The Canadian economy appears to have suffered its worst two-month period since the great plunge it took just over a year ago, as Statistics Canada reported a decline in real gross domestic product for April and forecast a similar drop in May.
Statistics Canada said on Wednesday that real gross domestic product fell 0.3 percent in April, which was better than an initial estimate a few weeks ago of a 0.8 percent drop. It was the first decline in real GDP since April 2020 during the first wave of the pandemic.
The agency also said its preliminary estimate for May showed a similar drop of 0.3%, as many restrictions remained in place throughout the month as the country grappled with the third wave of the pandemic. COVID-19.
April’s overall drop, along with early estimates for May, puts overall economic activity around 1% below pre-pandemic levels seen in February 2020.
Attention will now turn to June, as experts expect a consumer-led recovery with rising vaccination rates and shrinking restrictions, which should fuel job growth and reduce problems with health.
âThe ingredients that support consumer spending all line up,â said Craig Alexander, chief economist at Deloitte Canada.
“It is not going to return to pre-COVID levels, but the direction for growth will be clearly positive. I firmly believe that by the end of the year, I will not be able to get a reservation at a restaurant because people will want to reconnect.
In Alexander’s latest forecast, spending on durable goods is up 13.4% this year, which he says is already pretty much on the books compared to the big gains in the first half of 2021. He said that moderation in annual growth is an expected shift from spending towards service. sector activities in the second half of the year.
Card transaction data suggests service sector spending is on the rise for retail and restaurants, and some early signs of a surge of dollars in the travel industry, said Nathan Janzen, senior economist. from RBC.
âLooking back data for April and May still looks weak, as one would expect, but there is a more optimistic story for June and summer that is already in place,â he said.
CIBC chief economist Royce Mendes said indications now suggest second-quarter annualized growth is expected to be at least 2%, compared to the no-growth scenario many experts had previously expected.
April’s drop was behind a 5.5% drop in the retail sector after two months of increases, including a strong March when retail sales hit 55 .3 billion dollars, an increase of 26.7% year-on-year. The manufacturing sector fell 1% in April after growing 1.5% in March.
Statistics Canada also noted that the real estate sector contracted 0.7% in April, its first decline since October 2020, as home sales slowed in Canada’s major urban centers. In addition, accommodation and food services fell 4.6%.
There were, however, some glimmers of hope.
Despite travel restrictions, accommodation services rose 0.5% in April as Statistics Canada noted that more Canadians chose to go camping.
The overall picture was of an economy that has adapted as much as possible to restrictions, such as online shopping and curbside pickup, but whose trajectory is still linked to the trajectory of the pandemic. .
A pothole in this path is the most contagious Delta variant of the virus.
TD Senior Economist Sri Thanabalasingam said companies could face tighter restrictions if the variant gains momentum and the number of cases and hospitalizations increase. This would weigh on economic activity and slow the recovery, he said.
He added that the variant poses a similar risk to the pace of recovery in countries like the United States, which would dampen demand for Canadian exports.
âEven though domestically we may be a little more vaccinated against the impacts of the variant due to our impressive vaccination rate, it is truly a global challenge that must be overcome for Canada to truly regain its full economic capacity,â ” he said.
Jordan Press, The Canadian Press
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