Canadian Monthly GDP (May 2025)

Canada's economy sputters in May; June growth to tick back up 

• Canadian GDP in May printed in line with expectations, falling for a second consecutive month by 0.1% month-on-month (m/m). GDP growth in June is expected to tick higher, reversing some of this month's pullback.
• Compositionally, 13 of 20 industries registered a decrease on the month. Goods industries contracted again (-0.1% m/m), while the services sector remained flat.
• On the goods side, the manufacturing sector bounced back modestly (0.7% m/m) after a larger contraction the month prior. Routine maintenance in the oil patch drove mining/quarrying/oil & gas sector down 1% m/m in May. Elsewhere, the agriculture, utilities, and construction sectors all registered slight declines.
• On the services side, the transportation and warehousing sector edged ahead by 0.6% m/m, with most subsectors expanding in May. Meanwhile, the real estate sector grew for a second consecutive month (0.3% m/m) on the back of rising home sales. A 4.8% m/m slowdown in motor vehicle sales and a 0.2% decline in the public sector aggregate counterbalanced services gains.
• The advanced guidance for a 0.1% m/m increase in June GDP is driven by increases in retail and wholesale trade and partially offset by a decrease in manufacturing.

Key Implications

• May's weak GDP reading came as no surprise as tariff-related headwinds continue to blow. For the time being, industry data suggest Q2 GDP effectively flat. While this would represent a sharp pullback from Q1 growth, it would be a better outcome than the BoC's most recent guidance for second quarter growth. Past this, the outlook continues to face considerable uncertainty, not least since Canada and U.S. officials have yet to strike a trade deal. 
• The Bank of Canada will take this reading in stride, as they continue to weigh softening economic growth against ongoing underlying inflation pressures. At their meeting this week, the Bank decided to hold the policy rate steady at 2.75%, but did not close the door to additional rate cuts. With excess supply building in the economy and inflation showing some signs of containment, we believe there is room to lower the policy rate later this year.            

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.