The Canadian economy appears to have suffered its worst two-month stretch since the great plunge it took just over a year ago, as Statistics Canada reported a decline in real gross domestic product for April and foresees a similar drop in May.
Statistics Canada said Wednesday real gross domestic product fell 0.3 per cent in April, which was better than an initial estimate a few weeks ago of a drop of 0.8 per cent. It was the first decline in real GDP since April 2020 during the first wave of the pandemic.
The agency also said its preliminary estimate for May showed a similar drop of 0.3 per cent as many restrictions remained in place through the month as the country grappled with the third wave of the COVID-19 pandemic.
The overall decline in April, as well as the early estimate for May, put overall economic activity about one per cent below pre-pandemic levels seen in February 2020.
Attention will now turn to June as experts expect a consumer-led recovery with vaccination rates on the rise and restrictions rolling back, which should fuel job growth and reduce health concerns.
“The ingredients that support consumer spending are all lining up,” said Deloitte Canada chief economist Craig Alexander.
“It isn’t going to go back to pre-COVID levels, but the direction of growth is going to be unambiguously positive. I firmly believe that by the end of the year, I won’t be able to get a reservation at a restaurant because people are going to want to reconnect.”
In Alexander’s latest forecast, spending on durable goods grows by 13.4 per cent this year, which he said is already pretty much in the books from strong gains in the first half of 2021. He said tempering annual growth is an expected spending shift to service-sector activities in the second half.
Card-transaction data suggests service-sector spending is on the rise for retail and restaurants, and some early signs of dollars flowing into the travel sector, said RBC senior economist Nathan Janzen.
“The backward-looking data for April and May still looks soft, as would be fully expected, but there’s a more optimistic story for June and the summer that’s already in place,” he said.
CIBC senior economist Royce Mendes said indications now suggest that annualized growth in the second quarter should at least hit two per cent, compared with the no-growth scenario many experts had previously expected.
Driving the decline in April was a 5.5 per cent drop in the retail sector after two months of increases, including a strong March where retail sales hit $55.3 billion, a year-over-year increase of 26.7 per cent. Manufacturing fell one per cent in April after growth in March of 1.5 per cent.
Statistics Canada also noted the real estate sector contracted 0.7 per cent in April, its first drop since October 2020, as home sales slowed in Canada’s major urban centres. As well, accommodation and food services declined 4.6 per cent.
There were some silver linings, though.
Despite travel restrictions, accommodation services rose 0.5 per cent in April as Statistics Canada noted more Canadians opted to go camping.
The overall picture was of an economy that has adapted where able to restrictions, such as online shopping and curbside pickup, but one whose trajectory is still tied to path of the pandemic.
One pothole in that path is the virus’s more contagious Delta variant.
TD senior economist Sri Thanabalasingam said companies could face tighter restrictions if the variant picks up steam and case counts and hospitalizations rise. That would weigh on economic activity and slow the recovery, he said.
He added the variant poses a similar risk to the pace of the recovery in countries like the United States that would dampens demand for Canadian exports.
“Even though domestically we might be a little bit more inoculated from the impacts of the variant because of our impressive vaccination take-up, it really is a global challenge that has to be overcome for Canada to really get back to its full economic capacity,” he said.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
