The Conference Board of Canada economists Liam Daly and Kiefer Van Mulligen offer the following insights on the latest Gross Domestic Product (GDP) data:
“April saw the first monthly contraction in real GDP since last year’s decline at the outset of the pandemic. Output fell by 0.3 per cent, month-over-month. Statistics Canada expects output to drop by another 0.3 per cent in May. We anticipate that many of the hardest-hit sectors will show a bounce back in June, with our latest national forecast calling for 1.1 per cent growth in real GDP in the second quarter.”
“The performance across industries continues to closely reflect the strength and breadth of public health measures across Canada. The unevenness of the impact across the economy has become a defining feature of the pandemic. Bright spots such as the construction and resource extraction industries stand in stark contrast to services such as retail and hospitality which continue to feel the brunt of closures and restrictions.”
- More stringent public health measures did not slow down Canadian goods-producing industries, which grew by 0.5 per cent in April. Growth in the natural resource industries, mining, and construction more than offset declines in the manufacturing and utilities sectors.
- Output in the forestry and logging sector fell by 1.8 per cent in April, following a 2.0 per cent decline in March. Though output remains higher than pre-pandemic levels, these declines are surprising given the robust demand and surging prices for lumber. Wood product manufacturing increased by 2.0 per cent month-over-month.
- Elevated commodity prices likely contributed to growth in mining output, which increased by 1.4 per cent month-over-month. The iron and metal ore mining subsectors contributed most to this expansion.
- Construction sector output increased by 4.1 per cent. As low interest rates and a desire for more living space continue to fuel demand for housing, this growth was driven primarily by residential building construction. Yet, all construction subsectors expanded in April.
- Manufacturing output fell in both durable (-1.8 per cent) and non-durable (-0.2 per cent) producing industries. Shortages of semiconductors continued to drag production in the motor vehicle manufacturing subsector, which fell by 20.9 per cent.
- Canadians turned to various vices during April’s lockdowns, which drove output growth in the cannabis sector (+1.1 per cent), breweries (+0.6 per cent) and wineries and distilleries (+4.4 per cent).
- As provinces across Canada tightened restrictions in response to the third wave of the pandemic, services-producing industries in the economy contracted by –0.6 per cent.
- Compared to the fall in output during the second wave in December, April's fall in output among the services sector was larger, a testament to more stringent public health measures imposed in several regions this time around.
- Following closures of non-essential stores in some parts of the country, output in the retail trade industry declined by 5.4 per cent, the largest decline of all industries. Worst-affected were retailers of clothing, sporting goods, electronics, and furniture.
- Home resale activity fell, resulting in a –0.7 per cent decline in the real estate and rental and leasing, the first decline since the onset of the pandemic.
- Despite a –1.3 per cent contraction in educational services, overall, output in the public sector grew by 0.3 per cent. The expansion in output was driven by growth of health care and social assistance as well as public administration.
- After posting growth in March, the tightening of restrictions in April caused output contractions among high-contact services, which have become a hallmark of the pandemic.
- Output in the accommodation and food services industry fell by –4.6 per cent. April’s contraction left output in this industry 35.5 per cent below pre-pandemic levels. Similarly, the arts entertainment and recreation industry endured a –0.8 per cent fall in output leaving it –52.9 per cent adrift of pre-pandemic levels, the largest shortfall of any industry.
- Although there is no prospect of any significant improvement in May for the high-contact service industries, improving fortunes are expected to begin in June as the provinces embark on reopening plans that will see restrictions on these industries lifted.