Market observers are divided on the degree of GDP growth slowdown during the tail end of the year
The Canadian economy’s August and September growth is likely to be its last show of force this year with the looming slowdown during the fourth quarter.
Last week, the Bank of Canada predicted that annualized growth in the October-December period will be around just 1%, as a prelude to prolonged recovery “over the next several quarters.”
This will come in the wake of the GDP’s 1.2% upswing in August, and a 0.7% expansion in September, according to Statistics Canada.
September’s economic performance was already at roughly 96.1% of pre-pandemic output level. This makes it a “solid starting point” for Q4, said Derek Holt, economist at Bank of Nova Scotia.
Holt is somewhat more optimistic for the months ahead, estimating a fourth-quarter annualized gain of 3.5%.
However, a combination of colder weather and the surge of second-wave COVID-19 infections might disrupt this measured pace, and instead draw out the recovery for at least several years.
A recent Reuters poll of nearly 50 economists found that growth is likely to significantly decelerate to 5% in Q4 and 5.2% in Q1 2021, with an overall decline of 5.9% for the whole of 2020.
Three out of five respondents said that the risk of a fresh outbreak derailing Canada’s economic recovery was either “high” or “very high.”
“The second wave has already forced Ontario and Quebec to shut down businesses like restaurants, bars, and gyms for 28 days. Only with the virus under control can provinces safely reopen the entire economy. Until then, the next phase of the recovery will be slow and choppy,” said Sri Thanabalasingam, senior economist at TD.
