Canada’s economy saw the fastest pace of growth on record this past summer as the country rebounded from the spring lockdowns, Statistics Canada said Tuesday.
Economic output grew 8.9 per cent in the July-September period, the fastest pace of growth in records going back to 1961. If the economy kept up this pace for an entire year, it would have grown 40.5 per cent.
As impressive as that sounds, it was slightly less than experts had been predicting. Yesterday’s fall economic update from the federal government, for instance, assumed 47.5 per cent.
The rebound wasn’t enough to recover fully the losses from the first wave of the pandemic. Canada’s economy was still 5.3 per cent smaller at the end of the third quarter than it was at the end of 2019, Statistics Canada said.
Watch: What a Biden presidency will mean for Canada’s economy.
And with a second wave of COVID-19 hitting Canada this fall, economists are warning the rebound is likely to stall. Statistics Canada’s flash estimate for October showed the economy slowing down to 0.2 per cent growth.
“The fourth quarter of 2020 is still beginning with some growth, though less than we had anticipated,” CIBC economist Royce Mendes wrote in a client note.
“Looking ahead, the economy faces a December with harsh restrictions that will likely see another contraction in economic activity.”
That was echoed by economists at Bank of Montreal who said activity “is likely to have flattened in November and is expected to take a step back in December.”
BMO sees the economy’s annualized pace of growth shrinking down to just 2 per cent for the final quarter of 2020.
Massive household savings
One thing likely to cushion the blow from a second wave of pandemic lockdowns is the very large cash savings Canadian households accumulated over the course of the year.
Generous emergency government benefits paid out more than the income Canadians lost during the crisis, and with fewer things to spend on, household savings exploded.
“We estimate that compared with pre-virus trends, household savings have swelled at least $150 billion above where they may have expected to have been in more normal times,” BMO chief economist Doug Porter wrote.
Porter noted that disposable income ― meaning income after taxes and other mandatory charges ― is up 10.6 per cent from a year ago, while consumer spending is down 3.7 per cent.
These new savings, combined with continuing government stimulus spending, means we can expect to see some rapid economic growth next year, Porter suggested.