Canada: Economic activity expands for the third straight month in May
The economy expanded 0.2% month-on-month in May, slightly down from April’s 0.3% increase but beating analysts’ expectations of a 0.1% expansion.
According to Statistics Canada, 13 of the 20 industrial sectors posted gains over the previous month, with the manufacturing sector leading the pack expanding strongly thanks to normal motor vehicle production following temporary shutdowns at car manufacturing plants in April. Moreover, the construction sector continued to perform well, which chimes with a rise in housing starts in the second quarter, although retail trade was down, highlighting that consumers remain wary. On an annual basis, growth ticked down to 1.4% in May from 1.6% the month prior. Taken together, GDP data for April and May suggests growth picked up considerably in the second quarter relative to Q1.
Commenting on May’s print, Brian DePratto, a senior economist at TD Economics, noted:
“Three solid monthly GDP reports underscore both the strength of the recovery following the weak start to the year, as well as its temporary nature. Continuing the recent theme, much of the strength in today’s report can be put down to two sectors (manufacturing and real estate) coming back to life after earlier setbacks. […] we upgrade our second quarter GDP growth tracking again, to 3.0% annualized. […] To be sure, this pace of growth is unlikely to be sustained, but the current backdrop should give the Bank of Canada some near-term comfort in ‘going it alone’ and holding the stance of monetary policy constant as its peers ease.”