- Canada’s economic recovery strengthened in January, with real GDP rising 0.7% month-on-month, above Statistics Canada’s flash estimate of 0.5%. This left this measure of activity 3% below its February 2020 level. Along with January data, Statistics Canada also produced a flash estimate for February, which called for a 0.5% increase.
- Growth in January was driven by the goods-producing industries, where output rose 1.5% relative to December. Specifically, the mining, quarrying, and oil and gas extraction industry recorded a 2.7% gain, construction was up 1.4%, and manufacturing output grew 1.9%.
- From a services perspective, monthly growth was 0.4%, led by a 3.9% surge in wholesale trade. In addition, output in professional services was up 1.1%, and finance and insurance grew 0.8%. Conversely, retail trade decreased 1.7% on the back of tighter health restrictions
Key Implications
- January was a solid month for the Canadian economy. Despite tighter public health restrictions in Ontario and Quebec, the recovery strengthened, reflecting the growing resilience of the economy to the pandemic. With Statistics Canada projecting continued growth in February, the first quarter of 2021 is shaping out to be a very good one for Canada.
- Having said that, COVID-19 remains a downside risk, at least in the near-term. Variants of the virus are pushing up caseloads across the country, and provinces are, once again, under pressure to tighten restrictions. B.C., for one, has already imposed restrictions on indoor activities.
- A faster distribution of vaccines would go a long way to easing the weight of the pandemic on the economy. The pace of the rollout has accelerated in recent weeks, but it must continue to do so in order to allow for a safer reopening of the economy through the spring and summer. Supply chain issues, or vaccine hesitancy, could further complicate the economic recovery.
