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Q1 Macroeconomic snapshot: Waiting for a strong recovery

Mar 3, 2021
1.5 min read
FCC Economic & Financial Market Update 2021 Q1

The FCC Quarterly Economic and Financial Market update highlights developments in Canada and worldwide to help you navigate a complex business environment and make well-informed decisions.  In this post we highlight 3 big questions related to economic recovery in 2021. For a deeper dive into these topics and others, please read the full report.

1. What will GDP growth be this year?

It is estimated that GDP will decline in Q1 2021 due to COVID-led economic restrictions. The consensus forecast (Figure 1) calls for economic growth to pick up steam in Q2 and finish the year 4.7% higher year-over-year (YoY). A lot hinges on a successful rollout of vaccines and the re-opening of the economy. A full recovery in which GDP reaches the level observed before the pandemic is expected in early 2022.

2. What industries are slated to drive the recovery?

Canadian consumer debt fell while savings increased in 2020 as leisure spending declined and the Canadian Emergency Response Benefit (CERB) assisted those in need. There are strong signs of pent-up demand, which could benefit the Canadian foodservice sector and tourism once unleashed.

3. Where is the Canadian dollar heading?

Relative to US dollar, the Canadian dollar is projected to average $0.793 in 2021, declining slightly as the year goes on. The current strength in the Canadian dollar is really about weakness in the U.S. currency, as global trade has reduced demand for USD.  Future currency movements will depend on Canada and the U.S.’s ability to re-open their economies and optimize both the vaccine rollout and the level of stimulus spending.

Figure 1. Q2 quarterly GDP growth could be very strong

Quarterly real GDP quarter-over-quarter percent change
Seasonally adjusted at annual rates

Chart showing Q2 quarterly GDP growth could be very strong.

Source: Bloomberg

Kyle Burak

Senior Data Scientist

Kyle joined FCC in 2020 and is a Senior Data Scientist, specializing in monitoring and analyzing FCC’s agri-food and agribusiness portfolio, industry health, and providing industry risk analysis. Prior to FCC, he worked in the procurement and marketing department of a Canadian food retailer. He holds a master of economics from the University of Victoria.