Canada’s economy was flat in May, a sign a slowdown is already underway

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Canada’s economy did not expand at all in May, the second month of the year that it failed to make a gain, Statistics Canada said on Friday.

The data agency said a slight rebound in the services sector was not enough to offset a drop in goods-producing industries, so the total value of all economic output during the month was essentially unchanged from the previous month. last month.

The flat result was actually better than the slight 0.2 percent decline economists had expected.

An advanced estimate for June suggests the economy also fared slightly better last month, rising 0.1 percent.

Final numbers won’t be available until the end of August, but if the flash figure for June holds up, that means Canada’s economy grew 1.1% in the second quarter, which is not a strong result by any metric. but at least better than shrinkage. from 0.9 percent seen in the US during the same period.

“Today [Gross Domestic Product] The data suggests that the Canadian economy was slowing even before the Bank of Canada’s biggest rate hike was made,” said Andrew Grantham, an economist at CIBC.

Momentum may be cooling, says economist


Scotiabank economist Derek Holt said that while it was good to see the economy did not contract in May, there is little sign that things are going well going into the second half of the year.

“It looks like the momentum is cooling off,” he said. “There is no head start for Q3 GDP based on the math up to this point.”

Others found reason for optimism in the numbers. Bank of Montreal economist Doug Porter noted that the annualized pace of growth for Canada’s economy in the first half of this year was 3.75 percent.

That’s a full five percentage points better than the US, which was shrinking at a 1.25 percent pace during the same period.

“Although growth is clearly slowing rapidly after the big recovery, it compares very favorably with US trends,” Porter said.

Impact on interest rates

The GDP figures come against the backdrop of stubbornly high inflation, which hit its highest level in decades during the pandemic. Consequently, the central bank of Canada began a campaign of increases in its reference interest rate for loans, in order to calm things down.

Economists thought ahead of the GDP figure that the central bank is likely to keep raising its rate due to inflation, and Friday’s lackluster GDP data will do little to stray from that path.

“We continue to see the central bank raise rates by 50 basis points in September,” said economist Royce Mendes of Desjardins.



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