Canada’s Economic Recovery Continues with April GDP Growth, but May Forecast Uncertain

In April, Canada’s GDP increased by 0.3%, beating market expectations. This growth was driven by sectors such as wholesale trade and manufacturing, which rebounded from zero growth in March. The mining, quarrying, oil and gas extraction, and manufacturing sectors led the way in this growth spurt, which was the fastest since January.

Preliminary estimates for May suggest that the GDP likely increased by 0.1%. Sectors such as manufacturing, real estate, rental and leasing, and finance and insurance saw growth, while retail trade and wholesale trade experienced decreases. This puts the Canadian economy on track to exceed the Bank of Canada’s second quarter annualized growth forecast of 1.5%.

In April, 15 out of 20 sectors saw growth. Retail trade contributed to growth after two consecutive monthly declines. Construction, real estate, rental and leasing were among the sectors that weighed on growth in April. Both goods-producing and services-producing industries grew by 0.3% in April.

The Bank of Canada recently cut its key policy rate for the first time in over four years and hinted at the possibility of more cuts to come if inflation did not reach the target rate of 2%. However, recent inflation data showed an unexpected rise in consumer prices in May, leading to a decrease in expectations for a rate cut in July. The next rate announcement is scheduled for July 24th following which the bank will have more data to inform its decision.