Statistics Canada says economy grew 0.3% in April, but contracted in May

OTTAWA – Economic growth slowed in April and Statistics Canada said Thursday its early estimates for May pointed to a contraction for the month amid weakness in the resource, manufacturing and construction sectors.

The agency said growth in April was led by mining, quarrying and oil and gas extraction and customer-facing industries, as real gross domestic product rose 0, 3% for the month, compared to 0.7% in March.

However, its first estimate for May pointed to a contraction of 0.2% for the month. The official reading of the month is expected on July 29.

Stephen Brown, senior economist for Canada at Capital Economics, said the preliminary estimate for May came as a shock, but added it appeared to be partly due to temporary factors.

“Amid high commodity prices and supply cuts elsewhere, we would be surprised if activity in the mining, oil and gas sector did not rebound in June,” Brown wrote in a report.

“Similarly, as there are now signs that global product shortages are easing, manufacturing activity should also rebound in the coming months.”

According to Statistics Canada, real gross domestic product rose 0.3% in April.

  • The Statistics Canada offices at Tunny's Pasture in Ottawa are shown on Friday, March 8, 2019.

The economy reading comes ahead of the Bank of Canada’s next interest rate decision set for July 13. Economists generally expect the central bank to raise its main interest target, with many expecting an oversized increase of three-quarters of a percentage point.

The central bank is trying to bring inflation, which hit 7.7% in May, under control.

RBC economist Claire Fan said that despite May’s surprise drop, the economy continues to run firmly above long-term capacity limits, as evidenced by low unemployment rates.

“And inflation remains uncomfortably high at levels well above the central bank’s target,” Fan wrote in a report.

However, Fan said RBC expects growth to slow more significantly over the year, pointing to high inflation and rising borrowing costs which further weigh on household purchasing power. .

For April, Statistics Canada said the mining, quarrying, and oil and gas extraction sector increased by 3.3%, while oil and gas extraction increased by 3. .9%.

Oil sands extraction rose 5.6%, the largest monthly increase since September 2020, while oil and gas extraction excluding oil sands rose 1.6%.

The accommodation and food services sector grew 4.6%, with food services and drinking places rising 3.5% to pre-pandemic highs. Accommodation services increased by 7.2%.

The arts, entertainment and recreation sector rose 7.0%, but was still 12% below its February 2020 level.

The real estate sector contracted 0.8% in April, as activity at the offices of real estate agents and brokers fell 15.0%, the largest contraction since April 2020.

This report from The Canadian Press was first published on June 30, 2022.