The full impact of the COVID-19 pandemic was felt in the first quarter of the year as Canada’s economy took a hard hit from the crisis.
Statistics Canada reported Friday that Real gross domestic product (GDP) fell 2.1 per cent in the first quarter, owing to reduced household spending and widespread shutdowns of non-essential businesses in March, in response to the COVID-19 pandemic.
It said the economy dropped 7.2 per cent in March and preliminary information indicates an 11 per cent decline in April.
“Expressed at an annualized rate, real GDP fell 8.2 per cent in the first quarter. By comparison, real GDP in the United States fell 5.0 per cent,” said the federal agency.
“The downturn in GDP—the sharpest since the first quarter of 2009—reflects measures imposed in March to contain the pandemic, such as school and non-essential business closures, border shutdowns, and travel restrictions, as well as events earlier in the quarter, mainly the Ontario teachers’ strike and rail blockades in February.
“Household spending was down 2.3 per cent in the first quarter of 2020—the steepest quarterly drop ever recorded. Spending reductions were influenced by substantial job losses, income uncertainty, and limited opportunities to spend because of the mandatory closure of non-essential retail stores, restaurants and services, and restrictions on travel and tourism activities.”
The report said exports fell 3.0 per cent, and imports declined 2.8 per cent, as major trading partners—notably, the United States, China, and most European countries—implemented similar public health measures.
“The coronavirus hits hard. Today’s data puts some hard numbers around what we’ve all been living through, and while the worst is yet to be revealed in the data, the early days already paint a dire picture. It is hard to find any bright spots. A surge in non-durable spending came from stockpiling activity. Non-residential construction was surprisingly decent, but this component tends to be driven by the energy sector, and given rock-bottom oil prices since March, including briefly negative prices, a repeat performance appears unlikely,” said Brian DePratto, Senior Economist with TD Economics.
“Typically, the quarterly GDP gives us good insight into the starting point for the current quarter. These days are anything but typical. The reported data is likely to get worse (indeed, Statcan’s nowcast implies the worst back-to-back monthly performances on record, implying a more than 18 per cent drop in the level of activity relative to February), but there is reason to believe that last month may have been the nadir. Provinces continue the ‘opening up’ process, and while it will take some time for things to truly get back to some sort of ‘normal’, it is not unreasonable to think that a modest recovery may already be forming.
“The key question is what kind of recovery? Given the significant hits to incomes and longer-lasting impacts on some industries, a marathon appears more likely than a sprint.”
