OTTAWA — The Canadian economy stayed flat in May, with growth slowing down as businesses continue to face supply constraints and rising interest rates, though economists say the current cycle of interest rate increases is expected to continue into the fall.
Real gross domestic product was unchanged in May after a 0.3 per cent expansion in April, Statistics Canada reported Friday.
Growth in services-producing industries was offset by a decline in goods-producing industries, the federal agency said.
RBC assistant chief economist Nathan Janzen said the economy is hitting long-term production capacity constraints, in part because of the ongoing labour shortage.
“We’re expecting growth to slow, but part of the reason for that is because the economy right now is incredibly strong,” Janzen said, noting that the economic recovery from the pandemic was much faster than expected.
A preliminary estimate for second-quarter GDP points to 4.6 per cent annualized growth, up from 3.1 per cent for the three months of the year.
After taking a significant hit at the onset of the pandemic, real GDP surpassed the pre-pandemic level in November 2021.
“We’ve reached a very strong point in the economic cycle, earlier than expected. But the challenge from there [is] it’s just not sustainable,” he said.
The strength of the Canadian economy will have implications on the Bank of Canada’s next key interest rate decision, as it aims to cool high inflation.
Earlier this month, the central bank raised its key interest rate by a full percentage point, the largest single rate hike in more than 20 years.
CIBC senior economist Andrew Grantham said solid annualized growth in the second quarter means the Bank of Canada will likely go ahead with another supersized rate hike in September.
“That solid growth, combined with the details of today’s data which suggests supply constraints, rather than slowing demand, were holding back overall growth, means that the Bank of Canada is still on course to deliver another non-standard rate hike at its next meeting,” Grantham said in an email.
The Bank of Canada will make its next interest rate announcement on Sept. 7.
RBC is forecasting two consecutive quarters of negative growth next year, which would meet the definition of a technical recession. However, Janzen said the downturn is likely to be moderate and given early signs that global pressures on inflation are easing, the Bank of Canada may start reversing rate hikes next year.
With the inflation rate at a 39-year-high of 8.1 per cent, the central bank said it will continue to raise the cost of borrowing to decrease demand in the economy, hoping it can bring down inflation without triggering a recession.
Janzen said he expects a half-percentage point rate hike in September, with the Bank of Canada eventually bringing its key interest to a high of 3.25 per cent before it starts reversing its rate hikes.
According to the report released on Friday, the largest declines in May were experienced in the construction and manufacturing sectors, while transportation and warehousing saw the largest gains.
Statistics Canada said construction worker strikes in Ontario during May led to delays in projects. However, construction activity remained well above pre-pandemic levels.
Manufacturing contracted for the first time in eight months, with motor vehicle manufacturing stalled by a semiconductor chip shortage.
Transportation gains were driven by growth in air travel, which rose by 14.1 per cent.
The results are better than expected. StatCan’s preliminary estimate suggested the economy contracted by 0.2 per cent in May.
On Thursday, the U.S. Commerce Department said the U.S. economy contracted for a second consecutive quarter, but CIBC economists expect growth to bounce back over the remainder of the year.
This report by The Canadian Press was first published July 29, 2022.
The Canadian Press
Note to readers: This is a corrected story. A previous version included an erroneous comparison to April’s GDP reading.
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 also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
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 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.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
