Canadian Monthly GDP (May 2022)

Andrew Hencic, Senior Economist | 416-944-5307 

Date Published: July 29, 2022

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Canada's Economy Stalls in May, Points to a Slight Expansion in June

  • The Canadian economy recorded no growth in May, beating Statistics Canada's flash estimate for a contraction of 0.2% month-over-month (m/m). The flash estimate for June showed a mild return to growth of 0.1% m/m.
  • May's results showed output expanding in 14 of the 20 industries. The goods-producing sector contracted 1.0%, while the service-producing sector rose 0.4%.
  • On the goods side, construction (-1.6% m/m) and manufacturing (-1.7% m/m) led the declines. The mining, quarrying and oil and gas sectors, pulled back marginally (-0.1% m/m) after strong growth of 3.1% the month prior.
  • Demand for in-person services continues to increase. The arts, entertainment, and recreation sector expanded 2.7% m/m, as it continues its climb back to pre-pandemic levels. Transportation and warehousing also expanded robustly (+1.9% m/m), with air transportation rising 14.1% in May.

Key Implications

  • With no growth in May and the +0.1% m/m print for June, tracking for second quarter GDP growth is now 4.6% (annualized). This is slightly better than the 4.4% we anticipated earlier in the year in contrast to the declines observed stateside. However, in a sign that demand growth is responding to inflation and rising interest rates, momentum is slowing, with May and June showing little growth. 
  • Slowing growth shouldn't deter the Bank of Canada (BoC) from continuing with its rate hiking cycle. Interest rate hikes were supposed to slow growth and intermittent contractions were always a possibility. As inflation remains well above target and the economy continues to operate in excess demand we expect the BoC to continue raising rates until they get to 3.25%.            

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