OTTAWA, Canada—Canada’s economy grew 4.6 percent in 2021, bouncing back from its worst plunge on record the previous year due to the pandemic, the government statistical agency said Tuesday.
Gross domestic product (GDP) rose 1.6 percent in the fourth quarter—or 6.7 percent at an annualized rate—as the economy was hit by a wave of the Omicron variant of COVID-19.
The quarterly advance was “a touch faster than expected,” Desjardins analyst Royce Mendes said in a research note, with the economy ending the year stronger after contracting 5.2 percent (revised from 5.4 percent) in 2020.
Several analysts also expressed surprise over preliminary data showing the economy managed to push ahead in January, led by retail and construction, despite the reintroduction of COVID lockdowns in some provinces.
Mendes said that momentum was likely to have accelerated in February and outpaced the Bank of Canada’s growth forecast for the first three months of this year, as regions moved to relax public health restrictions.
But he also warned of an economic fallout going forward from the war in Ukraine, mostly through higher energy prices, and with “supply chains in Europe already being impacted.”
Last year’s economic growth, according to Statistics Canada, was driven by business investment in engineering structures and home ownership transfer costs, as well as an accumulation of inventories.
Imports outpaced exports.
And household spending growth was moderated by rising prices.
Canadians spent significantly on food, beverages and clothing in 2021 as public health restrictions were eased and people ventured out from home more.
Spending on housing spiked as many people worked from home and saved from less travel, and mortgage rates stayed at record lows. That pushed new home construction, resales and renovations to near-record levels, but also pushed up mortgage debt 10 percent, or an “unprecedented” Can$182 billion.
Wages rose a whopping 9.1 percent from 2020. But household disposable income still fell slightly in the second half of 2021 as governments started ending pandemic aid to workers and businesses.