The Canadian economy kept up its streak of monthly gains in October and appears to have done so again in November, which has left total economic activity within a statistical inch of where it was before COVID-19 hit.
While the labour market has since rebounded from steep losses seen over March and April of 2020, the same can’t be said of economic output.
Statistics Canada reported Thursday that total economic activity in October was 0.4 per cent below the pre-pandemic levels recorded in February 2020, with 0.8 per cent GDP growth for the month.
Preliminary data pointed to another gain in November that Statistics Canada said would leave the gap at just 0.1 per cent.
BMO chief economist Douglas Porter said getting GDP back to where it was in February 2020 is only one economic bellwether, but wouldn’t necessarily mean a full recovery once accounting for where the economy should be with population growth.
He warned that closing the gap could take a little longer because of an expected setback over December and January on the back of renewed public health restrictions.
“It’s just one sign along the road to recovery and … we’re likely going to have to repair more damage because of these latest restrictions in the coming year,” Porter said.
Heading into the Omicron storm, the Canadian economy posted its fifth straight monthly gain with October’s growth. The 0.8 per cent showing matched the preliminary estimate released last month.
Gains for the month were seen across most sectors, including manufacturing, whose rebound of 1.8 per cent in October more than offset a September contraction.
Driving that sector was output related to auto manufacturing, despite what the statistics office notes is an ongoing shortage of semiconductor chips, among other supply-chain issues hampering consistent production.
“There is actually still a lot of room for that sector to recover,” Porter said. “That’s actually one area I’m looking for much better news in the year ahead.”
Also helping in October were gains in retail trade, construction and home resale activity. The arts and entertainment sector was also up in October, helped by larger capacity limits for audiences.
TD economist Omar Abdelrahman said those very sectors will, once again, feel the brunt of tightened capacity limits among other renewed restrictions. He also said in a note that consumers could again focus their spending on goods and exacerbate supply-chain issues.
Preliminary data points to a sixth straight month of gains in November as Statistics Canada gave an early estimate of a rise in GDP of 0.3 per cent for the month.
Statistics Canada will finalize November’s figures in early February.
RBC economist Claire Fan said significant trade disruptions brought on by severe flooding in British Columbia could hold back growth in November, and the pandemic could add to the drag into December.
She wrote in a note that high vaccination rates, extended government benefits and provinces speeding up the rollout of booster shots should all help curb the economic threat from this latest wave of COVID-19.
CIBC senior economist Andrew Grantham says even after accounting for the possibility of a modest pullback in December, GDP is still running modestly ahead of the Bank of Canada’s forecast of economic growth in the quarter, at an annual rate of four per cent.
Grantham wrote in a note that the pace of economic growth likely won’t be enough for the central bank to change the timing for a first interest rate hike.
The Bank of Canada has said it doesn’t foresee a first increase to its key policy rate from its rock-bottom level of 0.25 per cent until at least April 2022.