Canada's real GDP grew 0.4 percent in February after rising 0.7 percent in January, according to data published by Statistic Canada today. This marks the tenth straight month of expansion since the sharp slowdown triggered by the first wave of COVID exactly a year earlier. Preliminary estimates for March point to a further 0.9 percent rise in the month. That would translate into a 6.5 percent annualized gain for Q1 as a whole, slightly outpacing the growth reported for the US earlier in the week. It would also bring real GDP back to within one percent of the peak level attained pre-pandemic.
Growth in February was entirely concentrated in the services sector, as the goods-producing sectors of the economy posted a marginal decline for the first time since April 2020. The growth in services largely reflected the easing of COVID restrictions during February in several of the largest Provinces. Most notably, retail trade grew 4.5 percent in the month, while accommodation and food services rose 3.5 percent after several months of decline. These sectors likely led the gains again in March, though there is also early evidence of a rebound in the goods-producing sector.
All in all the predictions of a decline in GDP for Q1 (including such forecasts right here in this blog, mea culpa) proved spectacularly wide of the mark. Perhaps, though, the error will turn out to be mainly one of timing. The powerful third wave of COVID compelled several Provinces, including Ontario, to impose some of the harshest restrictions of the pandemic to date, starting very early in April. Retailing and food services, the very sectors that led growth in the last month or two, have been very hard hit. Those restrictions will stay in place for much of May, with relief only expected in June as vaccine rollouts move us closer to herd immunity. So there is likely to be at least one quarter of declining GDP for Canada in 2021 -- it just won't be the quarter we all so confidently forecast a few months ago.
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