Canada’s economy posted a surprisingly strong January after clocking its worst year on record in 2020, Statistics Canada said Tuesday.
The economy grew 0.5 per cent in the first month of the year, much faster than the 0.1 per cent seen in December, on the strength of manufacturing and construction, StatCan said in a preliminary estimate for the month. Final numbers will be released March 31.
With final data in for December, the agency calculated that Canada’s economy shrank 5.4 per cent in the pandemic year of 2020, the sharpest contraction in records going back to 1961. But that data set doesn’t go back to the Great Depression, when Canada’s spending and economic output is estimated to have shrunk by 42 per cent from 1929 to 1930.
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Canada’s 2020 decline is somewhat worse than what the U.S. has seen, where economic output fell 3.5 per cent in 2020, but not quite as bad the European Union, which saw a 6.4-per-cent decline, or the U.K., where the economy shrank 9.9 per cent. Japan’s economy shrank by 4.8 per cent.
China’s economy was the only major one to clock growth last year, coming in at 2.3 per cent, much slower than the country’s usual pace.
Still, economists are more focused on the stronger-than-expected recovery than the gloomy numbers for last year.
“The ... increase in fourth-quarter GDP was three times as strong as the consensus forecast from just a couple of months ago,” Stephen Brown of Capital Economics wrote in a client note. “We expect GDP to return to its pre-pandemic level by the third quarter of this year, which is earlier than most other forecasters anticipate.”
One area that did not perform well was retail, which suffered under government restrictions through January.
Though StatCan didn’t break out preliminary retail sales for January, December retail sales were down 3.3 per cent, the agency said, with widespread declines in most sectors. StatCan attributed some of that to people doing their holiday shopping early, in November, due to expected pandemic delays.
“Canada’s economy was continuing to warm up as we turned the corner into a new year, even if the start of 2021 doesn’t look quite as boomy as we saw south of the border,” CIBC economist Avery Shenfeld wrote in a client note.
“That seems to set aside earlier fears of an outright downturn in the first quarter, as a relaxation in health restrictions suggests that January might have been the worst month for consumers.”