Canada's economy grew in April, but May contraction expected
Early outlook for May indicates a contraction of 0.2%
Statistics Canada says real gross domestic product grew 0.3 per cent in April.
The agency says the growth was led by the mining, quarrying and oil and gas extraction sector and client-facing industries.
However, its early estimate for May indicates the economy contracted by 0.2 per cent for the month. The official reading for May is expected on July 29.
"If the May drop holds, it would represent only the second monthly GDP decline in a year (January also fell on Omicron restrictions)," BMO chief economist Doug Porter said in a commentary.
For April, Statistics Canada said the mining, quarrying, and oil and gas extraction sector grew by 3.3 per cent, as oil and gas extraction gained 3.9 per cent.
Oilsands extraction rose 5.6 per cent, the largest monthly increase since September 2020, while oil and gas extraction excluding the oilsands grew 1.6 per cent.
The accommodation and food services sector added 4.6 per cent, as food services and drinking places grew 3.5 per cent to top pre-pandemic levels. Accommodation services rose 7.2 per cent.
The arts, entertainment and recreation sector rose 7.0 per cent, but was still 12 per cent below its February 2020 level.
Real estate slowdown
Porter said the drop in May looks to be due to broad weakness in the goods-producing sectors, even as many beaten-down service sectors likely recovered further.
"Resources, construction and manufacturing all are expected to slip," he said.
"Another big weight in coming months will be the deepening dive in home sales. Real estate agent activity fell 15 per cent [month over month] in April alone and is now down 25 per cent [year over year] from the blistering levels of a year ago."
CIBC's Andrew Grantham said that second-quarter GDP appears to be tracking just below an annualized pace of four per cent, lower than the six per cent rate the Bank of Canada forecast back in April.
"However, other than perhaps a quicker retreat in housing activity, the slower than projected growth appears to be due to supply rather than demand-side factors," Grantham said. "As a result, it will do little to ease the Bank of Canada's concerns regarding current inflationary pressures."
With files from CBC News