Canadian economy shrunk 0.3% in April, first drop since the start of the pandemic

Statistics Canada says Canada’s GDP contracted in April as real gross domestic product posted its first decline since April last year during the first wave of the COVID-19 pandemic.

The economy shrunk by 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.

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.

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 that 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.

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Accommodation and food services declined 4.6 per cent in April, the agency said.

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 while travel restrictions remained in place.

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.

“The good news for services most impacted is that, with a reopening already underway across many regions of the country, those businesses should be the ones leading the economy higher this summer,” CIBC senior economist Royce Mendes said.

He added that 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.