Real gross domestic product (GDP) grew 0.2% in May, following a 0.3% increase in April. The goods-producing industries grouping (+0.4%) was the main contributor to the overall growth with four of five sectors increasing in May. Services-producing industries edged up 0.1%. Overall, 15 of 20 sectors expanded in May, according to a report released Wednesday by Statistics Canada.
“Advance information indicates that real GDP increased 0.1% in June. Increases in construction, real estate and rental and leasing and finance and insurance were partially offset by decreases in manufacturing and wholesale trade. Owing to its preliminary nature, this estimate will be updated on August 30, 2024, with the release of the official GDP by industry data for June,” said the federal agency.
“With this advance estimate for June, information on real GDP by industry suggests that the economy expanded 0.5% in the second quarter of 2024. The official estimate for the second quarter will be available on August 30, 2024, when the official estimate of GDP by income and expenditure is released.”
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StatsCan said the manufacturing sector (+1.0%) led the growth in May, up for a second consecutive month. The increase in May was the largest since January 2023 as both durable and non-durable manufacturing rose in May 2024.
“Non-durable goods manufacturing (+1.4%) recorded its largest growth rate since November 2023, with over half of the increase stemming from petroleum and coal product manufacturing. The subsector rose 7.3% in May 2024, its largest increase since June 2021, as petroleum refineries (+7.9%) more than offset a 5.0% decline in April 2024. The rebound in May comes after many refineries across the country were undergoing maintenance in April,” it said.
“Durable goods manufacturing expanded 0.7% in May as 6 of 10 subsectors increased. The furniture and related products (+4.6%) and miscellaneous manufacturing (+4.7%) subsectors contributed the most to growth while the transportation equipment manufacturing subsector (-0.4%), affected by an automotive assembly plant in Ontario undergoing retooling activities, tempered growth.”
Avery Shenfeld, Chief Economist, Managing Director at CIBC Capital Markets, said Canada’s economy did marginally better than expected in the closing months of the second quarter, while not registering a medal winning performance when judged in terms of per capita output gains.
“The monthly gain of 0.2% in real GDP in May (rounded up from 0.156%), and the advance estimate for a 0.1% pace in June, point to a second quarter growth rate of just over 2% annualized. While that’s about a half point faster than our forecast for the quarter as a whole, these GDP-by-industry numbers can regularly diverge by that magnitude from the more prominent quarterly national expenditure accounts estimates. May’s growth was also given an strong lift from the public sector, which accounted for about half of the total gain that month, as growth in manufacturing was countered by weakness in retail and wholesale trade. The Bank of Canada is anticipating a stronger Q3 than our own forecast, and the fact that most of the Q2 growth was back in April, with a soft handoff for June, suggests that we’ll need a jump in July to get their forecast back on track. The data will likely see some small upward adjustments to forecasts for Q2 GDP, but not enough to stand in the way of a further BoC rate cut in September, which is more tied to the progress seen in inflation readings,” he said.
Douglas Porter, Chief Economist at BMO Capital Markets, said: “Make no mistake, the Canadian economy is paddling fast just to keep its head above water, but it is still managing to slowly move forward. All told, these latest GDP figures should tamp down talk of the Bank being wildly behind the curve, and quiet rumblings about the BoC potentially looking at a 50 bp cut. (Such a rapid step-up in easing would require extremely weak data and/or much milder core inflation.) Canada’s economy is still walking that fine line of struggling to keep upright, but just staying out of serious trouble, consistent with continued, measured interest rate cuts.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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