Economic activity continues to expand at a solid pace

Real gross domestic product rose 1.4% during the first quarter, buoyed by higher outlays on housing, increased spending on consumer durables, and rising export volumes. Total economic activity in the quarter was 1.7% below pre-pandemic levels observed in late 2019.

Household spending increased 0.7%, up from 0.2% in the fourth quarter of 2020. Outlays on consumer durables rebounded after a slight decline in late 2020 as auto purchases strengthened. 

Export volumes also contributed to economic growth, rising 1.5%. Imports rose 1.1%, supported by increases in intermediate metal products and commercial services. Both export and import volumes have risen for three consecutive quarters.

Household saving remains in double-digit territory

Household disposable income rose 2.3% in the first quarter, supported by an increase in government transfers as employee compensation continued to rebound. Government transfers to households were up 1.8%, led by increases in Employment Insurance and other benefits as Canadians grappled with a third wave of COVID-19 infections, regional stay-at-home orders, and the potential for future economic disruption. Transfers in the first quarter remained over one-third higher than pre-pandemic levels, while household disposable income was over 10% higher than levels reported in late 2019. As the growth in disposable income outpaced the increase in consumption, the household saving rate rose to 13.1%, marking the fourth consecutive quarter that the saving rate has been in double-digit territory.

Economy-wide output rises for the 11th consecutive month

Economy-wide output expanded by 1.1% in March, marking the 11th consecutive monthly increase since the initial economic lockdowns in March and April of last year. March’s headline increase, the largest since the summer of 2020, reflected broad-based gains across most industrial sectors as containment measures eased across much of the country. Higher retail activity contributed substantially to the headline increase. Total economic activity in March was about 1% below pre-pandemic levels.

Statistics Canada also released an advance estimate of real gross domestic in April, which points to a 0.8% decline as tighter public health measures affected retail trade and accommodation and food services in certain regions of the country.

Improvements to the business outlook despite challenges related to profitability and operating costs

New data from the Survey on Business Conditions for the second quarter pointed to improvements in the near-term outlook. Over two-thirds of businesses in the second quarter indicated they could continue to operate at current revenue and expenditure levels for 12 months or more before considering closure or bankruptcy. However, nearly four in ten businesses reported rising input costs related to labour, capital and raw materials as an obstacle in the near term, up substantially from one quarter of businesses in the first quarter.

Headline consumer inflation accelerated sharply in March and April

Headline consumer inflation accelerated sharply in March and April as base year effects and current price growth both put upward pressure on the headline rate. Consumer prices rose 3.4% on a year-over-year basis in April, after advancing by 2.2% in March. Excluding gasoline prices, consumer inflation in April stood at 1.9%

Employment losses though April and May during third-wave restrictions

Following losses of 207,000 in April, employment fell by an additional 68,000 in May as third-wave restrictions remained in effect across the country. May’s headline decrease reflected declines in part-time work and lower employment in Ontario and Nova Scotia.

In recent months, employment has fallen in industries that are among the most impacted by changes in the intensity of public health measures. From March to May, cumulative losses in retail have totalled 113,000 while those in accommodation and food services were 67,000.

With May’s headline decrease, net employment losses since the onset of the pandemic rose to 571,000, one half of which reflected losses among young workers. Employment among young women in May was 187,000 below pre-pandemic levels, while employment among young men was 103,000 below levels reported in February 2020. 

Canada’s unemployment rate edged up to 8.2% in May. Among 15 to 24 year-olds, the unemployment rate was 15.9%. The youth unemployment rate stood at 10.4% prior to the onset of the pandemic.

The number of Canadians working from home in May remained at 5.1 million.

Source: Statistics Canada