In this edition, we take a closer look at the recent ramped up pace of vaccinations in Canada, and what that means for the economy. Health restrictions continued to be maintained in many provinces into Q2, marking what we believe to be the low point of the economy for the year. We look for the economy to run very hot in the second half of the year as rising vaccination rates allow for the full reopening over the summer.

Theme 1: Canada ramping up vaccinations

Canada turned the corner in May ramping up the pace of vaccinations such that the country now stands right behind Israel who is the leader in the percentage of the population who have received at least one dose of a vaccine. This allowed several provinces to reopen and marks a turning point for the economy.

 

Theme 2: Canada’s economy stumbled in spring but set to rebound strongly in Q2

Health restrictions were maintained in many provinces in May weighing further on activity though rising vaccinations and a broader reopening of the economy sets up for a robust rebound starting in June. While we don’t think the economy contracted in the second quarter, growth will be materially slower than in the previous three quarters.

But our forecast is that Q2 will mark the low point for growth this year. We look for the economy to run very hot in the second half of the year as rising vaccination rates allow for the full reopening over the summer.

 

Theme 3: Canada to post record homes sales in 2021 despite slowing in second half of year

Canada’s housing market blasted into 2021 with fierce momentum with sales hitting successive record highs in January through March. The market softened somewhat in April and May though remained at historically elevated levels. We expect a gradual rise in longer-term interest rates, deteriorating affordability, mortgage stress test tightening and the resumption of office work to cool activity as the year progresses.

As Deputy Chief Economist, Dawn contributes to the macroeconomic and interest rate forecasts for Canada and the U.S. Before joining RBC, Dawn worked as a reporter for Bloomberg Financial News in Toronto covering the Canadian bond and currency markets. She also spent ten years as the Canadian bond market strategist for a major U.S. bank.

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