Restrictions weighing on the recovery

The restrictions reimposed in Ontario and Quebec this month have weighed heavily on restaurant visits, but we think overall GDP will continue to recover so long as more draconian lockdowns are avoided. The OpenTable data show that visits to restaurants have plunged to near-zero in Quebec, while visits in Ontario are down by almost 30%. The effects of the current restrictions on GDP should nevertheless be small. Even assuming a further decline in restaurant visits as the colder weather limits outdoor dining, we estimate that lower spending at food service and drinking places will directly subtract just 0.3% from total GDP in October. While there are also restrictions on other services, the effect of these will be smaller and consumers are likely to partially replace services spending with increased spending elsewhere. As activity in other sectors, such as manufacturing and construction, should continue to recover, we see scope for overall GDP to rise in October, although the increase is set to be far smaller than in recent months. A far bigger challenge may come over the rest of the year, depending on whether the restrictions imposed so far are enough to contain the virus or whether further measures are needed.