MNI DATA IMPACT: Canada Dec GDP +0.3%, 2020 Worst Since 1961

Canada's economy showed surprising resilience at the end of last year even as the second wave of Covid-19 forced more health restrictions, with a flash gain of 0.3% in December and a better-than-expected 0.7% rise in November, potentially saving 2020 from being the worst year since World War II.

Statistics Canada's official November figure reported Friday was stronger than economists' consensus for a 0.4% increase. The preliminary December figure signals fourth-quarter GDP gained at a 7.8% annualized pace, or 1.9% quarter over quarter.

That momentum helped curb the preliminary tally for last year's decline to 5.1%, still the largest in the current data series going back to 1961. The prior record drop was 3.2% set in 1982. Using historical data on industrial production that goes back further in time, output may have declined about 8% last year, smaller than slumps of around 11% in 2009 and 1945.

The annual decline was slightly smaller than the Bank of Canada's -5.5% estimate, and the central bank says GDP will gain 4% this year and 4.8% in 2022. Still, the BOC and markets expect the economy will shrink this quarter as the effects of Quebec's night curfew and Ontario's shutdown of schools took hold in January. Governor Tiff Macklem has said that while vaccines bolster the medium term outlook and allow him to taper QE over time, the economy still won't return to full output until into 2023. Canada's GDP remains 3% below the pre-pandemic level.

November's gain, the seventh in a row, was led by manufacturing, mining and energy. Sources have told MNI industrial production may pick up further this year as the economy adapts to Covid. Still, the December gain was the lowest since the spring Covid lockdown ended.

"The public sector, real estate and rental and leasing and the mining, quarrying, and oil and gas extraction sector all contributed to growth, while retail, accommodation and food services, and wholesale declined," in December, Statistics Canada said.