The Canadian economy grew 0.7 per cent in January in the face of severe public health restrictions, and appears to have grown almost as much in February, Statistics Canada said Wednesday.
January’s reading for real gross domestic product compared with a gain of 0.1 per cent in December, and topped the data agency’s preliminary estimate for the month of 0.5 per cent.
It was the ninth consecutive monthly increase since the plunge in the economy last year at the start of the pandemic in March and April when workers were ordered home and non-essential businesses forced to close.
Almost one year later, Statistics Canada said that total economic activity was still about three per cent below the February level last year, before the pandemic began.
The agency’s preliminary estimate for February this year showed growth of 0.5 per cent for the month.
TD Bank senior economist Sri Thanabalasingam said January was a solid month for the Canadian economy, despite the tighter public health restrictions in Ontario and Quebec, reflecting what he called 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,” Thanabalasingam said.
The Bank of Canada recently revised its expectations for the first quarter of the year, saying earlier this month that the economy should overall grow, rather than contract as it expected in January.
With early indicators suggesting improved business and consumer confidence for March, total annualized growth for the quarter appears to be on track to hit or exceed five per cent, RBC economist Claire Fan wrote in a note.
The shadow hanging over the economy now is COVID-19 and its variants that are pushing up caseloads across the country, placing pressure on provinces to tighten restrictions once again.
BMO chief economist Douglas Porter said the better-than-expected economic picture in January, even as the country shed more than 200,000 jobs, suggests sectors will be able to manage through any third-wave lockdowns or restrictions in the coming weeks.
But he cautioned that some sectors are going to feel the pain more than others. Arts and entertainment is half of what it was one year ago, he said, while hotels and restaurants are about 40 per cent below pre-pandemic activity.
Large sectors like construction and manufacturing are down about one per cent from a year ago, Porter said.
“This is the ultimate definition of this so called K-shaped recovery, where the industries at the upper end of the K are basically almost all the way back to where they were before the pandemic began, and those at the bottom of the K are desperately weak,” Porter said in an interview.
“If there’s good news, when things are eventually able to reopen again, you’re gonna see a spectacular bounce in those sectors that remain 40 or 50 per cent below pre pandemic levels.”
The growth in January came as goods-producing industries rose 1.5 per cent, while services-producing industries added 0.4 per cent.
Statistics Canada said the wholesale trade sector rose 3.9 per cent in January, more than offsetting a 1.5 per cent contraction in December.
The manufacturing sector grew 1.9 per cent in January to offset a decline of 0.7 per cent in December, while the mining, quarrying, and oil and gas extraction sector grew 2.7 per cent, its fifth consecutive month of growth.