The economic recovery in Canada continues to surprise to the upside. In the fourth quarter, GDP grew by 9.6% on an annualized basis. The consensus expectation had been for 7.5% growth in the final quarter of 2020. For all of 2020, the economy contracted by 5.4%. At the onset of the pandemic, if you had told anyone that we would still be in shutdowns one year later, absolutely no one would have predicted that GDP would be down only 5.4% for 2020. Through a combination of unprecedented fiscal spending and expansive monetary policy, the economy has managed to stay in reasonable shape. Unsurprisingly, the sectors driving growth are the ones benefitting most from that fiscal and monetary policy. The housing industry continues to capitalize on record low rates and is an engine of growth. Consumer spending (fueled in part by government subsidies) remains healthy, though it slowed a bit in the fourth quarter. USD to CAD is flattish this morning after gaining 0.7% yesterday as stocks rallied in response to a pullback in yields.
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