* total income equals primary income minus current transfers paid. † government transfers equals current transfers received. ‡ diposable income equals total income plus government transfers. sources : statistics canada and bank of canada calculations while disposable income increased, the impact of the pandemic on household spending was even greater. canadians, on average, spent about $ 4, 000 less in 2020 because of the pandemic. lockdown measures and fear of the virus kept wallets shut ( chart 3 ). 2 to analyze this further, we can divide spending into four categories : essentials ( such as food and clothing ), non - essentials ( such as cars and other durable goods ), hard - to - distance items ( primarily services such as travel ) and shelter. 3 hard - to - distance items represented more than half of the decline in spending, which reflected a significant reduction in sales at restaurants, bars and hotels. i know many of you felt this acutely. 2 the weakness in spending was mostly due to services consumption ( about 75 percent ). 3 the consumption categories are based on those used in j. macgee, t. m. pugh and k. see, “ the heterogeneous effects of covid - 19 on canadian household consumption, debt and savings, ” bank of canada staff working paper no. 2020 - 51 ( november 2020 ). essentials includes groceries, clothing and medical products as well as urban transit, education, communication and financial services. non - essentials include vehicles, appliances and jewelry. hard - to - distance ( hospitality ) includes food and beverage services as well as accommodation services. hard - to - distance ( others ) includes recreational, cultural and transportation services as well as travel expenditures by canadians abroad. shelter includes spending related to the ownership, rental or maintenance of a dwelling. - 6this drop in spending was greatest in the second quarter of 2020, when the lockdowns were widespread and stringent. in the second half of the year, as restrictions were relaxed, spending rebounded. the strength came primarily in non - essential goods such as motor vehicles, recreational goods and furniture, as people spent more time outdoors and activity in the housing market picked up. however, spending on high - contact services barely moved. chart 3 : canadians spent on average $ 4, 000 less in 2020 gap between actual per capita consumption and a linear trend ( quarterly data are nominal and seasonally adjusted at annual rate ) dollars 1, 000 - $ 3,

resale activity have been robust, supported by low mortgage rates and a desire for more living space. stronger foreign demand and rising prices have boosted activity and exports in the oil and gas, mining and manufacturing sectors. business investment intentions are also rising as confidence in the recovery has improved. in all, the level of economic activity at the end of last year was almost 1 percent higher than we had anticipated. however, recent data tell a mixed story about the labour market, which remains a long way from a full recovery. job losses in december and january were sizable. the losses were concentrated in quebec and ontario, in sectors most affected by the restrictions and mainly among part - time positions. but employment was resilient in some other sectors, surpassing levels seen before the pandemic. the near - term inflation outlook has been revised up. we now expect that inflation will move temporarily above our 2 percent target in the coming months, to around the top of the 1 to 3 percent control range. that reflects rising prices for gasoline, combined with adjustments from the prices of numerous goods and services that fell sharply when the pandemic struck a year ago. we then expect inflation to moderate, given excess capacity in the economy. accumulated savings and consumption let ’ s now turn to the impacts of the pandemic on income, spending and savings. the virus caused unprecedented losses in jobs and labour income. it also reduced household spending. however, extraordinary fiscal support more than offset these income losses, so on balance, household income increased. when you couple this increase with the drop in spending, household savings rose dramatically. this outcome may seem puzzling, but the story behind it largely rests on the pandemic ’ s uneven impact across sectors and workers. let ’ s look first at the impact on labour income. about three million jobs disappeared between february and april 2020. high - contact sectors — primarily services — as well as the lowwage workers employed in these sectors — primarily women and youth — were the hardest hit. jobs for workers earning less than $ 16 an hour fell 27 percent in 2020, almost five times the decline in overall employment. together, the hospitality and retail trade sectors explain 30 percent of the shortfall in employment income, while less than 10 percent can be attributed to sectors at the top of the wage scale ( chart 1 ). - 4chart 1 : losses in labour income in 2020 occurred primarily in low - wage sectors share of the total loss in compensation of employees per sector by wage