Question Period Note: Gross Domestic Product at Basic Prices

• Real GDP at basic prices surged 1.1% in February, following a 0.2% increase in January.
• Real GDP growth in February was above market expectations of a 0.8% increase (Bloomberg survey).

• With the gain in February, real GDP has increased for nine consecutive months and is now 1.5 per cent above its pre-pandemic level.
• The Canadian economy weathered the Omicron wave quite well and has considerable momentum.
• However, the Russian invasion of Ukraine has increased uncertainties for Canada’s outlook.
• In Budget 2022, the government makes targeted and responsible investments to create jobs and prosperity today, and build a stronger economic future for all Canadians.

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• Bottom Line: A very positive report, with a strong GDP gain in February (1.1%) following the easing of restrictions from the Omicron wave. This was better than market expectations and one of the strongest monthly gains on record. The preliminary estimate for March points to further gain (0.5%). Overall, the report suggests the economy was on strong footing in the first quarter.
• Industry Breakdown: The increase in February was broad-based across sectors with gains seen in 16 of 20 industries. Gains were strongest in contact-sensitive industries, with accommodation and food services surging 15.1% and arts entertainment and recreation jumping 8.4%. Mining, quarrying, oil and gas (+3.4%) and transportation and warehousing (3.1%) also posted strong growth. There was also a rebound in oil extraction and signs of increasing investment in the sector, with a rise (1.7%) in engineering construction contributing to higher construction activity (3.6%). Declines were seen in utilities (-2.3%), wholesale trade (-1.1%) and retail trade (-0.2%).
• Recovery Relative to Pre-Pandemic: Economic activity in February was 1.5% above its level in February 2020. Eleven of 20 sectors have output above their pre-pandemic levels, with finance and insurance, professional services and construction the furthest above. Remaining weakness is most pronounced in arts and entertainment (-25%) and transportation and warehousing (-13%), suggesting further room for growth.
• Outlook: Strong activity appears to have continued in March, supported by the ongoing rebound in hard-hit sectors, combined with strength in manufacturing (due to continued easing of supply constraints) and construction. Based on this preliminary reading, real GDP at basic prices is on track to grow by 5.6% (annual rate) in the first quarter as a whole (official data based on real GDP at market prices to be released on May 31st). This would be a moderation from the fourth quarter (6.7%) but well above the 1.0% gain expected in the February survey.