Canada: May GDP Shows Weakness Under the Hood
- Canadian real GDP rose by 0.3% m/m in May, in line with consensus forecasts. Table 1 summarizes key data.
- Statistics Canada’s flash estimate calls for a 0.2% decline in June. That drop reflects an anticipated reversal of May’s gains for wholesale trade and manufacturing. Oil and gas’ rebound from wildfire-induced production cuts is expected to provide a partial offset. The June number brings second quarter growth in GDP by industry to just over 1% (q/q annualized). Our tracking also suggests growth slightly weaker than forecast in the July Monetary Policy Report (graph 1).
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.
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