OTTAWA (Reuters) – Canada’s GDP is likely to plunge by a record 12% in the second quarter, Statistics Canada said in flash estimate on Friday, even as activity rose in May and June as COVID-19 containment measures were loosened.
Canada’s real gross domestic product was up a record 4.5% in May, following two months of unprecedented declines, and the economy is expected to grow by 5% in June, StatsCan said.
While the May and June recovery appears stronger than once feared, it is still not enough to reverse the steep decline in April, economists noted.
The estimated decline for the second quarter, meanwhile, would be by far the deepest quarterly plunge ever, StatsCan said.
The decline would also be worse than what was seen in the United States for the same quarter, as Canada enacted restrictions earlier and eased them less aggressively, Royce Mendes, a senior economist with CIBC Capital Markets said in a note.
“The good news is that the cautiousness has kept virus cases under control north of the border, suggesting Canada’s economy is in a position to outperform that of the U.S. in Q3,” Mendes said.
The May gain beat analyst expectations of 3.5%. It was the largest monthly gain since the series began in 1961, with record increases in construction and retail, and strong gains in food services even as accommodation services fell.
Economists said that while initial bounce-back has been strong, the pace of recovery will likely slow over the summer and without a vaccine, growth in some sectors will remain subdued.
“We continue to expect economic activity will still be running well-below year ago levels at the end of 2020,” said Claire Fan, an economist at RBC Economics in a note.
The Bank of Canada said earlier this month it expects Canada’s economic activity will not return to pre-pandemic levels until 2022.
The Canadian dollar was little changed at 1.3417 to the U.S. dollar, or 74.53 U.S. cents, after the GDP data release.
In a separate release, StatsCan said building permits fell by 12.8% in the second quarter, the largest decline since the fourth quarter of 2008, during the global financial crisis.
(Additional reporting by Steve Scherer in Ottawa and Fergal Smith in Toronto; Editing by Nick Zieminski and Marguerita Choy)