MNI REALITY CHECK: Canada GDP Seen Grinding Ahead on Vaccines

Canadian companies are reporting widespread supply chain disruptions as they adapt to the shift in orders triggered by the pandemic, and said the third wave of the virus leaves a question mark over the pace of growth this year as vaccines roll out.

Consumer spending is expected to lift Canada's GDP for a 10th straight month in February in a report due Friday at 8:30am from Ottawa. Growth is seen slowing to 0.5% from January's 0.7%, reflecting lockdown rules that may also weigh on the economy in March and April. Investors should watch for any flash March GDP figure, which may ratify the market's view that first-quarter growth was at least 5% annualized.

Oumar Dicko, Chief Economist at Canadian Automobile Dealers Association:

"The serious concern of the dealers in Canada and globally is the shortages in semiconductors which is creating a shortage in inventory, so even if consumers are getting back to the market, we are going to have an issue," he said. The inventory shortages aren't likely to drive up prices given inconsistent consumer demand, he said.

The third wave of the virus will likely hurt sales in the second quarter, undoing momentum in March when health rules were relaxed a bit, he said. Sales plunged 20% last year, leading some dealers to turn to a federal wage subsidy to keep staff on the payroll.

"Our forecast for this year is a flat forecast, so we are expecting a little higher than the last year but it won't be a full-fledged recovery, and this is very dependent on the trajectory of the virus in the Canada and U.S.," Dicko said.

"We are going to get back to a semblance of normal in the coming months but I think the new normal is a bit different, with the emphasis on online sales."

Jean-Michel Laurin, President/CEO of Canadian Poultry and Egg Processing Industry:

"We are still seeing demand patterns being upset by the pandemic, there are some hopes with the vaccinations happening," Laurin said. "It will take a while to get back to normal for the production side, and for the demand side getting back to normal would be a slow and long process before people feel safe gathering."

Sales to hospitality businesses have declined as much as 20% in some categories and that's been a bigger pressure than gains in home-cooked meals, Laurin said. "Things change very quickly with the third wave," he said.

"For the next seven or eight months, we are expecting slowly get back to a new normal as more Canadians get vaccinated," he said. "I expect less wild variation and variability."

Allen Kirkpatrick, Executive Director, Canadian Corrugated and Containerboard Association:

"There has been a remarkable shift in demand as the pandemic hit," he said. "We started 2021 much stronger than the last year."

"The hardest-hit sectors are not the places where we were strongly concentrated, like aerospace, automotive, and hospitality," he said. "I'm very optimistic regarding future demand and sales because retail and e-commerce has been changed, the sectors that we offer support."

"We are about 70 to 75 plants functioning within the sector of mills and converting specialty locations, every one of those plants wants to hire people right now," Kirkpatrick said. "The CERB program (of government relief checks for workers displaced by Covid) did not help those of us that needed labor, it was a drag on people who want to work with us."

Source: Statistics Canada