Canada’s economy shrank less than expected during a spring surge of COVID-19 cases, continuing to show surprising strength and resilience.
Gross domestic product (GDP) contracted by 0.3% in April and by a similar amount in May, according to estimates from Statistics Canada. Economists had been anticipating a drop of 0.8% in April.
Despite the contraction, the numbers highlight how well the nation’s economy handled successive waves of lockdowns to contain the spread of COVID-19. That resilience is expected to fuel a strong rebound in the second half of this year.
Early evidence points to robust activity in June as restrictions were relaxed and restaurants and other services were allowed to open again throughout the country.
Economists are predicting that Canada will recover to pre-pandemic levels of output in the third quarter, barring any further setbacks with the virus. The contraction in April and May -- driven in large part due to retail closures -- brought output down to about 98.5% of pre-pandemic levels, according to Statistics Canada.
The GDP numbers put the economy on track for growth of at least 2% annualized in the second quarter, down from 5.6% in the first three months of 2021. The expansion is seen accelerating to a pace of 9.1% in the third quarter, with a 6% gain in the final three months of 2021.
The Bank of Canada has projected growth of 3.5% in the second quarter.
The GDP numbers are probably the last in a series of weak economic data from the third wave of the pandemic. Credit card transactions, job postings and other data show the economy has already sprung back to life.
Royal Bank of Canada’s spending tracker shows consumer activity in early June was well above pre-pandemic levels. Consumer confidence has been hovering at record highs for more than a month. Job posting data from Indeed Canada shows restaurants are ramping up hiring.
The Canadian dollar was little changed after the report, trading 0.2% higher at $1.2385 per U.S. dollar.
