Canada: Economic output rebounds in May, signaling a stabilization in activity
The economy grew 4.5% month-on-month in May, contrasting April’s titanic 11.7% decrease and well above Statistics Canada’s preliminary estimate of a 3.0% increase. The economy shrank 13.8% year-on-year in May, but was less than April’s 17.3% drop.
Moreover, on 31 July, Statistics Canada released a special flash estimate of GDP for June to provide a snapshot of the state of the economy. The preliminary figure pointed to a 5.0% increase in activity on a month-on-month seasonally-adjusted basis. Despite not releasing a detailed breakdown, the flash estimate attributed the rise in June to greater output in the manufacturing, retail and wholesale trade, and construction sectors.
In May, activity in the goods-producing industries rebounded notably, particularly due to a 17.6% rise construction sector activity and healthy growth in the manufacturing, and mining, quarrying, and oil and gas extraction sectors. In terms of services-producing industries, the wholesale and retail trade, and transportation and warehousing sectors rose robustly in May relative to the previous month.
Looking ahead, the economy should continue to gradually recover towards the end of the year as lockdown measures continue to ease. Furthermore, ample fiscal stimulus and monetary easing should also provide support to activity. Nevertheless, oil production cuts and depressed activity in the U.S. poses a significant downside risk to the outlook.
Commenting on May’s GDP reading, Brian DePratto, a senior economist at TD Economics, noted:
“Even with May and June set to be the strongest two months of growth recorded under the current definition, the economy was still about 10% shy of its pre-pandemic level of activity in early summer. The June forecast and early July indicators augur for a decent pop-back of activity this quarter, but once the initial effect of re-openings fades, we’re likely to enter a more gradual phase of recovery.”