Canada’s economy posted a strong recovery over the summer, with more industries moving closer to pre-pandemic levels of output, however the pace of growth is starting to slow. Statistics Canada reported that gross domestic product rose 3% in July  and preliminary estimates also show a 1% expansion in August. The latest figures suggest Canada’s economy is bouncing back more quickly than originally expected, though the pace of the recovery is slowing and a recent spike in the number of COVID-19 cases in the country’s largest provinces could threaten future gains.

Provinces like Ontario and Quebec have already reimposed some social distancing measures to prevent the second wave from getting out of control. This will likely drag out a full recovery, which still wasn’t forecast to occur for another two years.

Based on the flash estimate, economic activity in August was about 95% of output levels in February. At the nadir of the recession in April, output levels were about 82% of pre-pandemic levels.

Some parts of the economy are faring better than others. Agriculture, forestry and fishing, along with retail trade, finance and insurance an real estate have all surpassed February levels of output. The manufacturing sector grew 5.9% in July as factories raised production. Within the sector, there were sizeable gains for motor vehicles, vehicle parts and furniture and related products.

Activity at the offices of real estate agents and brokers surged by 30.6% to reach the highest point since March, 2004. It’s quite likely that August was also strong: a record number of homes were sold that month, the Canadian Real Estate Association recently reported.

“A lot of the early recovery has come from re-opening from spring containment measures. And with most COVID-19 containment measures already eased, that boost won’t be repeated going forward,” Nathan Janzen, senior economist at Royal Bank of Canada said in a note. “The latest bout of virus spread in Canada has just reinforced that there are probably limits to how much the economy can recover as long as that threat remains.”

A new report from the Conference Board of Canada says that the lingering pandemic will flatten and potentially stall Canada’s economic recovery into 2021 with non-energy investment particularly hit. The board’s is forecasting a 6.6% decline in 2020 GDP as recovery is already underway and helped by government aid programs, however the outlook is dire for some industries. Closures and declines in household spending will restrain the recovery’s pace into mid-2021, board chief economist Pedro Antunes said. Pre-pandemic unemployment levels won’t return until 2025, he said. “With the Canadian economy suffering through its sharpest recession in living memory, firms are likely to delay any major investment decisions until there is more clarity surrounding the pandemic,” the board said.

Source: Globe and Mail
Source: Financial Post
Source: Financial Post