Economic Update – April 16, 2020

April 16, 2020

As the realities of the new economic situation set in, economists and statistical agencies have begun to calculate how far the economy has fallen, and forecast the characteristics of the recovery that we are likely to experience.

Canada’s GDP Down 10% in Q1 in StatsCan Estimate

Statistics Canada continued this week with its effort to release projections of important economic data during the coronavirus pandemic, publishing a flash estimate on April 15 of Canada’s March GDP. Normally GDP figures are released near the end of each month on a two-month lag. Statistics Canada has estimated that Canada’s GDP declined by approximately 9% in March (over February), which would represent the largest one-month GDP drop in almost sixty years.

For the first quarter of 2020, Statistics Canada estimates a decline of approximately 2.6% (over Q4 2019). This is a deeper drop than the 1% economists forecasted in a recent survey by Bloomberg News. On an annualized rate, the Q1 2.6% fall translates to a drop of approximately 10% (over Q1 2019). The Conference Board of Canada, which also released a new GDP outlook on April 15, only estimates a 5% annualized Q1 decline. This discrepancy underscores one of the challenges of economic forecasting in such unprecedented times, as the need for timely information means data is being released more rapidly, and the Conference Board’s GDP outlook did not have the benefit of Statistics Canada’s estimates.

Conference Board Forecasts 25% GDP Decline in Q2

Although its Q1 estimate did not reach the magnitude of Statistics Canada’s, the Conference Board also provided a Q2 outlook. The Conference Board forecast that Canada’s GDP will fall by 25% in the second quarter (over Q2 2019). At the provincial level, the Conference Board anticipates that Ontario’s GDP hit will be less than the other large provinces in 2020, with Alberta seeing the deepest decline in the country.

No Surprises with Hardest-Hit Industries in StatsCan’s Estimates

The industries that have seen the greatest declines in output are unsurprising, with travel and tourism, personal transportation, restaurants and accommodation being the hardest-hit. In the government and education sectors, the volume of output based on hours worked is also estimated to have fallen dramatically in March, as these industries adapt to working from home and social distancing. Again unsurprisingly, Statistics Canada has observed growth in the healthcare, food distribution, online retailing and streaming sectors.

Statistics Canada did not provide data on construction output. It’s not likely that GDP for construction would have been greatly impacted in March relative to other industries, as construction activity was classified as an essential service across the country until Quebec began closing large sections of its industry down in late-March. Ontario didn’t begin shutting down parts of its construction industry until the first week of April.

Statistics Canada’s official GDP estimate for March will be published on May 29. More information on the agency’s flash GDP data can be found here.

Ontario Lost 400,000 Jobs in March, ICI Building Permits Fell 44%

As OCS reported last week, Statistics Canada estimated that Ontario’s ICI building permits decline by 44% in March, as the industry felt the first effects of the coronavirus economic disruption. Statistics Canada also reported that Ontario lost 400,00 jobs in March, although these figures do not yet show job losses in the construction industry due to the industry’s partial shutdown in early April.

For more details see our April 9, 2020 Economic Update.