The Canadian economy rebounded in May. GDP rebounded 4.5% after recording two months of “unprecedented” declines as a result of emergency measures taken to slow the spread of COVID-19 that caused almost widespread closures. However, activity remains 15% below its pre-pandemic level in February.
Better, Statistics Canada indicates that preliminary information suggests that the GDP would have continued its momentum to advance by about 5% in June. “These flash estimates point to a decline of about 12% in real GDP in the second quarter of 2020. Due to their provisional nature, these estimates will be revised on August 28, when the official GDP is released for the month. June and the second quarter, ”however the federal agency specifies.
Coming back to May, the increase of 4.5% is far above the preliminary projection of 3% put forward by Statistics Canada and that of 3.5% which was the consensus among economists. The federal agency indicates that 17 of the 20 major sectors of activity have recovered. The Accommodation and Food Services segment led the list with an increase of 24.2%, however slowed by a decline of 2.3% in accommodation services, “restrictions on international and interprovincial travel still in place. force leading the majority of Canadians to stay at home ”. Construction is second with an increase of 17.6%, followed by retail trade with a surge of 16.4% driven by a 69% increase at motor vehicle and parts dealers. The manufacturing sector followed with an increase in activity of 7.4%, after falling 22.4% in April, while the wholesale trade posted a growth of 6% after three months of decline.
The sectors still in decline are those of the arts, entertainment and leisure (-2.9%), public administration (-1.8%) and management of companies and businesses (-0.1%).
The research firm Oxford Economics sees in this monthly data a Canadian economy engaged in a process of recovery after a record contraction of 11.7% in April and 7.5% in March. Returning to Statistics Canada’s preliminary target for June, Oxford predicts in its dominant scenario another substantial gain in July followed by a deceleration in growth, to reach its pre-pandemic level somewhere around mid-2021 at best.
Benoit P. Durocher, senior economist at Desjardins Group, goes in the same direction. “It would be surprising for real GDP growth to continue at such a rapid pace from the fourth quarter. Several difficulties will persist, such as maintaining a relatively high unemployment rate […] Moreover, the possibility of a resurgence of COVID-19 cases cannot be totally ruled out, ”he writes.
In its July reading, the Bank of Canada estimated that the Canadian economy would shrink 7.8% this year after expanding 1.7% last year, before growing 5.1% in 2021 and declining. 3.7% the following year. The economy will likely not have recovered from the health crisis until sometime in 2022, she said.