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Canada GDP: COVID-19 lockdowns lead to first economic decline since April 2020

Jessy Bains
·2 min read
A man wearing a face mask walks past a closed hair salon in Toronto, Canada, on May 7, 2021. The Canadian unemployment rate rose 0.6 percentage point to 8.1 percent in April from March 2021 as public health measures against the COVID-19 pandemic were tightened, according to Statistics Canada on Friday. (Photo by Zou Zheng/Xinhua via Getty Images) (Xinhua/Zou Zheng via Getty Images)
A man wearing a face mask walks past a closed hair salon in Toronto, Canada, on May 7, 2021. (Photo by Zou Zheng/Xinhua via Getty Images) (Xinhua/Zou Zheng via Getty Images)

Canada's economy grew 1.1 per cent in March compared to the previous month, but is expected to have contracted in April in the face of strict COVID-19 restrictions.

Statistics Canada says the March growth follows 0.4 per cent growth in February compared.

But early estimates point to a 0.8 per cent decline in April, the first decline since April 2020.

Accommodation and food services rose 5 per cent in March, during a brief respite from pandemic restrictions. Retail trade was up 3.7 per cent. Both are expected to have struggled in April as restrictions were reintroduced.

Statistics Canada says real GDP grew 1.4 per cent in the first quarter of 2021, following increases of 9.1 per cent in the third quarter and 2.2 per cent in the fourth quarter of 2020.

On an annualized basis, first-quarter GDP was up 5.6 per cent.

The agency says the housing market was a key driver in first-quarter strength, adding that low mortgage rates, government benefits, and an improving job market boosted demand for housing. It also says rising costs for materials boosted construction costs.

But a slowing real estate sector is among the reasons Statistics Canada expects a contraction in April.

Avery Shenfeld, chief economist at CIBC Capital Economics, noted the 13.1 per cent first-quarter savings rate jump.

"But the early read on the second quarter shows that money won't be spent just yet, as the retightening of social distancing measures led to a drop of 0.8 per cent in April GDP according to the 'flash' estimate released today.

"That said, investors will already be looking past Q2, with hopes that vaccinations will pave the way for much stronger growth again in the second half of the year. Keep the faith."

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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