MNI REALITY CHECK: Canada Recovery Seen Overcoming Slip in Q1

Canadian companies told MNI they see a continued economic recovery following a first-quarter slowdown, with consumers adjusting to health restrictions and the rollout of vaccines while longer-term growth is aided by the return of immigration flows.

Statistics Canada on Tuesday is expected by economists to show a 7.5% annualized gain in the fourth quarter, slowing from the significant gain of 41% in third quarter after the spring lockdown lifted. Strong investment in housing will be slowed by a second round of major lockdowns at the end of the year, something the BOC says will cause a small output contraction in the first quarter before solid growth in the second half of the year as vaccines roll out.

Statistics Canada may also report flash data for January and the first quarter. Investors are watching the official monthly figures for December as a sign of potential momentum into the first quarter, and economists see growth slowing to 0.3% from 0.7% in November.

Key notes from industry leaders ahead of the report due Tuesday at 8:30 EST:

Jim Goetz, President, Canadian Beverage Association:

Despite lower demand in the restaurant industry and take-out services due to the closures, "in general we have seen sales remain stable," he said.

If people get back to picking up groceries by car because of another next wave of COVID, it would not affect the industry that much, he said. On the other hand, the closure of restaurants is where the next wave would be significant.

Investment in protecting a safe supply chain is overtaking new product development, he said. "Our main goal is to make sure that those facilities are operating in a safe manner and there is still product on the shelf," Goetz said.

Jay Averill, Media Relations Manager, Canadian Association of Petroleum Producers:

"The industry is at the start of a long road to recovery, the speed of which is dependent on the effectiveness of vaccines and the opening up of economies around the world," he said.

The rise in energy prices should underpin a 14% increase in natural gas and oil investment in 2021, he said. That follows some years of major declines in the industry's capital spending. This year's capital spending of CAD27.3 billion is still far off the CAD34 billion in 2019.

"The combination of a global economic slowdown resulting from the COVID-19 virus and the dramatic drop in oil prices due to geopolitical actions by Russia and Saudi Arabia had a devastating impact on Canada's oil and natural gas sector in 2020."

Robert Ghiz, President & CEO, Canadian Wireless Telecommunications Association:

Installing 5G equipment will boost investment by CAD26 billion over the next five years, Ghiz said, about double last year's total of CAD12.4 billion, and add 250,000 jobs.

"We are seeing more demand and more opportunity in our immigration levels, which declined during COVID, but as restrictions get lifted, and as the federal governments ramp up the immigration levels in Canada to help drive the economy, that means more customers," he said.

"When lockdowns started the demand was down in terms of wireless connectivity, but it rose dramatically in wireline connectivity, and that was obviously because people were working from home", he said.