Canada’s economy shows optimistic pace of recovery

The second quarter of 2021 saw Canada’s economy returning to optimistic results, as vaccine-supported reopenings led to stronger national growth.

According to Statistics Canada, gross domestic product was probably up by 0.7% last month, following a 0.3% decline seen in May (it was still in line with forecasts). Combined with the preliminary numbers for June’s recovery, growth is on track to about 2.5% on a year-over-year basis.

Such prediction coincides with private-sector economist forecasts, but exceeds the central bank’s expectation of 2% for the second quarter.

The GDP results point to resiliency of the national economy, which has already proved it can rebound as soon as COVID-19 restrictions are lifted. As the vaccination rates are growing and virus cases remain low, economists expect strong growth in the second half of 2021. With June’s preliminary estimate, output is only 0.8% away from its pre-pandemic levels.

In June, massive reopenings across Canada allowed businesses to get back to work after months of shutdowns. According to Statistics Canada, high-contact sectors and manufacturing returned to growth.

“The segments that have been punished in various ways during the previous 18 months (especially at the start of this year) – accommodation and food services, retail trade – should be the strong growth drivers during the next few months,” – David Doyle from Macquarie Capital Markets says.

The last month’s recovery directs Canada’s economy on the right track. Now, economists expect the output to go up by almost 6% in the third and fourth quarters, as the country keeps benefitting from less strict COVID-19 restrictions. However, although Canada’s vaccination rates are high, the development of the virus is still a significant threat to the economic recovery.

“As virus cases are low across the country, the economy may show even a stronger rebound this summer”, – Royce Mendes from CIBC noted. “But still, there are certain difficulties ahead, namely different variants of the virus which have already slowed down the progress in other developed economies.”