Canadian output on the cusp of full recovery
11th-straight monthly GDP gain
Canada’s economy continued its run of surprising strength at the start of the year, validating expectations that activity will soon return to pre-pandemic levels.
Gross domestic product grew 0.4 per cent in February, Statistics Canada reported Friday in Ottawa. A preliminary estimate shows momentum kept up in March with output expanding 0.9 per cent, which would be the 11th-straight monthly gain in GDP.
The numbers highlight how well the nation’s economy handled successive waves of lockdowns to contain the spread of COVID-19, a resilience that’s fuelling a strong rebound in 2021 after the nation’s sharpest downturn in the post-second World War era. At this pace, output should return to pre-pandemic levels by the second half of this year — even though lingering effects of the crisis will leave Canada with some slack into 2022.
“Canada’s economy remains among the most resilient major economies in the world in the face of recurring COVID-19 risks,” Derek Holt, an economist at Bank of Nova Scotia, said in a report to investors. The 11 straight months of gains puts Canada “in a relatively exclusive club” that includes Australia and the U.S.
Growth in the first quarter came in at about the seven-per-cent annualized pace anticipated by the Bank of Canada, which last week accelerated the timetable for a possible interest-rate increase and further pared its bond purchases amid the stronger-than-expected recovery. The central bank has forecast growth of 6.5 per cent this year, after a 5.4-percent contraction in 2020.
Output in March was about 1.3-per-cent below monthly levels recorded in February 2020. On a quarterly basis, GDP is also within 1.5 per cent of what it was pre-pandemic.
To be sure, gains are likely to slow after the country entered a third wave of nationwide lockdowns — the effects of which weren’t yet felt in March. But Canada’s economy has breezed through restrictions all winter.
“This print will comfort the Bank of Canada in its decision to begin and eventually extend the tapering of its quantitative easing purchases” Dominique Lapointe, an economist at Laurentian Bank Securities in Montreal, said by email.
In February, retailers led gains, with activity for the sector up 4.5 per cent for the month. Sectors that have been hit hardest from shutdowns also showed some strength, as restrictions were temporarily lifted during the month. For March, Statistics Canada said manufacturing, retail trade, and finance and insurance contributed to the gain. Oil and gas production fell in February, following five months of consecutive gains.