Data released on Friday showed that Canada’s real GDP contracted by a record 38.7% in the second quarter of 2020 (annualized). On the positive, analysts at National Bank of Canada point out that monthly figures are hinging at a 41% rebound in the third quarter.
Key Quotes:
“We now have a fuller picture of this atypical downturn caused by the economic lockdown imposed to fight the COVID-19 pandemic. The recession may have lasted only two quarters so far but the decline in activity has been unprecedented. Since 2019Q4, output has tumbled no less than 13.4%. By comparison, the peak-to-trough decline during the Great Recession of 2008-09 was only 4.4%. This is not surprising given that the 38% annualized drop recorded in Q2 was more than four times as large as the previous record of -8.7% from 2009Q1.”
“Household income actually increased in Q2 thanks to generous transfer payments from government, a development which led the savings rate to rise to its highest level ever. This probably already contributed to strong GDP showings in May (+4.8%), June (+6.5%) and July (+3.0%, advance estimate) and should support household consumption going into H2.”
“Monthly figures published up to now are hinting at a +41.1% annualized rebound in Q3. But the pace of this recovery remains highly uncertain and dependent on the evolution of the pandemic both at home and abroad.”
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