Canadian economic growth rebounded in April, but early indications suggest it failed to maintain momentum through May.
Statistics Canada reported Friday that real gross domestic product rose 0.3% in April – matching its initial estimate for the month – after remaining essentially unchanged a month earlier.
However, the agency’s first figures for May suggest that the pace of growth has not continued and slowed to 0.1% for the month.
BMO chief economist Doug Porter said growth overall is holding up a little better than expected in 2024, but remains generally lackluster.
“For the Bank of Canada, this does not change much, as growth is still somewhat below potential, which likely means a further rise in the unemployment rate and further moderation in underlying inflation,” Porter wrote in a report.
“As long as the latter remains true, more rate cuts will eventually come. We are still anticipating the next reduction in September,” he added.
The Bank of Canada cut its key interest rate earlier this month for the first time since the early days of the pandemic and while it is expected to cut again, the timing is uncertain.
Statistics Canada reported that annual inflation in May was 2.9%, up from 2.7% in April, a result that dampened financial market expectations of a rate cut in July.
The economy’s growth in April came as 15 of 20 sectors expanded during the month, with both goods-producing and service-producing industries contributing to growth.
Service-producing industries increased 0.3%, with the wholesale trade sector jumping 2% in April. Retail trade also gained 0.5% for the month.
The arts, entertainment and recreation sector posted a 0.9% increase, while the accommodation and food services sector gained 1.2%. The finance and insurance sector added 0.4%.
During the same period, goods-producing industries grew 0.3%, with mining, quarrying, and oil and gas extraction increasing 1.8%.
The manufacturing sector grew 0.4% in April, while the construction sector slipped 0.4%.