OTTAWA — Better-than-expected growth in November pushed the Canadian economy above its pre-pandemic level for the first time in nearly two years, but the surge in COVID-19 cases attributed to the Omicron variant is expected to inflict a new setback to start 2022.
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Canada’s real gross domestic product (GDP) rose 0.6% in November, posting a sixth consecutive month of growth, lifting it 0.2% above its February 2020 level, the report said. Tuesday Statistics Canada.
Growth faltered late in the year, however, as the federal agency said its preliminary estimate for December suggested real GDP remained essentially unchanged.
However, Bank of Montreal chief economist Douglas Porter said the weakness may be short-lived.
In particular, he noted that the economy grew in November despite the devastating floods in British Columbia, and appeared to have held firm in December despite Omicron.
“We know the economy can come back pretty quickly when things reopen,” Porter said.
“So if this new, mild reopening that we are seeing at the start of February ever lasts, I expect the economy to rebound nicely for the rest of the quarter.”
Statistics Canada said its preliminary estimate would put growth for the year as a whole at 4.9%. This result, which will not be finalized until next month, represents a turnaround from 2020, when the Canadian economy had its worst year on record, with output down 5.4%.
The agency further estimates that the economy grew at an annualized rate of 6.3% during the fourth quarter. If that pace holds true, it will mark the fastest quarterly growth of last year.
Growth of in-person activities
Gains were seen in November in the wholesale trade sector, which saw its strongest monthly growth since July 2020, and in the manufacturing sector.
There was also growth in the finance and insurance sector, which Statistics Canada attributed to abnormally high levels of activity in November as investors shifted funds to safer assets amid uncertainty. linked to the Omicron variant during its emergence.
Accommodation and food services also both saw increases, with more travelers and looser capacity restrictions at bars and restaurants in Ontario and Quebec.
Canada’s men’s soccer team also drove an economic gain: Statistics Canada reported that two World Cup qualifiers in Edmonton in November contributed to 5.4% growth in the arts sector and entertainment.
Economist Tu Nguyen of consultancy RSM Canada said high vaccination rates in Canada had helped the recovery.
“It allowed us to fill arenas, performance halls, hotels and restaurants, and we saw a significant increase in in-person activities,” she pointed out.
Despite growth in restaurants and sporting events, economist Stephen Brown of Capital Economics noted that the arts and entertainment sector was 20% below pre-pandemic levels, and that accommodation and catering were still far from their February 2020 level.
The Bank of Canada warned last week that it expects the Omicron variant to dampen spending in the first quarter and slow growth to an annualized rate of around 2.0%.
Whatever economic growth the country loses in the first quarter will be pushed back to the second quarter of 2022, Nguyen said.
Although he expects a contraction in January, Royce Mendes, managing director and head of macroeconomic strategy at Desjardins, said he believes the central bank will focus on the strong performance of late 2021 and move forward. before with a first increase in its key interest rate in March.
Jordan Press, The Canadian Press