Canada’s economy did a little better than expected this fall, but a string of new pandemic lockdown measures announced in several provinces in recent days could stop the rebound in its tracks, economists say.
The economy grew by 0.4 per cent in October, Statistics Canada said in a report Wednesday, and its preliminary “flash estimate” for November suggested the same pace of growth. That’s marginally better than what economists had been expecting.
Not surprisingly, the food and accommodation sector declined in October, shrinking by 3.9 per cent. Construction expanded after shrinking the month before, while manufacturing reversed course and declined for the first time in five months.
Earlier on HuffPost: Saving the economy means beating COVID-19, prime minister says. Story continues below.
“The fact that GDP growth is holding up in the fourth quarter might not come as much solace, as rising Covid cases and the necessary public health response will make it more difficult for the economy to keep its head above water in the first quarter of 2021,” CIBC economist Royce Mendes wrote in a client note titled “Calm Before the Winter Storm.”
“Still, if officials can begin easing restrictions, or at the least not have to tighten them further, growth could begin to reemerge not long after, and hopefully there’s no looking back this time.”
Many forecasts expect Canada’s economy to start returning to normal in the second quarter of 2021, with vaccines being rolled out en masse by then.
But before that happens, there is likely to be more pain. U.K.-based Capital Economics estimates that Canada’s economy will shrink by two per cent, at an annualized rate, in the first quarter of 2021. After that, it sees things bouncing back quickly, posting eight per cent growth in the second quarter.
But that’s not a consensus forecast, and some experts are holding out hope Canada might weather the new wave of lockdowns better than it did during the first round last spring.
Canada’s economy shrank by 1.9 per cent in the first quarter of 2020, and then shrank a record 11.3 per cent in the second quarter as lockdowns took hold. It bounced back in the third quarter after lockdowns eased, climbing 8.9 per cent ― a record increase, but still not enough to get the economy back to where it was before the pandemic.
As of October, Canada’s economy was still about 4 per cent smaller than it was before the pandemic, StatCan said.
“The new news here is that activity held up surprisingly well during the early stages of renewed restrictions in the fall. And while those restrictions may well bite more deeply in the next few months’ releases, this resiliency gives us much more comfort on our above-consensus call for next year,” Bank of Montreal chief economist Doug Porter wrote.
“Clearly, consumers and businesses are learning to cope with restrictions, and activity in less-affected sectors is stepping into the void. Good news overall.”