2021 US and Canada GDP growth to be outstanding without introducing the next wave(s)


0

The decline in US “real” GDP (ie after accounting for inflation) in the full year 2020 was -3.4% compared to the full year of 2019. However, 2021 is shaping up to be much better. Growth in the first quarter of 2021, quarter to quarter, was +6.3% and the second quarter, +6.5%. Oxford Economics, which partners with ConstructConnect, calculates projections for construction “beginnings” and “placed capital spending”, forecast that US “real” GDP growth will advance +7.0% year-on-year in 2021 before the throttle is loosened again. Another fast +4.3% y/y in 2022. The long-term average US GDP growth rate (and also Canada, which we’ll get to shortly) was in the range of +2.0% to +2.5%. The reason this is expressed as a range is that it depends on whether one includes slowdown/recession results (for 2001, 2009 and 2020) in calculating the average. In Canada, where provinces have been more stringent than US states in enforcing COVID-related lockdown measures over the past 16 months, the drop in GDP in 2020 of -5.3% year-on-year was significantly worse than in America. Also, while Canada’s rise in Q1 2021 was +5.6% Q/Q, there are doubts about whether Q2 will yield much positive results. The change in “Canadian GDP by industry” in the first three months of this year was + 0.7% for January; + 0.4%, Feb; and +1.3%, March. However, in the first two months of the second quarter, the change in “GDP by industry” was -0.5% for April and -0.3% for May, with June’s results not yet published. Statistics Canada will not release the percentage change in GDP for the second quarter of 2021 until August 31. By the way, the reader from Charts 1 and 2 will note that the 2021/2020 GDP growth of +7.0% for the US and +6.8% for Canada, if achieved, will easily outperform all other years going back to at least 2000 the beginning of this century . Graph 1: “real” US GDP growth, “real” Y/Y & Q/Q after inflation-adjusted. Data source: Bureau of Economic Analysis (BEA) Graph: ConstructConnect. Graph 2: ‘Real’ Canadian GDP Growth, Y/Y & Q/Q Data source: Statistics Canada Table 36-10-0140-01. Diagram: ConstructConnect. Spending on Retail and Services In the United States, consumer spending typically makes up about 70% of GDP. In Canada 55%. In Canada, the percentage is lower because foreign trade plays a greater role in total economic activity than in America. However, in both cases, consumer spending accounts for more than half of the national output. Therefore, if consumer spending is strong, the economy will likely move forward. In contrast, consumer spending is directed just under half towards ‘retail’ and just over half towards ‘services’. The latter includes travel, hotel/hotel stays, dining out, and a “happy hour” at your local pub. Elements of retail and services took a hit last year, especially in the first half, but the latter spent more time prostrating on the canvas than the first half. How are they now? Well, I’m happy to report, and backed by the rest of the graphs in this article, I’ve improved a lot! From Chart 3, not only has total US retail sales recovered from a deep drop in the spring of 2020, they are currently well above the trend line that could be extended from the period of steady gradual growth from 2009 through 2019. From Chart 4 Canadian retail sales increased similarly. As a level, though, they are now about what one can expect based on their slow upward pattern over the decade prior to the pandemic’s onslaught. They have not embarked on an entirely new upward trajectory as in the US (it seems likely that the rally in the US, shown in Chart 3, is ultimately temporary.) According to Figure 5, sales by ‘food services and drinking places” (also known as bars and restaurants) in the United States came back all the way home after wandering off the beaten path. However, the comparative statistics for Canada, as shown in Chart 6, are not entirely rosy. There has been a significant increase in bar and restaurant sales north of the border since the decline in early 2020, but there is still some distance to go to make a full recovery. But the Canadian chart is interesting for another feature. It shows three clear decreases corresponding to the three most devastating outbreaks or waves of infection with the Corona virus, with the negative control continuing on the most recent. Widespread vaccination coverage in the United States and Canada, where more than half of the population in both countries received at least one “injection”, greatly increased confidence that 2021 will see extraordinarily strong GDP growth. But there remains a nagging concern that new forms of the disease, creating a “playground” among the remaining pockets of unvaccinated people, may somehow derail optimistic forecasts. The rest of the charts in this article, with accompanying explanatory text boxes, delve into some of the nitty-gritty about aspects of retail spending in the US and Canadian economies. Chart 3: Total US retail sales per month adjusted for seasonal changes, holidays, and differences in trading days, but not for price changes. The last data point is June 2021. Data source: US Census Bureau (Department of Commerce). Connect Connect. Chart 4: Total Retail Sales in Canada Latest data point for May 2021. Data source: Statistics Canada Table 10-20-0078-01.Chart: ConstructConnect. Chart 5: US sales by food and beverage service venues Latest data point for June 2021, adjusted for seasonal, holiday and trading day differences, but not for price changes. Data source: US Census Bureau (Department of Commerce) Graph: ConstructConnect. Chart 6: Food and Beverage Services at Sales Places in Canada ** Better known as Bar and Restaurant Sales. Data source: Statistics Canada Table 21-10-0019-01.Chart: ConstructConnect. Chart 7: US Building Materials and Supplies Dealers Sales Data Source: Census Bureau. Diagram: ConstructConnect. Chart 8: US Home Retail Sales Y/Y * “YoY” is every month versus the same month in the previous year. Based on “current” dollars (ie, not adjusted for inflation). Latest data points for May 2021, adjustments for seasonal changes, holidays and trading day differences, but not for price changes. Data source: US Census Bureau (Department of Commerce) Graph: ConstructConnect. Chart 9: US Retail Sales and Food Services – Y/Y – June 2021 “Current dollars” mean that they are not adjusted for inflation. The base numbers are seasonally adjusted and are not “homogeneous”. Data source: US Census Bureau. Graph 10: Canada’s Retail Home Sales Latest data points for May 2021. * “Annual” is each month versus the same month in the previous year. Based on ‘current’ dollars (i.e. no accounting for inflation) and seasonally adjusted data. Data source: Statistics Canada. Graph: ConstructConnect. Graph 11: Canadian Retail Sales Y/Y – May 2021 ‘Current dollars’ means not adjusted to account for Inflation Core numbers are seasonally adjusted and are not “homogenous” Data source: Statistics Canada Graph: ConstructConnect Graph 12: Retail Sales – Canada, provinces and cities May 2021 on an annual basis (Y/Y) and stocks on a “current” dollar basis (that is, unchanged for inflation) Seasonally adjusted Data source: Statistics Canada Graph: ConstructConnect Graph 13: Total retail sales since the “Great” Recession, US and Canada based on data adjusted for seasonality, holidays and days Trading The latest data point released for the US is June 2021; for Canada, the data tracks May 2021. Data source: Statistics Canada and US Census Bureau (Department of Commerce) Graph: Const ructConnect.


Like it? Share with your friends!

0

What's Your Reaction?

hate hate
0
hate
confused confused
0
confused
fail fail
0
fail
fun fun
0
fun
geeky geeky
0
geeky
love love
0
love
lol lol
0
lol
omg omg
0
omg
win win
0
win
Joseph

0 Comments

Your email address will not be published. Required fields are marked *