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

Co-creatorsAdrianna Hatton and Malcolm McKenzie stand next to the little free library revealed Sunday at 9710 First St. (Wolf Depner/News Staff)
Literary crowd helps opens little free library in Sidney

Located at 9710 First St., the book sharing box features original art and reclaimed wood

Deep Cove Elementary School principal Shelley Hardcastle (right) and vice-principal Mary Kaercher help to restock Reay Creek with fish – in this case, coho fry – after a recent bleach spill killed hundreds of fish. (Wolf Depner/News Staff)
North Saanich’s Deep Cove Elementary School helps to restock Sidney’s Reay Creek

Restocking followed bleach spill that killed hundreds of fish in creek

A new report pegs the annual cost of hiring a third party to monitor use of pickleball courts in North Saanich at $12,000. (Black Press Media file photo).
North Saanich could end up hiring third party to monitor pickleball courts

Other options up for consideration include use of cameras and timed locks

The barred owl is the most likely to be spotted in the south Island. (Ann Nightingale photo)
Barred owls dominate Greater Victoria owl-scape

Western screech owl population decimated, partly due to barred owls

Between June 1 and 7, 168 net unconditional sales were made for properties in the VREB region. (Black Press Media file photo)
Victoria home sales slightly behind last June’s pace

Benchmark value of single-family home in Greater Victoria tops $1 million

At an outdoor drive-in convocation ceremony, Mount Royal University bestows an honorary Doctor of Laws on Blackfoot Elder and residential school survivor Clarence Wolfleg in Calgary on Tuesday, June 8, 2021. THE CANADIAN PRESS/Jeff McIntosh
‘You didn’t get the best of me’: Residential school survivor gets honorary doctorate

Clarence Wolfleg receives honorary doctorate from Mount Royal University, the highest honour the school gives out

Two-year-old Ivy McLeod laughs while playing with Lucky the puppy outside their Chilliwack home on Thursday, June 10, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO: B.C. family finds ‘perfect’ puppy with limb difference for 2-year-old Ivy

Ivy has special bond with Lucky the puppy who was also born with limb difference

A million-dollar ticket was sold to an individual in Vernon from the Lotto Max draw Friday, June 11, 2021. (Photo courtesy of BCLC)
Lottery ticket worth $1 million sold in Vernon

One lucky individual holds one of 20 tickets worth $1 million from Friday’s Lotto Max draw

“65 years, I’ve carried the stories in my mind and live it every day,” says Jack Kruger. (Athena Bonneau)
‘Maybe this time they will listen’: Survivor shares stories from B.C. residential school

Jack Kruger, living in Syilx territory, wasn’t surprised by news of 215 children’s remains found on the grounds of the former Kamloops Indian Residential School

A logging truck carries its load down the Elaho Valley near in Squamish, B.C. in this file photo. THE CANADIAN PRESS/Chuck Stoody
Squamish Nation calls for old-growth logging moratorium in its territory

The nation says 44% of old-growth forests in its 6,900-square kilometre territory are protected while the rest remain at risk

Flowers and cards are left at a makeshift memorial at a monument outside the former Kamloops Indian Residential School to honour the 215 children whose remains are believed to have been discovered buried near the city in Kamloops, B.C., on Monday, May 31, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Pick a Sunday:’ Indigenous leaders ask Catholics to stay home, push for apology

Indigenous leaders are calling on Catholics to stand in solidarity with residential school survivors by not attending church services

“They will never be forgotten, every child matters,” says Sioux Valley Chief Jennifer Bone in a video statement June 1. (Screen grab)
104 ‘potential graves’ detected at site of former residential school in Manitoba

Sioux Valley Dakota Nation working to identify, repatriate students buried near former Brandon residential school

The Queen Victoria statue at the B.C. legislature was splattered with what looks like red paint on Friday. (Nicole Crescenzi/News Staff)
Queen Victoria statue at B.C. legislature vandalized Friday

Statue splattered with red paint by old growth forest proponents

Most Read