Economic activity growth rises in May
GDP increased 0.3% month-on-month in seasonally-adjusted terms in May (April: +0.1% mom), slightly below the flash estimate of 0.4%. That said, April’s figure was revised up from a flat reading. May’s data was driven by accelerations in services and manufacturing growth more than offsetting declines in construction, and mining and energy. The end of a strike by government workers boosted public-sector services, while improved global supply chains supported manufacturing. In contrast, forest fires and facility maintenance in Alberta province led some energy firms to reduce operations, weighing on energy output.
On an annual basis, monthly GDP rose 1.9% in May, which was above April’s 1.8% expansion.
A flash estimate suggests that GDP fell 0.2% in June due to declines in wholesale trade and manufacturing. In contrast, the energy sector likely rebounded from May’s fire-induced disruptions. This puts GDP growth for Q2 as a whole at around 1.2% in quarter-on-quarter annualized terms.
On the reading and outlook, Desjardins economists said:
“May and June numbers suggest the Canadian economy is slowing and reinforce our view that the Bank of Canada will hold rates in September given the recent emphasis on balancing the risks of over and under tightening policy. Economic growth is now tracking weaker than the Bank’s projections, even after the economy got a boost—as expected—from the end of the federal public service strike in May. That effect will surely fade in June and beyond, as implied by the weak flash estimate.”
TD Economics’ Marc Ercolao said:
“Since April, GDP data has been impacted by a series of transitory shock whose net effects make the data more difficult to interpret. Looking ahead, headline GDP figures may continue to be skewed by the government’s grocery rebate and the effects of the B.C. port strike in July. All said, slowing growth appears to be on the cards for the Canadian economy.”
Canada GDP Chart
Canada GDP Data
|Economic Growth (GDP, ann. var. %)||2.8||1.9||-5.1||5.0||3.4|
|GDP (USD bn)||1,725||1,743||1,648||2,002||2,137|
|GDP (CAD bn)||2,236||2,314||2,210||2,510||2,783|
|Economic Growth (Nominal GDP, ann. var. %)||4.4||3.5||-4.5||13.6||10.9|