Today’s GDP release from Statistics Canada confirms just how bad the economic decline was in 2020. However, the release also provides some good news that the economy is weathering the recent public health restrictions better than expected.
According to today’s release, real GDP declined by 5.1 percent in 2020 confirming that this is the worst recession on record. The overall drop in 2020 is significantly larger than both the 2.9 percent decline seen during the 2008-09 financial crisis and the 3.2 percent drop seen in the 1981-82 recession.
On the positive side, today’s release also showed that the economic recovery accelerated in November and continued in December despite increasing virus counts and renewed public health restrictions. Specifically, real GDP rose by 0.7 percent in November while the flash estimate for December pointed to a further 0.3 percent increase. Despite the solid GDP release, we still have a long economic recover ahead. The economy is operating 3 percent below February levels. And, we are likely to experience a renewed contraction in the first quarter of 2021.
November’s increase was broad based with 14-of-20 industrial sectors increasing. On the goods side of the economy, mining and quarrying and oil and gas extraction grew 3.9 percent as demand for raw materials continued to rebound and a number of facilities restarted production. Manufacturing output grew by 0.5 per cent bringing the sector to within 3 per cent of pre-pandemic levels.
On the services side, finance and insurance grew 1.3 per cent in November. The finance and insurance industry is the second best performing sector since the beginning of the pandemic next to agriculture. Real GDP in the finance and insurance industry is now up 4 per cent since February. Some of this increase is the result of a substantial increase in mortgage debt, the result of a hot housing market. Household mortgage debt is now up 7.4 per cent since last November. Demand for investment services has also seen solid growth as households continue to sit on a large pool of savings accumulated over the last year.
The retail and wholesale trade sectors also continued to see solid growth. This was led by strong growth in food and beverage stores, beer wine and liquor stores, and non-store retailers.
Interestingly, air transportation soared 41.8 per cent in November as Canadians increased the number of trips abroad. This is unlikely to continue into January as governments begin to tighten travel restrictions.
Overall, today’s release is good news. However, it is clear that the pace of the recovery is slowing, and we have a long road ahead of us. Today’s report is very much aligned with our current thinking on the economy, which you can find in our latest publication available at https://www2.deloitte.com/ca/en/pages/finance/articles/economic-outlook.html.
Categories: Canadian Economic Outlook, E-Sight, Economics
Alexander Economic Views 
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