The Canadian economy rose at a 5.6% rate during the first quarter according to data released on Tuesday, slightly below expectations. According to National Bank of Canada analysts, the report does not change their view for strong growth in the second half of 2021.
Key Quotes:
“While real GDP growth in Q1 was below consensus expectations, the performance was much stronger than what was expected a few months ago. As a reminder, closures of non-essential stores in both Ontario and Quebec in the first months of the year were not auspicious for economic growth. Despite this, Canada’s performance in Q1 puts its economy in an enviable position on a relative basis. The country registered the second-best performance among G-7 countries during the quarter, bringing the Canadian economy within 1.7% of its pre-pandemic output (Q4 2019), also the second-strongest print.”
“This morning's release does not change our view for strong growth in the second half of 2021. After a temporary pause in the recovery due to public‑health measures in Q2, impressive growth can be expected as services continue to reopen. True, residential activity could come back to Earth but consumption in services (30% of GDP), which remained depressed so far, could rebound fast amidst reopenings in H2 2021. Consumption is thus likely to firm up, all the more so that households have accumulated astronomical excess savings over the last five quarters (9.5% of GDP).”