Economy grew in May despite wildfire effects, looks to have slowed in June: StatCan
OTTAWA –
The Canadian economic system grew by 0.3 per cent in May regardless of downward strain from wildfire-hit oil and gasoline manufacturing however it appears to have slowed in June, Statistics Canada mentioned Friday.
In its newest report on financial development, the federal company’s preliminary estimate suggests actual gross home product grew at an annualized price of 1 per cent within the second quarter.
The May determine got here in barely decrease than was anticipated by Statistics Canada as mining and oil and gasoline firms lowered their operations in Alberta on the outset of the record-breaking wildfire season.
The vitality sector was down 2.1 per cent in May, the discharge exhibits.
“This was the sector’s first decline in five months and its largest since August 2020,” the company mentioned.
The modest GDP enhance in May was pushed partly by a rebound within the public administration sector as most federal public servants on strike returned to work by the tip of April. However, 35,000 Canada Revenue Agency staff remained on strike for 3 days in May, which dampened the rebound.
The economic system remained resilient within the second quarter, however development began to look weaker by the tip of the interval, with wholesale gross sales posting considered one of their largest declines in historical past in June, mentioned RBC economist Claire Fan in a word.
“The resilience in consumer demand we’ve seen to date is not to be overlooked, adding to sticky inflation pressures. But momentum in services spending also appears to be waning — gross sales at food services and drinking places have been trending at levels below this January for months,” she wrote.
That modest development is unlikely to carry, because the federal company’s preliminary estimate for June suggests the economic system contracted by 0.2 per cent.
Statistics Canada says the estimated lower in June is especially owing to the wholesale commerce and manufacturing sectors.
Both sectors noticed development in May as provide chain points associated to semiconductor chips eased, however the downward pattern in June is anticipated to “more than offset the increases recorded in May,” the company mentioned.
The slowdown comes because the Bank of Canada’s key rate of interest sits at 5 per cent, the very best it has been since 2001. The rate of interest spike is anticipated to gradual the economic system down, although it has usually carried out higher than anticipated this yr.
The actual property sector, for instance, is anticipated to proceed to develop in June regardless of excessive rates of interest.
In May, house resales in most of Canada’s largest markets led to an business enhance of seven.6 per cent.
A collection of transitory shocks since April, such because the wildfires, has made the info harder to interpret, wrote TD economist Marc Ercolao in a word.
“Looking ahead, headline GDP figures may continue to be skewed by the government’s grocery rebate and the effects of the B.C. port strike in July,” he mentioned.
But the the pullback in June will doubtless assist assist a maintain on the Bank of Canada’s key coverage price in September after saying a hike this month, mentioned Ercolao.
“Slowing growth appears to be in the cards for the Canadian economy, and we believe this will be enough for the (central bank) to remain on hold at its next meeting,” he mentioned.
The Bank of Canada will not hesitate to hike charges additional if mandatory, mentioned Fan, however she added that “the worst is yet to come” for households coping with rising debt service prices.
“We expect that will soften spending, push inflation lower and keep the (central bank) to the sideline over the second half of this year,” she mentioned.
This report by The Canadian Press was first printed July 28, 2023.
