Canada’s economy demonstrated a 0.3% growth in May, extending its growth streak for a second consecutive month and positioning the economy well for a robust second quarter, as reported by Statistics Canada. This growth surpassed the agency’s initial projection of 0.1% for the month.
Statistics Canada noted that 13 out of 20 industrial sectors, including construction, manufacturing, finance, insurance, and the public sector, contributed to the gains in May. The mining, quarrying, oil, and gas extraction sector experienced a 1% increase, leading the growth for the second month in a row. Maintenance activities typically scheduled for May were either completed earlier or postponed, facilitating increased extraction.
Additionally, transportation and warehousing sectors saw growth as pipelines facilitated a higher flow of natural gas to the market. The real estate and rental and leasing sector witnessed increased activity, particularly in real estate agent offices due to heightened home-selling activities.
An early estimate for June suggests a 0.2% expansion in that month, and with a slight revision by Statistics Canada for April’s GDP growth to 0.6%, the Canadian economy is set for a strong second quarter.
The advance estimate by the data agency indicated a 3.4% growth in real GDP on an annualized basis for the second quarter, rebounding sharply from a slight contraction in the first quarter of the year. This turnaround allayed fears of a technical recession that arose from two consecutive quarters of GDP contraction on an annualized basis.
BMO chief economist Doug Porter commented that the recent figures indicate the earlier concerns about a recession were overstated, highlighting that the economy is still progressing positively. Despite the positive numbers, CIBC economist Andrew Grantham cautioned that policymakers should be cautious as quarterly figures are subject to revisions. Grantham also noted that certain temporary factors, such as accelerated oil maintenance and the positive impact of events like the FIFA World Cup, likely influenced the second quarter’s GDP growth.
Looking ahead, Grantham predicted a slightly slower growth rate in the coming months due to lingering economic slack. He anticipated that the Bank of Canada would maintain the current interest rates throughout the remainder of the year.