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  • KPB & Co Research


Data from Statistics Canada show that Canadian Real Gross Domestic Product (GDP) grew 4.5% in May-2020, on account of solid growth in both the goods-producing (+8.0%) and service-producing sectors (+3.4%). Preliminary data also indicate that the growth momentum continued into the month of June-2020 with a print of about 5%, putting the total for the quarter (3-months ending in June) at a 12% decline. The steady rise in GDP is welcomed positive news, but there is still a long road ahead before GDP returns to pre-covid-19 levels, as the current level is 15% below that of February-2020, and there is the possibility of second wave of COVID-19 infections.

Growth Drivers

The positive GDP momentum began to build when the economy re-opened in May-2020, after the government saw signs that the spread of the coronavirus was abating.  Majority of the sectors posted positive growth during the period, in-spite of the fact that a number of companies particularly in the retail, and entertainment sectors filed for bankruptcy. Surprisingly, "Retail" was among the top growing sectors along with "Construction", "Accommodation and food services", and "Manufacturing", all of which grew in mid to high double digits. 

SEctor breakdown

The report provided by the Statistics Canada highlighted a number of developments which contributed to the growth seen in each sub-sector. Chief among these was the re-opening of the economy, but there was also the positive spill-off effects from increase demand as people got back to work, and the move to online-shopping.

​The Next 2 Quarters

​All indications suggest that the Canadian economy will continue to recover so as long as it continues to remain open. Ontario recently moved into stage III re-opening ,potentially indicating future acceleration of economic activity. On the other hand, there are certain risks on the horizon that could delay the return to normalcy. First, the experience of many countries thus far show that the possibility of a second wave of inflections is fairly high, which if it materializes will lead to resumption of lockdown measures and continued depressed economic activity. Finally, the federal government have been seeking to reduce the level of support provided to the economy as we go into the the last two quarters in bid to stop the drain on the fiscal resources. As the federal government cuts down on the level of support, you could see more economic fallout, even in a context where a second wave does not materialize.

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