Canada: initial recovery in may and June seems to have been stronger than feared - RBC

31.07.2020 20:11
Canada's GDP grew by 4.5% in may, and preliminary data show a 5% increase in June. Claire Fan, an economist at RBC, notes that growth in may was widespread, and it seems likely that a further recovery is likely, albeit at a slower pace:

"Canada's GDP recovered by a moderate 4.5% in may, with measures to contain the coronavirus easing after GDP fell by 18% over the previous two months. Activity was also still 15% below may levels in may.

The initial recovery during may and June seems to have been stronger than at one time feared, although not enough to reverse the decline in April. Preliminary data from statistics Canada estimates that GDP fell by about 40% in the second quarter, which is slightly less bad than the Bank of Canada's scenario (-43% annual rate), and still close to the range possible in their April scenarios. However, much of the initial recovery came from the loosening of coronavirus containment measures, which brought activity to an exceptionally low level in April - along with unprecedented support for household income, which probably more than offset a drop in household income due to COVID in the second quarter.

Further small increases will be more difficult in the coming months. And, in the absence of a vaccine, more effective drugs, the threat of renewed virus spread will keep some containment measures in place - and spending (particularly on services) restrained. We continue to expect that economic activity will continue to be markedly below the levels of a year ago at the end of 2020."

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