HomeContributorsFundamental AnalysisCanadian GDP Continuing to Grow in Second Wave

Canadian GDP Continuing to Grow in Second Wave

  • Monthly GDP estimates surprised on the upside in November (+0.7% m/m) and December flash estimate (+0.3% m/m)
  • Lockdowns still taking a toll on hospitality and travel services, but other sectors continuing to grow
  • Near-term GDP tracking above prior assumptions, medium-term still highly reliant on vaccine rollout/effectiveness

The Canadian economy grew 0.7% in November and surprisingly posted another 0.3% gain in December according to Statistics Canada’s flash estimate. Those increases were despite escalating COVID-19 containment measures over that period.

The pace of improvement still slowed in December with containment measures reportedly starting to bite more significantly in the hard-hit accommodation & food services industry, as well as lower retail sales as restrictions on in-store sales at non-essential retailers ramped up.

Lockdowns have been more targeted by industry through the second wave. The manufacturing sector has continued to recover as has activity in service-sector activity like professional services. Oil & gas output has been recovering. GDP was still down almost 3% from a year ago in November, but roughly half of that weakness comes from the accommodation & food services, recreation, and ‘other’ services sectors.

Virus containment measures likely bit more significantly on overall growth in January – but the Nov/Dec numbers clearly flag upside risk to our Q4 GDP growth forecast (closer to an 8% annualized GDP increase compared to RBC and BOC’s ~4 1/2% projections). And slowing virus spread means that January restrictions could begin to be gradually eased as early as February that may be enough to prevent a decline in overall GDP in Q1 as well. Beyond the very near-term, a more sustainable recovery in GDP back to ‘new normal’ levels still depends heavily on the rollout and effectiveness of vaccines.

RBC Financial Group
RBC Financial Grouphttp://www.rbc.com/
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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