A Statistics Canada building and sign is pictured in Ottawa on Wednesday, July 3, 2019. THE CANADIAN PRESS/Sean Kilpatrick

A Statistics Canada building and sign is pictured in Ottawa on Wednesday, July 3, 2019. THE CANADIAN PRESS/Sean Kilpatrick

RBC economist: Stronger economic growth for Canada expected in rest of 2021

Statistics Canada reports the economy grew by 5.6% in first quarter

The Canadian economy grew at an annual rate of 5.6 per cent in the first quarter of the year before falling back in April, leaving experts looking forward to summer and hopes for household spending to ignite a sharp rebound.

Part of the optimism comes from the billions in savings Canadians are sitting on that have grown through the pandemic as consumers had fewer options to spend their extra cash and government aid put a financial floor under hard-hit households.

The savings rate rose to 13.1 per cent from the 11.9 per cent recorded in the final quarter of 2020, marking four straight quarters where the rate was in double digits, and more than double the 5.1 per cent recorded in the first quarter of 2020.

Generally, higher income households had higher savings than lower income households. Overall, households added another $47 billion in savings in the first quarter to the over $200 billion added in 2020, RBC senior economist Nathan Janzen said.

In an interview, he said the figures on savings and increases in disposable income, which Statistics Canada noted rose by $32.3 billion over the first quarter, suggest consumer spending could quickly recover when restrictions ease.

“That’s probably not so much of a May story, but we could start to see early stages of that recovery in June,” Janzen said.

“Then certainly over the summer as vaccination rates, presumably, will have ramped up significantly, you could see more spending going back to more normal levels, or above, and not just for goods, but also for those high-contact services that have been essentially unavailable for purchase for most of the last year.”

The growth for the first three months of the year was better than the contraction first forecast months ago, but still represented a slowdown from the 9.6 per cent pace seen over the last three months of 2020.

Statistics Canada said Tuesday that the quarter ended with an increase of 1.1 per cent in real gross domestic product in March, following the 0.4 per cent registered in February, bringing overall economic activity one per cent below the levels seen pre-pandemic in February 2020.

Helping the economy through the first quarter were looser public health restrictions that allowed households to spend more on goods and services, including on home building and renovations as residential investment grew at an annual rate of 43 per cent in the quarter.

Construction expanded for the third consecutive quarter, driven by construction of single-family homes and renovations as Canadians looked to improve their houses or find a larger space.

But containment measures imposed in April appeared to trip up months of gains as Statistics Canada estimated a drop in economic output of 0.8 per cent for April, which would be the first decline since the drop in April 2020 during the first wave of the pandemic.

TD senior economist Sri Thanabalasingam wrote that with many restrictions still in place through May, the economy likely didn’t fare much better in the second month of the second quarter.

Statistics Canada said the GDP decline in April would leave overall economic activity about two per cent below pre-pandemic levels in February 2020.

However investors already seem to be looking past the rest of the second quarter, noted CIBC chief economist Avery Shenfeld, hoping vaccinations will pave the way for stronger growth in the second half of the year.

BMO chief economist Douglas Porter said Tuesday the GDP numbers have been as much a health report as an economic report.

“The good news is we’re seeing pretty clear signs that we’re well past the peak of the third wave now and things are poised to start opening again,” Porter said.

“Hopefully, this one will last longer — hopefully permanently — and we do look forward to a pretty solid comeback by the Canadian economy in June and through the summer.”

—Jordan Press, The Canadian Press

RELATED: Forecast: Rebounding global economy faces multiple threats

economy

Just Posted

An old growth cedar stands in a cut-block within the Caycuse Valley. More than 100 prominent Canadians, have signed an open letter calling for the immediate protection of all remaining old-growth forests in B.C. (Submitted)
Brian Mulroney and Greta Thunberg among 100 celebrities pushing to save B.C. old growth

List includes Indigenous leaders, scientists, authors, Oscar winners

This conceptual rendering shows revisions to the proposed warehouse in Sidney on land under the authority of the Victoria Airport Authority. York Realty, which plans to build, then lease the building, said significant changes to the the massing and height of the building respond to community feedback. Additional feedback can be submitted until June 30. (Screencap/York Realty)
Sidney warehouse proposal lands Greater Victoria Chamber of Commerce endorsement

Public has until June 30 to submit additional comments after significant modifications

COVID-19 exposures have been reported at Colquitz Middle School and Tillicum Elementary School, both on June 14. (AP Photo/Nam Y. Huh, File)
Two Saanich schools report COVID-19 exposures

Exposures reported at Colquitz Middle School and Tillicum Elementary School

Sooke RCMP seized cocaine, ketamine, MDMA, prescription pills, $6,000 cash, a machete and pepper spray during a bust June 15. (Courtesy of Sooke RCMP)
Sooke RCMP seize drugs, machete, pepper spray

Man arrested near Evergreen Mall following drug deal

An eastern cottontail rabbit on the UVic campus. (Evert Lindquist/News Staff)
Wild rabbits persist at the University of Victoria

Feral rabbits are still absent, but another non-native species has arrived on campus

People line up to get their COVID-19 vaccine at a vaccination centre, Thursday, June 10, 2021 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Vaccines, low COVID case counts increase Father’s Day hope, but risk is still there

Expert says people will have to do their own risk calculus before popping in on Papa

(Black Press Media file photo)
POLL: When was the last time you visited the mainland?

The films are again lighting the screens at local theatres, the wine… Continue reading

Anyone with information on any of these individuals is asked to call 1-800-222-TIPS (8477) or visit the website victoriacrimestoppers.ca for more information.
Greater Victoria Crime Stoppers wanted list for the week of June 15

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

The border crossing into the United States is seen during the COVID-19 pandemic in Lacolle, Que. on Friday, February 12, 2021. THE CANADIAN PRESS/Paul Chiasson
U.S. border restrictions to remain in place until at least July 21

Safety minister says Canada, U.S. extending restrictions on non-essential international travel

The Co-op gas station at Whiskey Creek is burning after a camper van exploded while refueling just before 4 p.m. on Thursday, June 17, 2021. (FACEBOOK PHOTO)
Exploding camper van torches Highway 4 gas station between Qualicum Beach and Port Alberni

Highway traffic blocked after Whiskey Creek gas station erupts into flames

Helen Austin performing with Trent Freeman at the 2018 Vancouver Island MusicFest. Austin is one of the many performers listed for the 2021 event.
Vancouver Island MusicFest goes virtual for 2021

Black Press to stream 25 hours of programming July 9-11

Himalayan Life helped finance the construction of Nepal’s Yangri Academic Centre and dormitories after a 2015 earthquake devastated the valley, killing more than 9,000 people. (Screen grab/Peter Schaeublin)
B.C. charity founder pledges to rebuild Nepalese school swept away by flash floods

6 years after a catastrophic earthquake killed more than 9,000 people, Nepal gets hit again

FILE – A science class at L.A. Matheson Secondary in Surrey, B.C. on March 12, 2021. (Lauren Collins/Surrey Now Leader)
Teachers’ union wants more COVID transmission data as B.C. prepares for back-to-school

BCTF says that details will be important as province works on plan for September

Provincial health officer Dr. Bonnie Henry outlines B.C.’s COVID-19 restart plan, May 25, 2021, including larger gatherings and a possible easing of mandatory masks on July 1. (B.C. government photo)
B.C. records 120 new COVID-19 cases, second vaccines accelerating

Lower Pfizer deliveries for early July, Moderna shipments up

Most Read