to what you are expert on economic analysis, do you, are you worried about inflationary pressures on both, we've kind of talked around about it, but I'm seeing more, I'm talking to a lot of retailers this week who are seeing inflationary pressures on things, everything from pallets to containers, and it's gonna find its way into prices on certain commodities. We've already seen it on, you know, lumber, for example, which is just bananas expensive. Do you think that can be a bit of a governor on the recovery or are you thinking about that today? And I know it's a complex model to even think about, but give me your thinking.
Becky Oakes
I mean, it obviously is a concern. I know, there's some reports coming out, in which the inflationary rise we've seen might be temporary. Some people think it might be a bit longer. I mean, for me, the bit I'm concerned about, if I was to point to something would be interest rates. You know,
Michael LeBlanc
Right.
Becky Oakes
We've seen a lot of consumers, yes, household debts down. But you've got people taking on very large mortgages, which is, which is great. But at the same time, there has to be that balance between if interest rates change over the next year or two, have people put themselves in a position, they can still afford to make those repayments.
Michael LeBlanc
Right.
Becky Oakes
One thing we've seen the last quarter is things like HELOC, so home equity lines of credit, they're on the increase in terms of new HELOC balances at the highest we've seen. So, you know, where you kind of have some elements in the credit, in the finance world, where it's variable rates payment commitments, that's just something to be really mindful of, particularly for consumers, but also businesses. If interest rates go up, what does that mean?
Michael LeBlanc
Yeah.
Becky Oakes
Are you still able to make those repayments? And that's the one where, you know, we saw in 2019, people got called out on that when interest rates increase. So,
Michael LeBlanc
Right, right. Well, listen, lots of great information, this study and I'm sure you've got lots more where can listeners go to find out more about the work you do and stuff you publish and, and learn more about the work that Equifax is doing to try and help us all figure this out.
Becky Oakes
So, we do have a wealth of information on our website equifax.ca. We also have regular webinars, blogs, press releases, so just keep an eye out for those and there's always some good information in there.
Michael LeBlanc
All right, well Becky, thanks for joining me on The Voice of Retail podcast, and a belated welcome to Canada. Hope you continue to enjoy. You're not enjoying the full experience for the past year, but this too shall pass. So, listen, once again, thanks for, for doing all this work. And joining me on the podcast today and I wish you much continued success.
Becky Oakes
Thank you for having me.
Michael LeBlanc
Thanks for tuning into today's episode of The Voice of Retail. Be sure and follow the podcast on Apple, Spotify or wherever you enjoy podcasts so you don't miss out on the latest episodes, industry news, and insights. If you enjoyed this episode, please consider leaving a rating and review as it really helps us grow so that we continue to get amazing guests onto the show. I'm your host Michael LeBlanc, President of M.E. LeBlanc & Company Inc. And if you're looking for more content or want to chat, follow me on LinkedIn or visit my website at meleblanc.co.
Michael LeBlanc
Until next time, stay safe. Have a great week.