Canada: GDP contracts in May; preliminary estimate points to a rebound in June
The economy fell 0.3% month-on-month in May, which was softer than April’s 0.5% fall, and Statistics Canada’s preliminary estimate made in early July. Economic activity rose 14.6% year-on-year in May, easing from April’s 20.0% increase, and predominately driven by a low base effect due to heightened restrictions to curb the spread of the virus in the same month last year.
In May, the services-producing industries contracted at a noticeably softer pace due to a weaker fall in retail trade and the real estate, and rental and leasing sub sector. That being said, the goods-producing industries decline in May, contrasting the modest increase in April and predominately driven by a sharp drop in construction activity.
Moreover, Statistics Canada released a special flash GDP estimate for June to provide a snapshot of the state of the economy. The preliminary figure pointed to a 0.7% increase in activity on a seasonally-adjusted month-on-month basis. Although a detailed breakdown was not released, the flash estimate attributed June’s increase to stronger retail trade, manufacturing, and mining, quarrying, and oil and gas extraction output.
Commenting on the short-term outlook, Sri Thanabalasingam, senior economist at TD Economics, noted:
“It may not be smooth sailing for the rest of the recovery. Economic gains are still very much tied to the whims of COVID-19. The Delta variant is wreaking havoc around the world, leading to a re-tightening of restrictions in some countries. Canada has so far avoided the worst of this virus, but cases are rising in some provinces. A fourth wave could lead to another stalling in the recovery though with relatively high rates of vaccination a full reversal appears less likely.”