TD Economics Data Release: Canadian economy advances in May • Canadian real GDP increased 0.2% in May, after inching up 0.1% in April. With May’s gain, growth has remained in positive territory throughout the first five months of 2013. • The services side of the ledger was a source of strength in May, rising 0.5%, with the wholesale and retail trade sectors industries posting notable increases. The strong showing in retail trade reflects increased activity across nine of the twelve categories, with motor vehicles and parts dealers recording the strongest gain for the month. Wholesale trade output was driven by the miscellaneous category which includes wholesalers of agricultural supplies. The real estate agents and brokers industry (+3.4%) received a boost from an improving existing home market, as home resales were up a strong 4.0% (m/m) in May. • The goods-producing sector declined 0.3% in May, largely reflecting a 1.7% decrease in the mining, oil and gas extraction sector. Oil and gas extraction fell 2.2% for the month as both petroleum and natural gas activities were down. Statistics Canada explained that maintenance activities at some petroleum facilities hampered production in May. Support activities were also lower for the month, reflecting declines in both drilling and rigging services. Key Implications • This healthy GDP reading for May will help to buffer the anticipated weakness in June. Notably, real GDP could slide by as much as 0.4%-0.5% in the final quarter of Q2, weighed down by the flooding in Alberta and the province-wide construction strike in Québec. • We continue to expect economic growth for Q2 to come in around 1.6% (annualized rate). In addition to the flood impacts, Canadian real GDP growth in the second quarter will also have been constrained by modest U.S. activity in the quarter. Indeed, the advanced U.S real GDP reading for Q2 released this morning came in at a soft 1.7% (annualized rate), reflecting the impact of the sequester. That said, we expect U.S. economic activity to accelerate in the second half of the year which will support a stronger growth profile for Canada. • The performance of the retail trade sector was encouraging and bodes well for consumer spending in Q2 following a lackluster Q1 showing. Looking beyond the second quarter, spending growth is likely to be held back as consumers work to rein in their debt levels.
Posted on: Wed, 31 Jul 2013 21:46:19 +0000
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