Canada’s economy expanded by 0.3 per cent in May, marking a second consecutive month of growth and positioning the country for a stronger second quarter after a sluggish start to the year, according to new data released by Statistics Canada.
Growth was broad-based, with 13 of 20 industrial sectors posting gains during the month. Key contributors included construction, manufacturing, finance and insurance, and the public sector.
The mining, quarrying, oil and gas extraction sector led growth for the second straight month, rising 1 per cent. Statistics Canada attributed the increase in part to maintenance work that was completed earlier than usual or postponed, allowing producers to boost extraction levels.
The transportation and warehousing sector also recorded gains as pipeline operators moved more natural gas to export markets. Increased home sales helped drive activity in the real estate, rental and leasing sector, with real estate offices reporting stronger business during the month.
Statistics Canada’s preliminary estimate suggests the economy grew by an additional 0.2 per cent in June. Combined with an upward revision of April’s GDP growth to 0.6 per cent, the data points to a solid performance for the second quarter.
The agency estimates that real GDP increased at an annualized rate of 3.4 per cent in the second quarter, a significant turnaround from the slight contraction recorded in the first quarter, which had fuelled concerns about a possible technical recession.
Despite the stronger-than-expected figures, economists caution that the pace of growth may not be sustained. CIBC economist Andrew Grantham noted that the second-quarter performance exceeded the Bank of Canada’s forecast but said policymakers are unlikely to place too much weight on the initial estimates, which are often revised.
Grantham also pointed to temporary factors—including changes to oil sector maintenance schedules and economic activity linked to the FIFA World Cup—as contributors to the stronger GDP figures. He expects growth to moderate in the coming months and believes the Bank of Canada will likely keep interest rates unchanged for the remainder of the year.
