Canada’s economy showed resilience over the winter months by extending its growth streak, though it faces yet another test as the country grapples with a third wave of COVID-19.
Real gross domestic product rose 0.4 per cent in February, Statistics Canada said Friday. A preliminary estimate points to a 0.9-per-cent gain in March, which would be the 11th consecutive month of GDP gains after calamitous falls in March and April of 2020.
If that estimate holds, the economy grew at an annualized pace of about 6.5 per cent in the first quarter, bringing GDP to within 1.3 per cent of its prepandemic level.
Time and again, the Canadian economy has shown it’s able to rebound quickly as COVID-19 restrictions are eased, a key factor driving Friday’s numbers. But it also managed to post growth amid the second wave – an encouraging sign as the third wave threatens to stall momentum.
“Canada’s economy remains among the most resilient major economies in the world in the face of recurring COVID-19 risks,” said Derek Holt, head of capital markets economics at Scotiabank, in a note to investors.
“The start of the [second] quarter is likely to be a setback, but then again, Canada has been resilient and posted economic growth throughout the rolling restrictions and easings.”
Friday’s report showed a bounceback in troubled service industries. Service-producing industries grew 0.6 per cent in February, paced by a 4.5-per-cent jump in retail as many provinces eased restrictions on stores. Accommodation and food services grew 3.5 per cent.
Real estate also made an impact. The legal services industry, which Statscan said derives much of its activity from property transactions, grew 1.6 per cent in February. The offices of real estate agents and brokers climbed 3.4 per cent to a record high in output. The construction industry rose 2 per cent, with residential building construction up 4.7 per cent.
Still, the results were not uniformly positive. Six of 20 industrial sectors fell in February, and goods-producing industries contracted 0.2 per cent. Mining, oil and gas extraction fell for the first time in six months on lower crude production in Alberta. Manufacturing decreased 0.9 per cent in February, although sales are estimated to be up 3.5 per cent in March.
The overall picture, however, puts Canada in rare company. Mr. Holt said Canada’s streak of growth is matched by Australia and the United States, while the likes of Britain, Japan and the euro zone are less consistent. New data on Friday confirmed the euro zone has slipped into a double-dip recession. A day earlier, the U.S. posted 6.4-per-cent annualized growth in the first quarter, almost identical to Canada’s estimate.
“Even with much more forceful restrictions, a slower vaccine rollout, and without the help of the two mega U.S. stimulus packages at the start of the year, somehow the Canadian economy matched the U.S. step for step through the winter months,” said Bank of Montreal chief economist Doug Porter in a note to clients. “That is impressive.”
Canada’s April employment figures will be released next Friday, offering some indication of how severely the latest round of public-health restrictions is affecting workers. As ever, the economy remains highly sensitive to the path of the virus and the speed of vaccination.
The federal government has indicated that roughly 15 million vaccine doses will be delivered in the next five weeks, while Ontario and Quebec said Thursday that all adults will be able to book vaccination appointments before the end of May.
“As a greater share of the population is inoculated, provinces will likely be more inclined to gradually relax public-health guidelines,” said Sri Thanabalasingam, senior economist at Toronto-Dominion Bank, in a report. “Still, this timeline is uncertain. What’s more certain is that the next phase of the recovery will require vaccines to gain the upper hand on the virus.”
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Matt Lundy