Real GDP plummets, but positive growth expected in the months ahead

By: Alicia Macdonald

The Conference Board of Canada’s Associate Director, Alicia Macdonald offers insights on the latest Gross Domestic Product (GDP) data:

As expected, real GDP plunged in the first quarter as measures to contain the spread of COVID-19 were implemented. Growth is projected to have continued its decline in April, with much of the country in lockdown. The numbers this morning leave no question that Canada is in the midst of its deepest recession in decades. However, with restrictions easing across the country, the economy should have hit bottom in April and we should see positive growth in the months ahead.


  • Real GDP fell by at an annualized rate of 8.2 per cent in the first quarter, a smaller decline than the flash estimate from Statistics Canada last month.
  • Consumer spending fell by 9.0 per cent last quarter as job losses weighed on income and the closure of non-essential businesses limited the ability of households to spend. This was the largest decline in household spending in statistics that date back to 1961.
  • Household disposable income increased despite the sharp decline in employment thanks to government transfers. With income increasing and spending falling, the savings rate shot up to 6.1 per cent and is expected to continue to climb in the second quarter.
  • Business investment was also down on the quarter although some components did continue to grow. Spending on engineering structures, non-residential buildings and intellectual property all recorded gains while investments in machinery and equipment experienced a sharp drop.
  • Housing investment was down marginally as gains in new home construction were offset by declines in renovation and ownership transfer costs, reflecting slowing conditions in the resale market as physical distancing measures were put in place.
  • Despite the depreciation of the Canadian currency there was a sharp drop in exports due to sputtering global demand, production shutdowns and the closure of international borders. Domestic demand was similarly soft, resulting in a drop in imports. Nevertheless, the drop in exports was larger, leading to a fourth consecutive quarterly deterioration in Canada’s trade surplus.
  • On a monthly basis, real GDP fell by 7.2 per cent in March, better than the initial flash estimate of a 9 per cent decline.
  • Statistics Canada also provided an initial preliminary estimate for April GDP which is currently projected to have declined by 11 per cent.
  • Some traditional sources of data were unavailable to Statistics Canada this quarter given the disruption caused by the pandemic. As a result, larger than normal revisions are likely.
  • Overall, this morning’s reports of GDP were slightly better than expected. Nevertheless, the results are clear that Canada is in the depths of its deepest recession in decades.