The sector continues to be an indispensable component of the national economy
Without the housing sector’s exuberance, Canada’s Q1 economic readings would’ve likely been significantly worse, data from the national statistics agency indicate.
Earlier this week, Statistics Canada reported that gross domestic product expanded by an annualized rate of 5.6% during the first quarter. This was markedly lower than the 6.8% predicted by economists in a Bloomberg poll.
Still, the reading was a far cry from the immediate aftermath of the pandemic’s early onslaught: For perspective, economic activity as of the end of Q4 2020 stood at 1.7% below the levels seen at the close of 2019.
Yet despite the overall economy’s slightly weaker performance, housing spending accelerated by 43% annually. This energy pushed residential investment to 8.6% of GDP, a level that Bloomberg reported was the highest on record since 1961.
Read more: Analyst: Economy’s dependence on housing activity poses grave risks
Spending by households grew at an annual rate of 2.7%, far higher than the 0.9% level at the end of 2020. The household savings rate rose from 11.9% at the end of the fourth quarter to 13.1% during Q1, indicating substantial pent-up demand that is expected to feed into accelerated market activity once the economy fully reopens.
“There’s lots of spending power left,” said Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce.
This will set the stage for growth exceeding an annualized pace of 6% during the second half of 2021, industry observers predicted.
“More fiscal juice should push the economy over the hump, while the vaccine rollout will speed up the recovery, though labour markets will take much longer to heal,” BMO Capital Markets said earlier this year.
