Quick Take

Canada’s GDP growth continued in February as third wave loomed

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The Conference Board of Canada’s economists Kiefer Van Mulligen and Liam Daly offer insights on the latest Gross Domestic Product (GDP) data:

As national vaccinations started to pick-up in February, real GDP grew by 0.4 per cent month-over-month. With Statistics Canada’s preliminary estimate for growth in March sitting at 0.9 per cent, first quarter output will likely be higher than expected in our most recent national forecast. Yet recent surges in new cases of COVID-19 reversed the loosening of restrictions in many provinces in April. We therefore expect that growth may have cooled off in recent weeks.

A hot residential construction sector and a strong performance in the retail sector are standout drivers of February's GDP growth. The performance profile across industries continues to be shaped by the pandemic. With restrictions limiting pursuits such as travel and recreation, Canadians are increasingly turning towards activities such as shopping and home renovations. However, with total output down 2.2 per cent compared to February of last year, the remaining ground will only be recovered once a further easing of restrictions occurs.

Highlights of February’s GDP report include the following:

  • February’s data shows a small overall decline of 0.2 per cent among the goods-producing industries of the economy. Most service industries made gains, posting overall growth of 0.6 per cent. Taken together, the economy grew by 0.4 per cent.
  • Notable output growth was recorded in the construction industry (2.0 per cent) fuelled by record high levels of residential construction.
  • Overall manufacturing output declined by 0.9 per cent with textile, plastic and rubber, and non-metallic products segments recording the largest contractions.
  • A shortage of semiconductor chips, an important input into modern vehicles, slowed vehicle production at many North American plants. The slowdown was felt by manufacturers along the vehicle supply chain. Reflecting the disruption to vehicle production, transportation equipment manufacturing fell by 4.2 per cent.
  • Contractions in certain corners of the manufacturing industry were offset by growth in elsewhere notably printing and electrical equipment manufacturing.
  • Frosty conditions in much of the southern United States caused disruptions to natural gas production facilities and created elevated demand among residents. These conditions precipitated a significant spike in natural gas prices, which was beneficial for the natural gas distribution segment of the utilities industry where output grew by 2.9 per cent.
  • The mining, quarrying and oil and gas extraction sector recorded the first decline in six months (-2.8 per cent).
  • The retail trade sector led the pack with the strongest monthly percentage growth (+4.5 per cent) driven largely by output in clothing and clothing accessories.
  • However, output in the transportation and warehousing industry dropped by 2 per cent. This was rooted in a significant decline in the air transportation subsector (-35.3 per cent).
  • Output in the wholesale trade sector also slipped by 1.0 per cent in February. Declines in the building material and supplies wholesaler-distributors subsector contributed the most to this monthly drop.
  • In February, the Bank of Canada noted early signs of excess exuberance in the housing market. Today’s release reported monthly growth of 0.5 per cent in the real estate and rental and leasing sector. Output in the sector sat 3.4 per cent higher year-over-year in February.
  • Amid more stringent quarantine requirements for travellers entering Canada in February, the accommodation and food services sector grew by 3.5 per cent month-over-month. This follows consecutive monthly declines since last September. Gains were especially strong for the food services and drinking places subsector.
  • The professional, scientific and technical services sector continued to grow in February after posting growth in every month except one since last April. With many roles in the industry able to work easily from home, output in February was 0.8 per cent higher year-over-year.

COVID-19: Get all the insights

Kiefer Van Mulligen

Kiefer Van Mulligen

Economist

Liam Daly

Liam Daly

Economist

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