Canada’s economy unchanged in April, but likely surged 0.4% in May

OTTAWA (Reuters) – The Canadian economy was unchanged in April from March, missing forecasts, before likely rebounding with a 0.4% jump in real gross domestic product in May, Statistics Canada said on Friday.

Analysts polled by Reuters had forecast a 0.2% month-over-month rise in April. March GDP was upwardly revised to 0.1% growth from an initial report of flat growth.

Canada’s goods-producing sector expanded 0.1% in April, but were offset by a slight decline in the service-producing sector.

While April’s growth underperformed expectations, the strong forecast for May aligns with signs that the economy is keeping hotter than anticipated despite a record-paced monetary tightening cycle by the Bank of Canada.

The central bank cranked up its key interest rate to a 22-year high of 4.75% earlier in June over concerns that inflation could get stuck above its 2% target, and money markets see a higher than 50% chance of another rate hike in July.

The preliminary growth estimate for May, which can change when final data is released next month, was led by increases in the manufacturing and wholesale trade sectors, as well as by offices of real estate agents and brokers, Statscan said.

The mining, quarrying, and oil and gas extraction sector and the utilities sector are expected to be post declines in May.

In April, mining, quarrying, and oil and gas extraction grew for the fourth consecutive month, and helped to offset declines in other goods subsectors like manufacturing and agriculture, forestry, fishing and hunting.

Public administration was a drag on the services industry in April, when a strike by federal government workers represented by the Public Service Alliance of Canada labor union impacted several government departments.

Declines in wholesale trade as well as finance and insurance also contributed to the softness in the services sector.

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