(OTTAWA) Canada’s economy grew 0.3% in May despite downward pressure from oil and gas production, hit by wildfires, but appeared to have slowed in June, Statistics Canada said Friday.
In its latest economic growth report, a preliminary estimate from the federal agency suggests that real gross domestic product (GDP) grew at an annualized rate of 1% in the second quarter.
The May figure is slightly below Statistics Canada’s expectations as mining, oil and gas companies scaled back activity in Alberta at the start of the record wildfire season.
The energy sector fell 2.1% in May, according to the federal agency. “This is the first decline in five months and the steepest since August 2020,” Statistics Canada said.
The economy remained resilient in the second quarter, but growth started to look weaker at the end of that period, with wholesale sales posting one of their biggest declines in history in June, the report said. Royal Bank economist Claire Fan in a note.
“The resilience in consumer demand we have seen to date should not be overlooked, which adds to lingering inflationary pressures. But the momentum in services spending also appears to be waning – gross sales for food services and drinking places have held at lower levels than January for months,” she wrote.
This modest growth is unlikely to continue, as the federal agency’s preliminary estimate for June suggests the economy contracted 0.2% last month. These figures will be revised before their official publication, in a month.
According to Statistics Canada, the decline announced by the preliminary estimate for June will be mainly attributable to the wholesale trade and manufacturing sectors.
Both sectors saw growth in May as semiconductor chip supply chain issues eased, but the downtrend in June should “more than [offset] the gains seen in May.” “, said the agency.
Despite high interest rates, the real estate sector should continue to grow in June.
In May, home resale activity in most of Canada’s largest markets led to a 7.6% increase in the industry.
A series of transitory shocks since April, such as wildfires, have made the data harder to interpret, TD Bank economist Marc Ercolao said in a note.
“Then, the overall GDP numbers could continue to be skewed by the government grocery refund and the impact of the BC ports strike in July,” he said.
But June’s pullback will likely encourage the Bank of Canada to hold its key rate in September, after announcing a hike earlier in July, Ercolao noted.
“Slower growth appears to be on the cards for the Canadian economy, and we believe that will be enough to keep the [central bank] on hold at its next meeting,” he said.
The Bank of Canada won’t hesitate to raise rates further if needed, Fan said, but added that “the worst [is] yet to come” for households struggling with rising costs of service. debt.
“We expect this to slow spending, lower inflation and keep the [central bank] out in the second half of this year,” she explained.
