Statistics Canada reported that the Canadian economy experienced a second consecutive month of contraction in May but showed signs of improvement in June. Real gross domestic product (GDP) declined by 0.1% in May, matching the previous month’s drop. The decrease in May was primarily attributed to the goods-producing sectors, with mining, quarrying, and oil and gas being the most affected.
However, there was a positive development in manufacturing, which grew by 0.7% in May, partially offsetting the 1.8% decline in April due to the full impact of U.S. tariffs. Despite the improvement, manufacturing activity in May remained 1.1% lower than in March. Transportation and warehousing also rebounded in June after a decline in April.
The real estate and rental industry saw an uptick in activity, particularly in Toronto, driven by increased home resales. Additionally, the spectator sports industry experienced growth in May, thanks to three Canadian teams advancing to the second round of the NHL playoffs.
Chief economist at BMO Financial Group, Douglas Porter, viewed the report as a positive indicator amid ongoing trade tensions. He noted that while the Canadian economy weathered the trade uncertainty better than expected, there are lingering weaknesses. The upcoming June data release will provide more clarity on the extent of the economic rebound.
Early estimates for June by Statistics Canada predict a 0.1% rebound in real GDP, with retail and wholesale trade contributing to growth while manufacturing is anticipated to have declined. The agency’s preliminary assessment for the second quarter suggests the economy remained relatively stable. The Bank of Canada projected a 1.5% annual decline in real GDP for the second quarter, citing uncertainties related to U.S. tariffs.
Porter highlighted differences between Statistics Canada’s GDP output figures and the Bank of Canada’s spending estimates, emphasizing the impact of significant changes in exports and imports on the data. Despite the economic challenges, the central bank maintained its policy rate at 2.75% for the third consecutive time, citing resilience in the Canadian economy.