Canada’s Q4 GDP beats estimates, showing Omicron resilience

Statistics Canada reported Tuesday that the economy grew by 4.6 percent last year, as compared to a decrease of 5.2 percent in 2020, which was the first year of the COVID-19 pandemic.

Annualized GDP growth of 6.7% was recorded in the fourth quarter.

Statistics Canada reported that the biggest contributor to economic growth in 2013 was household spending and residential building. New home construction, resales, and renovations all increased at near-record levels.

The 15.4% increase for the year was second only after the 1983 gain of 17.4 percent, which was recorded as the country emerged from a recession in 1983.

Statistics Canada revealed that the country’s total residential mortgage debt grew by an astonishing $182.4 billion in 2012.

At the end of 2021, output was flat as Statistics Canada reported that real gross domestic product had essentially remained unchanged in December. The Canadian economy was 0.4% higher than the pre-pandemic levels in February 2020.

In an earlier estimate, the agency said that the Canadian economy grew at 0.2% in January.

Economists were surprised by the January figure, as they expected a pullback due to the Omicron wave, which saw a loss of 200,000 jobs.

“The fact that Statistics Canada is suggesting that the economy managed to grind ahead in that month to me is a very pleasant positive surprise given that big parts of the economy saw restrictions kick in at the start of the year; mostly Ontario and Quebec but other areas as well,” said BMO chief economist Doug Porter.

Royce Mendes, Desjardins’ managing director and head for macro strategy, stated that the economy built on this momentum in February, as the country turned a corner against the latest pandemic wave. This allowed businesses to reopen throughout the country.

The figures come a day before the Bank of Canada’s next scheduled interest rate announcement. It is widely expected that the central bank will raise its key rate on Wednesday, in the first of several increases this year.

They also landed the day after Yves Giroux (Parliamentary Budget Officer) released his updated outlook on Canada’s economy and federal finances.

Giroux’s report released Tuesday said the economy, after a weak start to 2022, should grow 3.9 per cent this year, driven by a sharp rebound starting in the second quarter.

He also foresees a budget deficit this fiscal year of $139.8 billion, and $47.9 billion in the next fiscal year which starts in April — both figures being better than the government projected in its financial update in December.

Giroux warns, however, that a rosier picture of federal finances, aided largely by a stronger-than-expected economy could easily turn to sour.

Giroux claimed that the outstanding Liberal election promises total to $48.5 billion in additional spending. If much of that shows up in this year’s budget, Giroux says debt and deficits would rise.

— with files from Reuters