The demand for houses in Canada has worried the Bank of Canada for some time now but the demand was a major driver of growth in GDP. The gross domestic product increased at 5.6% annualized rate in the first quarter of 2021, Statistics Canada reported on Tuesday.
While this data is below the 6.8% growth Bloomberg economists had forecasted, housing investment grew at an annualized 43% pace. The investment in homes whether its constructing, renovating or buying new homes is helping the economy power through COVID19 restrictions.
The boom in housing brought residential investment up to 8.6% of GDP. In March, the economy expanded 1.1 %.
The Canadian economy is getting closer to normality and one reason for optimism is that household spending was up 2.7% versus 0.9% at the end of the fourth quarter of 2020. At the same time, household savings rate increased to 13.1% from 11.9% at the end of last year. This data suggests that there could be massive growth later this year.
Although the wave of lockdowns across Canada from April through May stalled growth, economists expect the growth to return to normal in the second half of 2021 as restrictions in the country’s biggest provinces are eased and amid higher vaccination rate.
As of the date of this post, 58% of the population in Canada has received the first dose at least.
References:
1) Hagan, S. (2021, June 1). Housing Boom Helps Prop Up 5.6% Annualized Growth in Canada. Bloomberg.com. https://www.bloomberg.com/news/articles/2021-06-01/housing-boom-helps-prop-up-5-6-annualized-growth-in-canada.
2) Holder, J. (2021, January 29). Tracking Coronavirus Vaccinations Around the World. The New York Times. https://www.nytimes.com/interactive/2021/world/covid-vaccinations-tracker.html.
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