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GDP dropped at an annual rate of about 39 per cent between April and June, Statistics Canada reported on Aug. 28. The extraordinary level of government support for households appears to have offset a significant amount of the immediate damage from effectively closing the economy for most of the spring. That should mean a stronger “reopening” phase as lockdown measures were eased heading into the summer.
The Bank of Nova Scotia’s “nowcast,” which estimates the current quarter’s growth rate by assembling key indicators in real time, suggests the economy is growing at an annual rate of about 49 per cent, significantly better than the central bank’s July estimate.
“As the economy reopens, the bounce-back in activity in the third quarter looks to be faster than anticipated in July,” the central bank said. “While recent data during the reopening phase is encouraging, the bank continues to expect the recuperation phase to be slow and choppy as the economy copes with ongoing uncertainty and structural challenges.”
Few, if any, economists expect the current pace will be sustained. Aid programs are scheduled to be tapered off or ended during the autumn and elevated levels of joblessness and bankruptcies will dent the economy’s ability to generate wealth. The virus will continue to weigh on confidence until a vaccine is discovered and produced at scale.
Jean-François Perrault, Bank of Nova Scotia’s chief economist, still estimates that Canada’s GDP will decline 5.7 per cent in 2020, and grow only 4.8 per cent in 2021, an outlook that aligns with those of most of his peers.
“The economy has much work to do to absorb all of its excess capacity,” Arlene Kish, director of Canadian economics at IHS Markit, advised clients in a note last week.
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