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The Canadian economy contracted 5.4% in 2020, the worst year on record

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March 02, 2021 • • 13 minutes ago • • 1 minute read • • Join the conversation A closed sign can be seen in the window of a small business.A closed sign can be seen in the window of a small business. Photo by Olivier Douliery /.AFP via Getty Images / Files

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OTTAWA – The Canadian economy recorded its worst performance in 2020, when the COVID-19 pandemic hit the country, closing businesses and leaving millions of people unemployed.

According to Statistics Canada, real gross domestic product shrank by 5.4% in 2020. This is the largest annual decrease since comparable data was first collected in 1961.

The decline for the year was due to the shutdown of large swaths of the economy in March and April during the first wave of the COVID-19 pandemic that devastated the economy.

Since then, economic activity has grown slowly and steadily.

According to Statistics Canada, the economy grew 9.6% on an annualized basis in the fourth quarter of last year, compared to an annual growth rate of 40.6% in the third quarter.

That was higher than expected, with an average economist estimate of 7.5%, according to financial data firm Refinitiv.

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Despite better than expected results for the full quarter, December was up 0.1%, followed by a 0.8% increase in November.

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Statistics Canada found that aggregate economic activity in December was about 3% below pre-pandemic levels in February 2020.

Looking ahead to January, Statistics Canada announced that the economy expects an early 0.5% growth.

CIBC chief economist Avery Shenfeld wrote in a note that the number should allay fears of a complete downturn in the first quarter in early January.

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Wholesale, manufacturing and construction led the increase, while retail declined earlier in the year, according to Statistics Canada.

BMO chief economist Douglas Porter said the economy weathered second wave restraints better than expected and could signal a better than expected quarter and possibly a year overall.

“Look for new growth drivers that will kick in as the economy gradually opens up again this year, resulting in roughly (six percent) growth – a nice reflection of last year’s deep dive,” he wrote in a note.

“It’s not exactly a V-shaped recovery, but it’s very close.”

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