By Paul Vieira
OTTAWA--Canadian economic growth accelerated in November, setting the stage for a far stronger end-of-the-year performance than what the Bank of Canada anticipated.
Output is expected to either slow markedly or contract in the first quarter of 2021, the result of widespread economic restrictions authorities imposed to contain exponential growth of Covid-19 cases during a second wave. With transmission now slowing, economists suggest there is optimism the recovery can pick up steam once the second wave ebbs.
Statistics Canada on Friday said Canada's GDP in November jumped 0.7% from the previous month, to 1.93 trillion Canadian dollars, or the equivalent of $1.51 trillion. In October, GDP rose 0.4% on a month-over-month basis. November's 0.7% gain exceeded the data agency's own estimate for a 0.4% advance, which economists used as their market expectation.
Statistics Canada also said its estimate for December suggests a 0.3% month-over-month GDP increase, which translates into a 7.8% annualized gain for the fourth quarter. Last week, the Bank of Canada forecast fourth-quarter growth of 4.8%.
For 2020, the data agency said it anticipates a 5.1% decline in GDP, or the biggest annual decline in modern history. Nevertheless, this marks a significant improvement from pessimistic outlooks after the pandemic hit North America in earnest. In July, for instance, the Bank of Canada had penciled in a 7.8% decline in output for 2020.
Canada's economy "seems to be in a better shape than anyone expected," said Stephen Brown, economist at Capital Economics. He said the stronger outlook for the fourth quarter reduces the chance that output shrinks in the first quarter, although any growth that emerges would be meager.
With November's data, the economy remains 3% below prepandemic levels. "While the level of activity is still down from a year ago -simply because some sectors can not operate - the rest of the economy is pulling its weight," said Douglas Porter, chief economist at BMO Capital Markets. Mr. Porter added the firm has now upgraded its outlook for 2021, penciling in 5% growth.
Canada's most-populous regions have imposed stay-at-home orders or curfews to contain Covid-19 spread, with the seven-day average of confirmed cases reaching a peak on Jan. 9. Since then, cases growth has slowed, and the seven-day average is now at a two-month low although 77% above levels from three-months ago.
The November report indicated that the commodity sector helped power growth in November, spurred by growing global demand for potash and other minerals. Energy extraction also rose for a third straight month. Manufacturing, meanwhile, rebounded strongly, up 1.7%, as factories built up inventories.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
01-29-21 0942ET
