Canada: GDP recovery continued in February and March – CIBC

Data released on Friday in Canada showed the GDP rose by 0.4% in February according to the advanced estimate, slightly below market consensus. Analysts at CIBC, point out the economy at the end of March, was as close to its pre-COVID level as it has since the pandemic began.

Key Quotes: 

“The lull in between the second and third waves of the virus saw Canada's economy recover further ground. At the end of March, the economy was operating as close to it’s pre-COVID level as it has since the pandemic began. That said, the data are about to turn. Employment numbers out next week will reveal the pain felt by many businesses and employees in April. It will likely be in stark contrast to the numbers for the US, where the economy was continuing to pick up steam. The good news is that the information for the lull in between waves reveals how quickly Canadian activity can bounce back when the virus is contained.”

“The February GDP advance of 0.4% was a tick slower than the consensus had forecast, but came alongside a flash estimate for March which showed an acceleration in growth to 0.9%. Together, that had the economy just 1.3% below it’s pre-COVID level of GDP, and has Q1 tracking slightly more than 6 ½% SAAR growth, just shy of the Bank of Canada’s forecast.”

“Data for the first quarter show that the economy was very resilient in the face of the second wave of the virus and grew further during the lull. However, we’ll have to wait and see how much pain will be inflicted by this latest rise in COVID cases. We’re less optimistic than the Bank of Canada on the second quarter of this year, given how harsh restrictions have needed to be and the fact that there could be less of an offset to weakness in services coming from some goods sectors. We’ll have a better idea of how the third wave is affecting the economy after next week’s employment data.”