Canada’s economic recovery continued to moderate as summer wound down, leaving activity still well short of pre-pandemic levels before the second wave of the COVID-19 virus hit, new data from Statistics Canada show.
The agency reported Friday that real gross domestic product (GDP) rose 1.2 per cent in August from July, slightly more than its preliminary estimate of 1 per cent. It was the fourth straight month of growth, as the economy continued its rapid rebound from the lockdowns in the spring aimed at containing the virus, although the pace of the recovery has been slowing after the dramatic effects of the re-openings in May and June.
Statscan also published an advance estimate for September of 0.7-per-cent growth – which, if accurate, would mean the economy expanded by about 10 per cent in the third quarter, consistent with Bank of Canada and private-sector estimates. But that still leaves the economy about 4 per cent below its pre-COVID levels.
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With October’s sharp increase in the spread of the virus, both in Canada and abroad, renewed virus-containment restrictions threaten to put the brakes on the recovery.
“The economy is now moving into the recuperation phase, where additional gains in economic activity are harder to come by. With pandemic-related uncertainty weighing on business and consumer confidence, most industries are struggling to return to pre-pandemic levels of output,” Toronto-Dominion Bank senior economist Sri Thanabalasingam said in a research note.
The August GDP gains were led by a continued strong recovery in the service sectors of the economy (up 1.5 per cent), which were more deeply affected by the spring lockdowns and subsequent re-openings, while goods-producing sectors grew a more modest 0.5 per cent. Economists noted that the segments that drove much of August’s gains – services such as arts, entertainment and recreation (up 13.7 per cent) and accommodation and restaurants (up 7.3 per cent) – stand to be the hardest hit in the second-wave containment measures, as authorities focus on reducing contact through indoor gatherings.
“The way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in the fourth quarter,” Bank of Montreal chief economist Doug Porter said in a research report.
Earlier this week, the Bank of Canada issued new forecasts predicting fourth-quarter growth of only 0.2 per cent quarter over quarter – or 1 per cent annualized – in light of the second wave of the pandemic and the return of some government-mandated closures and business restrictions. Ontario and Quebec have already shut down indoor restaurants and bars in large urban centres where COVID-19 cases are highest, while other provinces are clamping down on indoor gatherings and debating whether additional measures are warranted.
Some economists think the central bank’s forecast is overly pessimistic.
“We suspect that with ongoing massive fiscal support, less restrictions than earlier, and, simply, that consumers and businesses have learned to operate in this new environment, the late-year setback should be relatively mild,” said Mr. Porter, who forecast that quarterly growth would top 2 per cent annualized.
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“We think there is still scope for continued rebounds in those sectors not directly affected by the restrictions, so we are pencilling in a much larger fourth-quarter gain of 5 per cent annualized,” said Stephen Brown, senior Canada economist at Capital Economics, in a research note.
But the COVID-19 virus remains a massive wild card in any economic forecast, as a growing number of countries face the prospect of renewed restrictions – while at the same time eagerly looking forward to the growing possibility of a viable vaccine in early 2021.
“We are now in a phase of the recovery that could see strong winds and dangerous tides. Navigating through the turbulence will not be easy, as much will depend on the course of the virus,” TD’s Mr. Thanabalasingam said. “Getting the spread under control could right the ship, but seas will remain choppy without a vaccine or effective treatment.”
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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
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