11 and out

No, I'm not talking about the Toronto Maple Leafs' abysmal early exit from the Stanley Cup playoffs last night -- everyone knows that the Leafs never make it eleven games into the playoffs anyway. I'm talking about Canada's GDP, which grew for the eleventh straight month in March, but appears to have fallen in April as COVID lockdowns took hold. 

Data released by Statistics Canada this morning show that real GDP rose 1.1 percent in March, up from a 0.4 percent gain in February. The growth was broad-based, with both goods and services output posting matching 1.1 percent gains and eighteen of the twenty industrial sectors recording gains. Even so, real GDP remained about 1 percent below the pre-pandemic peak posted in February 2020.

The picture looks slightly different if we look at quarterly GDP data, also released this morning. Real GDP rose 1.4 percent in Q1, or about 5.6 percent at an annualized rate. This represented a deceleration from the 2.2 percent gain posted in the final quarter of 2020 and was slightly below the analysts' consensus. Oddly enough, the data suggest that real GDP for the full quarter was actually 0.3 percent higher than the pre-pandemic level seen in the first quarter of 2020. This reflects the very sharp fall in GDP in March 2020, as the first wave of the pandemic struck. As I have suggested here in the past, the monthly data will be more useful than the quarterly figures until the COVID-related gyrations are behind us. 

Growth for the month of March was led by the retail sector, which posted a 3.7 percent gain following a  5.9 percent jump in February.  This sector has been particularly hard-hit by COVID restrictions, and the all-too-brief easing of those restrictions during the first quarter of the year contributed to this strong rebound.  The sector was once again clobbered by fresh anti-COVID measures across the country in April as the third wave of the pandemic hit. Falls in retail trade, combined with weakness in manufacturing, real estate and educational services, resulted in a 0.8 percent decline in real GDP in April, according to StatsCan's preliminary estimate. 

There has been a gradual lifting of restrictions in parts of the country during May, but the lockdown in the most populous Province, Ontario, remained in force throughout the month and will only be lifted in stages during June.  This makes it unlikely that May will see any real GDP growth for the country as a whole, but the picture for June is looking considerably brighter. The strong "handoff" from the March data and the relatively modest scale of the decline seen in April could mean that a downturn in GDP for Q2 as a whole may be avoided, and all indications are that the second half of the year will see very strong growth.