The Canadian economy contracted by 11.5 per cent from the first to the second quarter, or 38.9 per cent on a quarterly annualized basis, the steepest quarterly decline on record going back to 1961. Consumer spending fell 13.1 per cent as the start of the COVID-19 pandemic caused record job losses and prompted stores to close. Business investment was down 16.2 per cent and exports fell 18.4 per cent as our trading partners dealt with the fallout of COVID-19 in their own economies.The good news in an otherwise historically bad GDP report was that positive economic growth resumed with vigor following the record decline in April. The Canadian economy grew 4.8 per cent in May and 6.5 per cent in June, the highest monthly growth on record. We are currently tracking third quarter real GDP growth at close to 8 per cent, or more than 30 per cent on a quarterly annualized basis. While that is a sharp and welcome rebound in economic activity, there is still quite a way to go before the Canadian economy is fully recovered. In fact, we do not expect real GDP to return to its pre-COVID-19 level until 2022. That means that the current near-zero Bank of Canada policy rate and the resulting historically low 5-year fixed mortgage rates will be around for quite some time to come.
