The Daily
 In the news  Indicators  Releases by subject
 Special interest  Release schedule  Information

Experimental indexes of economic activity in the provinces and territories, January 2021

Warning View the most recent version.

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.

Released: 2021-05-11

Following a slowing of activity growth in December, the three-month moving average of economic activity further slowed or declined in a majority of provinces and territories in January.

The experimental indexes based on principal component analysis (PCA) and the least absolute shrinkage and selection operator (LASSO) were developed to address the need for a comprehensive measure of economic activity at the sub-national level in advance of the annual estimates of gross domestic product for the provinces and territories. PCA and LASSO are statistical methods that can be used to combine a range of economic indicators from a number of areas (e.g., the labour market, merchandise trade, manufacturing production, and wholesale and retail trade) into composite indicators.

The average growth over the November-to-January period for the PCA-based indexes was slower than that over the three months ending in December for 9 of the 11 indexes reported. The largest decreases were found in Prince Edward Island, Alberta, Quebec and Ontario.

The average growth over the three months ending in January for the LASSO-based indexes showed declines in 10 of the 12 indexes reported, compared with the three months ending in December. The largest decreases occurred in Alberta, Quebec and New Brunswick.

The current tightening of restrictions is associated with more economic activity compared with the beginning of the pandemic

Over the late fall and the winter, rising COVID-19 cases led to increased restriction levels, but there was no commensurate decline in activity, compared with the period from March to May 2020.

When the indexes are compared using February 2020 as the base period, the steep decline with the onset of COVID-19 is evident in the decrease over the March-to-May period. The indexes then illustrate the recovery of activity over the summer and into the fall, until restrictions began to be tightened again. However, the indexes indicate that the tighter restrictions did not lead to a return to the steep declines in activity seen at the beginning of the pandemic. Rather, growth in activity stalled over the October-to-January period.

The reason behind the different response of economic activity to the second wave of COVID-19 is not clear, and it is likely the result of a combination of factors.

During the first wave, there was also a rapid decline in oil prices that had large effects on Alberta and Saskatchewan. This did not occur during the second wave; in fact, energy exports and production increased over the fall and winter.

The first wave saw a contraction in tourism and travel industries, and they did not experience as large a recovery over the summer. While restaurants did see an increase in business, airlines continued to see reduced demand, and travel advisories and restrictions remained in place, as did capacity restrictions for accommodation and lodging services. As a result, many of the industries most sensitive to the impacts of COVID-19 were already operating at a reduced level of activity when the second-wave restrictions began to be tightened.

Between the first and second waves, firms adapted to COVID-19. This included the introduction of physical distancing practices, renovations to permit greater operations during the pandemic (particularly restaurants that invested to expand patio capacity), increased use of work-from-home arrangements, a movement to online sales with curbside pick-up for retailers, the ability of childcare providers to remain open and the implementation of online options for school systems. These adjustments allowed businesses to continue operating during the second wave at reduced capacity or through physically distanced business practices rather than closing outright as would have happened during the first wave.

Chart 1  Chart 1: PCA-based activity indexes, British Columbia, Alberta, Ontario and Quebec
PCA-based activity indexes, British Columbia, Alberta, Ontario and Quebec

Pause in growth also seen in aggregate data for Canada

The same type of pause seen in the activity indexes is also present in the major monthly indicators of economic activity. Estimates of real exports, real imports, employment and monthly real gross domestic product all show a slowing of growth over the fall and winter, following a recovery from the rapid declines that occurred with the onset of the pandemic.

Chart 2  Chart 2: Exports, imports, employment and monthly GDP, Canada
Exports, imports, employment and monthly GDP, Canada

While the month-to-month changes can differ across the national surveys or the activity indexes, the general pattern is consistent across the different sources. This supports the notion that restrictions related to the second wave of the pandemic did not have the same effect on production, trade or labour markets as those related to the first wave.

  Note to readers

Additional information is available in the paper titled "Experimental Economic Activity Indexes for Canadian Provinces and Territories: Experimental Measures Based on Combinations of Monthly Time Series," which is part of the series Analytical Studies: Methods and References (Catalogue number11-633-X).

Contact information

For more information, contact us (toll-free 1-800-263-1136; 514-283-8300;

To enquire about the concepts, methods or data quality of this release, please contact Ryan Macdonald (343-998-1890;, Economic Analysis Division.

Date modified: