The Canadian economy grew by 0.3 per cent in May despite downward pressure from wildfire-hit oil and gas production but it looks to have slowed in June, Statistics Canada said Friday.
In its latest report on economic growth, the federal agency’s preliminary estimate suggests real gross domestic product grew at an annualized rate of one per cent in the second quarter.
The May figure came in slightly lower than was expected by Statistics Canada as mining and oil and gas companies reduced their operations in Alberta at the outset of the record-breaking wildfire season.
The energy sector was down 2.1 per cent in May, the release shows.
“This was the sector’s first decline in five months and its largest since August 2020,” the agency said.
The modest GDP increase in May was driven in part by a rebound in the public administration sector as most federal public servants on strike returned to work by the end of April. However, 35,000 Canada Revenue Agency workers remained on strike for three days in May, which dampened the rebound.
The economy remained resilient in the second quarter, but growth started to look weaker by the end of the period, with wholesale sales posting one of their largest declines in history in June, said RBC economist Claire Fan in a note.
“The resilience in consumer demand we’ve seen to date is not to be overlooked, adding to sticky inflation pressures. But momentum in services spending also appears to be waning – gross sales at food services and drinking places have been trending at levels below this January for months,” she wrote.
That modest growth is unlikely to hold, as the federal agency’s preliminary estimate for June suggests the economy contracted by 0.2 per cent.
Statistics Canada says the estimated decrease in June is mainly owing to the wholesale trade and manufacturing sectors.
Both sectors saw growth in May as supply chain issues related to semiconductor chips eased, but the downward trend in June is expected to “more than offset the increases recorded in May,” the agency said.
The slowdown comes as the Bank of Canada’s key interest rate sits at five per cent, the highest it’s been since 2001. The interest rate spike is expected to slow the economy down, though it has generally performed better than expected this year.
The real estate sector, for example, is expected to continue to grow in June despite high interest rates.
In May, home resales in most of Canada’s largest markets led to an industry increase of 7.6 per cent.
A series of transitory shocks since April, such as the wildfires, has made the data more difficult to interpret, wrote TD economist Marc Ercolao in a note.
“Looking ahead, headline GDP figures may continue to be skewed by the government’s grocery rebate and the effects of the B.C. port strike in July,” he said.
But the pullback in June will likely help support a hold on the Bank of Canada’s key policy rate in September after announcing a hike this month, said Ercolao.
“Slowing growth appears to be in the cards for the Canadian economy, and we believe this will be enough for the (central bank) to remain on hold at its next meeting,” he said.
The Bank of Canada won’t hesitate to hike rates further if necessary, said Fan, but she added that “the worst is yet to come” for households dealing with rising debt service costs.
“We expect that will soften spending, push inflation lower and keep the (central bank) to the sideline over the second half of this year,” she said.
This report by The Canadian Press was first published July 28, 2023.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
