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 exceeded the agency’s initial projection of 0.1% for the month. Thirteen out of twenty industrial sectors, including construction, manufacturing, finance, insurance, and the public sector, contributed to the overall growth.
The mining, quarrying, oil, and gas extraction sector saw a 1% increase in May, leading growth for a second month in a row. Some routine maintenance activities that typically occur during the month were either completed ahead of schedule or postponed, allowing for increased extraction. Additionally, transportation and warehousing sectors experienced growth, driven by increased natural gas exports via pipelines.
Real estate agent offices were notably busy due to heightened home-selling activity, boosting the real estate and rental and leasing sector. An early estimate for June suggests a 0.2% expansion in that month. With a slight upward revision of April’s GDP growth to 0.6%, the Canadian economy is on track for robust growth in the second quarter.
Statistics Canada’s preliminary estimate indicates a 3.4% annualized increase in real GDP for the second quarter, rebounding sharply from a mild contraction in the first quarter of the year. Despite concerns of a technical recession following two consecutive quarters of annualized GDP decline, BMO chief economist Doug Porter believes the earlier weakness was overstated.
CIBC economist Andrew Grantham cautions against reading too much into the quarterly numbers, noting that they are subject to revision. He attributes some temporary factors, such as advanced oil maintenance and positive impacts from events like the FIFA World Cup, to the second-quarter GDP boost. Grantham anticipates a slower growth pace in the upcoming months, suggesting that the Bank of Canada is likely to maintain interest rates at their current levels throughout the remainder of the year.
