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

(File photo from The Canadian Press)
Red Deer down to 66 active COVID-19 cases

Red Deer has lowest number of active cases since last November

Orange shirts, shoes, flowers and messages are displayed on the steps outside the legislature in Victoria, B.C., on Tuesday, June 8, 2021 following a ceremony hosted by the Songhees and Esquimalt First Nations in honour of the 215 residential school children whose remains have been discovered buried near the facility in Kamloops, B.C. THE CANADIAN PRESS/Chad Hipolito
Alberta city cancels Canada Day fireworks at site of former residential school

City of St. Albert says that the are where the display was planned, is the site of the former Youville Residential School

FILE – Perry Bellegarde, National Chief of the Assembly of First Nations, takes part in an event on Parliament Hill in Ottawa on Tuesday, July 7, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Indigenous Peoples Day must be a ‘call to action’, says Assembly of First Nations chief

Discovery of children at Kamloops residential school site must lead to change, Perry Bellegarde says

The Government of Alberta identified 115 new COVID-19 cases Sunday, bringing the provincial total to 3,089.
(Black Press file photo)
Alberta reports 100 new cases of COVID-19

The Central zone sits at 218 active cases

The Government of Alberta identified 115 new COVID-19 cases Sunday, bringing the provincial total to 3,089.
(Black Press file photo)
Red Deer drops to 71 active cases of COVID-19

Province adds 127 new cases of the virus

The border crossing into the United States is seen during the COVID-19 pandemic in Lacolle, Que. on February 12, 2021. THE CANADIAN PRESS/Paul Chiasson
VIDEO: Border quarantine to soon lift for fully vaccinated Canadians

Eligible travellers must still take multiple COVID-19 tests

Fans watch the warm-up before Game 6 between the Toronto Maple Leafs and the Montreal Canadiens in NHL playoff hockey action Saturday, May 29, 2021 in Montreal. Quebec’s easing of COVID-19 restrictions will allow 2,500 fans to attend the game for the first time in fourteen months. THE CANADIAN PRESS/Ryan Remiorz
Two-thirds of Canadians say governments shouldn’t lift all COVID-19 restrictions

Poll reports Canadians who gained pandemic weight say they have gained 16 pounds on average

Paul Bernardo is shown in this courtroom sketch during Ontario court proceedings via video link in Napanee, Ont., on October 5, 2018. Teen killer and serial rapist Paul Bernardo is set for a parole hearing today. The designated dangerous offender, has been eligible for full parole for more than three years. Bernardo’s horrific crimes in the 1980s and early 1990s include for kidnapping, torturing and killing Kristen French and Leslie Mahaffy near St. Catharines, Ont. THE CANADIAN PRESS/Greg Banning
Killer rapist Paul Bernardo faces parole hearing today; victim families opposed

Designated dangerous offender has been eligible for full parole for more than three years.

People look over the damage after a tornado touched down in Mascouche, Que., north of Montreal, Monday, June 21, 2021. Dozens of homes were damaged and one death has been confirmed. THE CANADIAN PRESS/Ryan Remiorz
One dead and extensive damage as tornado hits Mascouche, Que., north of Montreal

Damage reported in several parts of the city, and emergency teams dispatched to sectors hardest hit

FILE - In this Nov. 29, 2020, file photo, Las Vegas Raiders defensive end Carl Nassib leaves the field after an NFL football game against the Atlanta Falcons in Atlanta. Nassib on Monday, June 21, 2021, became the first active NFL player to come out as gay. Nassib announced the news on Instagram, saying he was not doing it for the attention but because “I just think that representation and visibility are so important.” (AP Photo/John Bazemore, File)
Nassib becomes first active NFL player to come out as gay

More than a dozen NFL players have come out as gay after their careers were over

A pair of Alberta residents were arrested after police responded to a report of a woman who had allegedly been assaulted and confined against her will on June 20, 2021. (File photo)
Salmon Arm RCMP arrest 2 Albertans suspected in alleged assault, unlawful confinement

Firearms, stolen items seized including NHL hockey cards believed to be worth thousands

A man makes his way past signage to a mass COVID-19 vaccination centre at the University of Toronto’s Mississauga campus during the COVID-19 pandemic in Mississauga, Ont., on Monday, May 17, 2021. THE CANADIAN PRESS/Nathan Denette
Canadians encouraged to see mRNA shots as interchangeable as more 2nd doses open up

Doctors urge people not to hesitate if offered Moderna after getting Pfizer for their first shot

Chief of Defence Staff Jonathan Vance sits in the front row during a news conference in Ottawa on June 26, 2020. THE CANADIAN PRESS/Adrian Wyld
Defence committee rises without report on Vance allegations

Committee had been investigating the government’s handling of complaints against former defence chief

Tl’etinqox-lead ceremony at the site of the former St. Joseph’s Mission in Williams Lake, B.C., June 18, 2021. (Angie Mindus photo - Williams Lake Tribune)
‘We are all one people’: Honouring residential school victims and survivors

Love, support and curiousity: Canadians urged to learn about residential schools and their impact

Most Read