(OTTAWA) Economic growth slowed in April, and Statistics Canada said Thursday that its first estimates for May pointed to an economic contraction amid weakness in the resource, manufacturing and construction sectors.
Updated yesterday at 2:01 p.m.
Growth in April was driven by the mining, quarrying, and oil and gas extraction sector, as well as industries dealing directly with the public, the official said. federal agency. Real gross domestic product advanced 0.3% for the month, after advancing 0.7% in March.
However, the first estimate for May indicated a contraction of 0.2%. The official reading for this month is expected on July 29.
Stephen Brown, senior economist for Canada at Capital Economics, pointed to the preliminary estimate for May as a shock, but added that it appeared to be partly attributable to temporary factors.
“With 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.
Stephen Brown, senior economist for Canada at Capital Economics, in a report
The release of gross domestic product data 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, and many expect an “oversized” increase of three-quarters of a percentage point.
The central bank is trying to tame inflation, which reached 7.7% on an annual basis in May.
Key sectors
Royal Bank economist Claire Fan said that despite the surprise drop estimate for May, the economy continues to run firmly above its long-term capacity limits, as evidenced by low rates unemployment.
“And inflation remains uncomfortably high, at levels well above the central bank’s target,” Ms.me Fan in a report.
However, M.me Fan pointed out that the Royal Bank expects growth to slow more markedly in the year, insisting on high inflation and rising borrowing costs, which further weigh on purchasing power. Household.
For April, Statistics Canada reported that the mining, quarrying, and oil and gas extraction sector increased by 3.3%, with oil and natural gas extraction increased by 3.9%.
Oil sands extraction rose 5.6%, recording its largest monthly increase since September 2020, while oil and natural gas extraction excluding oil sands rose 1.6%.
The accommodation and food services sector rose 4.6% as food services and drinking places climbed 3.5% to surpass pre-pandemic levels. Accommodation services rose 7.2% in April.
The arts, entertainment and recreation sector advanced 7.0%, but was still 12% below its February 2020 level.
The real estate sector contracted 0.8% in April, as activity at offices of real estate agents and brokers fell 15.0%, its biggest decline since April 2020.