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Canadian economy posts worst showing on record in 2020

Click to play video: 'Freeland says consultations launched to help rebuild Canada’s economy post-COVID-19' Freeland says consultations launched to help rebuild Canada’s economy post-COVID-19
Canadian Deputy Prime Minister Chrystia Freeland on Monday said the federal government is launching consultations to help “inform and guide” the country’s economic growth plan. Freeland outlined the need to rebuild Canada’s economy even stronger than before the coronavirus pandemic, and added this task must be done for it to be “more innovative and more competitive than ever,” especially since the pandemic has “exposed critical gaps” in Canada’s social safety net. – Jan 25, 2021

The Canadian economy posted its worst showing on record in 2020 as the COVID-19 pandemic swept across the country shutting down businesses and putting people out of work.

Statistics Canada says real gross domestic product shrank 5.4 per cent in 2020, the steepest annual decline since comparable data was first recorded in 1961.

The drop for the year was due to the shutdown of large swaths of the economy in March and April during the first wave of the COVID-19 pandemic that crushed the economy.

Since then, economic activity has slowly and steadily grown.

Read more: Canada’s small businesses now have $135B in debt due to COVID-19, CFIB estimates

 

Statistics Canada says the economy grew at an annualized rate of 9.6 per cent in the fourth quarter of last year, down from an annualized growth rate of 40.6 per cent in the third quarter.

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That was higher than expected, with the average economist estimate at 7.5 per cent, according to financial data firm Refinitiv.

However, despite the better-than-expected result for the quarter as a whole, December eked out a 0.1 per cent increase, which followed a 0.8 per cent increase in November.

Read more: Governor of Bank of Canada points to child care, education to help ease protracted employment recovery

Statistics Canada noted that total economic activity in December was about three per cent below the pre-pandemic level in February 2020.

Looking ahead to January, Statistics Canada said its early estimate was for growth in the economy of 0.5 per cent.

CIBC chief economist Avery Shenfeld wrote in a note that the early January figure should set aside fears of an outright downturn in the first quarter.

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Statistics Canada said wholesale trade, manufacturing and construction sectors led the increase, while retail trade fell to start the year.

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BMO chief economist Douglas Porter said the economy soldiered through second-wave restrictions better than anticipated, and may signal a better-than-anticipated quarter, and potentially year overall.

“Look for new growth drivers to kick into gear as the economy re-opens in stages through this year, leading to roughly (six-per-cent) growth – a nice mirror image to last year’s deep dive,” he wrote in a note.

“It’s not precisely a V-shaped recovery, but it’s very close.”

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