Economy is bouncing back

StatsCan says GDP grew at rate of 2.5% between April, June.

OTTAWA—The Canadian economy appears to have bounced back after its worst two-month stretch since the start of the pandemic, eking out a gain in June and growth in the second quarter of the year.

Statistics Canada said its preliminary estimate is that real gross domestic product grew at an annualized rate of 2.5 per cent between April and June, buttressed by a 0.7 per cent rise in June as pandemic restrictions eased following declines of 0.5 per cent in April and 0.3 per cent in May.

The decline in May put total economic activity about two per cent below pre-pandemic levels seen in February 2020. The agency said that with growth in June, total economic activity was about one per cent below pre-pandemic levels.

Getting through the last one per cent may not take much longer, even though some sectors have longer to go than others, said Desjardins chief economist Jimmy Jean.

Restrictions are rolling back in much of the country as vaccination rates rise, and with early indications suggesting a boost in activity, the country should see a pretty strong rebound in the third quarter absent any hiccups, Jean said.

“I think we will also be talking about the Canadian economy having fully recuperated its pre-pandemic losses,” he said.

“That’s an important milestone, but I think we also have to remember that we’re still not quite there when it comes to the labour market.”

The uneven recovery in sectors prompted the federal government on Friday to announce it was extending aid to businesses and workers until Oct. 23, and freezing benefits at current rates.

Speaking in Hamilton, Finance Minister Chrystia Freeland said the government wanted to ensure small businesses in particular have the support they need so the country can have a full and robust recovery.

The GDP figures Friday outpaced the Bank of Canada’s forecast this month that the economy would grow at an annualized rate of two per cent in the second quarter. The central bank expects the economy to grow at an annualized rate of 7.3 per cent this quarter.

“Spring lockdowns in much of the country triggered the first monthly GDP declines in a year, but those setbacks are expected to be reversed in relatively short order, with June’s rebound alone almost doing the job,” said BMO chief economist Douglas Porter.

For May, Statistics Canada said retail declined by 2.7 per cent after a drop of 5.7 per cent in April as the sector was weighed down by restrictions on in-person shopping meant to combat the third wave of COVID-19.

Statistics Canada said manufacturing declined 0.8 per cent in May, marking the third contraction in four months.