<< Read More: Canada’s Jobs Recovery From The Pandemic Downturn Is Very Different From Past Recessions

As the following charts highlight, Canada’s economy (like the US economy) experienced an extremely deep economic downturn early last year which was triggered by the pandemic.

Despite a somewhat erratic pattern of recovery over the past twelve months, on balance, the Canadian economy has posted a fairly rapid rebound in GDP.

Indeed, the bounce-back has been so speedy, and somewhat unexpected, that the Bank of Canada just released a new guideline on its monetary policy based on a speedier economic recovery.

Photo by sebastiaan stam on Unsplash

Canada’s central bank increased its economic growth projections for the Canadian economy to 6.5% this year, much higher than the 5.8% GDP growth projection the federal government used in its recent April budget document.

The central bank also indicated that it would reduce its government bond purchases to $3 billion a week from $4 billion and shifted its forward guidance for a rate hike to the second half of 2022 from 2023.

As the chart below indicates, past recoveries from Canadian recessions often took as long as 25 to 45 months before pre-peak output levels were restored.

However, because of the unusual nature of the pandemic recession, the economic rebound (i.e., GDP growth) is coming much more rapidly. Indeed, former peak levels of output (i.e., February of 2020) will likely be reached by around the middle of this year.

As a recent National Bank report indicates, as of the end of January, Canada’s GDP was only 2.6% below the previous peak levels of February 2020.

And not surprisingly, in recent months, the economic recovery has been speedier in services than in goods production, though over the past 12 months, that has not been the case.

Already a number of sectors have exceeded their pre-pandemic peaks - including agriculture, forestry/fishing, hunting, finance/insurance, wholesale trade, and real estate.

Nonetheless, as already noted, service sector output continues to lag, including arts/entertainment which was 51.8% below its pre-pandemic level, and accommodation and food services at 41.8% below its February 2020 level.