The Canadian economy ended 2021 on a strong note, expanding by 4.6% on an annual basis thanks to a reopening economy, according to data released by Statistics Canada on Tuesday.
Real gross domestic product, after adjusting for inflation, grew by 1.6% in the fourth quarter on a quarterly basis following a similarly strong third quarter of 1.3% growth.
A heated housing market played an important role in the expansion, with high values of home resales and residential construction. As people worked from home, they built new homes, moved to other homes, and carried out renovation projects. All helped boost the economy.
In-person services such as spending on food and beverages and on clothing had sizeable growth as the economy reopened following a 2020 marked by COVID restrictions. Still, they were still way below the pre-pandemic level, as Canada remains conservative in its pandemic response and industries such as tourism and entertainment might take longer to recover.
As Canadians went out, traveled and shopped, savings rates unsurprisingly dropped to 6.4% in the fourth quarter compared to the double-digit increases throughout 2020 and in the first half of 2021.
After half a year of consistent growth, the economy stayed steady in December. The lack of growth can be attributed to the spread of the omicron variant as public health restrictions reduced in-person services, most notably retail trade (2.7%), accommodation and food services (1.5%), and arts, entertainment and recreation (3.7%).
The possibility that the pandemic would become endemic has fueled strong growth forecasts. This year, though, is off to a rough start as omicron, border protests and deteriorating political conditions abroad have taken a toll and could cause first quarter growth to slightly recede. But prospects are now positive for Canada, with the main challenge being high inflation that could impose a drag on consumption.