Canada’s economy expanded by 0.3% in May, marking the second consecutive month of growth and positioning the economy for a robust second quarter, as reported by Statistics Canada. The growth exceeded the 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 positive performance in May.
The mining, quarrying, oil, and gas extraction sector experienced a 1% increase in May, leading the growth for the second month in a row. Maintenance activities that are typically carried out during the month were either completed earlier or postponed, facilitating increased extraction. Additionally, transportation and warehousing saw growth, driven by heightened natural gas exports through pipelines.
Real estate agent offices saw heightened activity due to increased home sales, boosting the real estate and rental and leasing sector. An early estimate for June suggests a 0.2% expansion for that month. Statistics Canada also revised the GDP growth for April slightly upward to 0.6%, setting a promising trajectory for a solid second quarter of growth for the Canadian economy.
The advance estimate from the data agency indicates a 3.4% annualized increase in real GDP for the second quarter, rebounding sharply from a slight contraction in the first quarter. While concerns about a technical recession arose after two consecutive quarters of annualized GDP decline, BMO chief economist Doug Porter believes the previous weakness was overstated.
However, CIBC economist Andrew Grantham cautions against overinterpreting the quarterly numbers, citing potential revisions and temporary factors like oil maintenance and the positive effects of events like the FIFA World Cup on second-quarter GDP growth. Grantham anticipates a slight slowdown in growth in the upcoming months, projecting a gradual reduction in economic slack and the Bank of Canada maintaining interest rates unchanged for the rest of the year.