Canada’s Economy Expanded 1.4% In the First Quarter Amid Strong Housing Boom
Canada’s economy continued on its rebound trajectory in the first quarter, as a surge in home construction projects helped fuel the increase.
According to Statistics Canada, GDP grew 1.4% in the first quarter of 2021, following a 9.1% and 2.2% increase in the third and fourth quarter, respectively. The latest figures put Canada’s output levels at an annualized rate of 5.6%, and 0.3% above the same period a year ago. In March alone, GDP rose 1.1%, marking the eleventh consecutive month of gains following the nadir observed in March and April of last year.
The economy was given a boost in the first quarter, largely thanks to the housing sector, which saw investment boom 9.4% in the first quarter to an annualized pace of 43%— the highest on records dating back to 1961. The growth in the housing sector was broad-based, with new construction rising 8.7%, in large part due to building activity of detached units in Ontario and Quebec.
Household spending also noted a 0.7% boost last quarter, amounting to an annualized pace of 2.7%. However, when compared to year-ago levels, spending was still 1.9% lower. In the meantime, household disposable income grew 2.3%, following two straight months of declines. The jump was largely attributed to government transfer payments, which increased 1.8% following the expansion of Employment Insurance and other pandemic-related income support programs.
Nominal household consumption increased 1.1%, but was surpassed by growth in disposable income. The savings rate among Canadian households jumped from 11.9% in the fourth quarter to 13.1% last quarter— nearly double the rate of 5.1% observed during the first quarter a year ago.
Despite the positive outlook on Canada’s economic recovery, price pressures are making a strong appearance, particularly for goods and services produced domestically. The GDP implicit price index, which measures the overall price of locally produced goods and services, increased 2.9% in the first quarter, largely driven by a surge in costs for building materials and for energy used domestically and exported.
Information for this briefing was found via Statistics Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.