Canada’s economy expanded by 0.3% in May, marking the second consecutive month of growth and setting a strong pace for the second quarter, as reported by Statistics Canada. This growth surpassed the initial estimate of 0.1% growth for the month. A total of 13 out of 20 industrial sectors, including construction, manufacturing, finance, insurance, and the public sector, contributed to the positive performance. The mining, quarrying, oil, and gas extraction sector saw a 1% increase in May, driving growth for the second month in a row due to accelerated maintenance work and extraction activities. Transportation and warehousing also experienced growth, with increased natural gas exports through pipelines. Real estate agent offices were notably busy, reflecting heightened home-selling activity and boosting the real estate and rental and leasing sector.
An early estimate for June suggests a 0.2% expansion, further solidifying the economy’s growth trajectory. Statistics Canada has also revised April’s GDP growth slightly upward to 0.6%, positioning the Canadian economy for a robust second quarter. The data agency’s advance estimate indicates a 3.4% annualized increase in real GDP for the second quarter, rebounding sharply from a mild contraction in the first quarter. Concerns of a technical recession following two consecutive quarters of GDP contraction earlier in the year have been alleviated by these positive numbers. BMO chief economist Doug Porter emphasized that the economy remains resilient, dispelling fears of a recession.
While policymakers are expected to take a cautious approach given the potential for data revisions, CIBC economist Andrew Grantham anticipates a slower growth pace in the upcoming months. One-off factors like advanced oil maintenance and positive impacts from events such as the FIFA World Cup likely bolstered second-quarter GDP growth. Grantham foresees a gradual reduction in economic slack and predicts the Bank of Canada to maintain interest rates throughout the rest of the year.
