• January GDP rose 0.1%, just shy of consensus
  • Manufacturing increased despite auto closure
  • Drop in air transport partly due to travel advisories
  • Likely to be the near-term peak in economic activity

In normal times we’d be diving into the details of this report, labouring over tenths of a percent of GDP growth and trying to decide what it means for the Bank of Canada’s meeting in two weeks. But these are not normal times. Thousands of businesses have temporarily closed their doors and a million Canadians reportedly lost their jobs in one week alone. March’s GDP is likely to show a record decline—one that will stand until we get the April figures. We’re not debating the next BoC move because the central bank already cut its policy rate by 150 basis points in a single month and announced a new QE program. The government, like others around the world, has committed billions and billions to supporting the economy through this period of unprecedented disruption. Those efforts won’t be enough to prevent a recession—even with a decent start to Q1, March is likely to pull the quarter into negative territory, and drop in Q2 activity looks like a sure thing. But we think the substantial stimulus put in place—from wage subsidies and business loans to expanded income support and transfers to households—will be enough that, before too long, we’ll be back to scrutinizing tenths of a percent of GDP growth.

For those that are interested in the nitty gritty, activity was up on 12 of 20 industries in January. Manufacturing output grew for the first time in five months as decent gains in a number of subsectors were more than enough to offset a 12% pullback in motor vehicle output due to the permanent closure of GM’s Oshawa plant. Air transportation posted its largest monthly decline in a decade with coronavirus-related travel advisories reportedly adding to bad weather and system glitches. Overall, goods producing industries were up 0.2% and services output rose 0.1%.

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