April GDP managed to continue to increase for the fourth consecutive month, though the gain of 0.1% represented a slowing from March’s unrevised increase of 0.2% and February’s 0.3% rise. Expectations going into the report were for April GDP to rise 0.1%. The strength in the month was concentrated in service-producing industries where activity rose 0.3%. This more than offset a 0.3% decline in the smaller goods-producing component of the economy.
Strength in April services was relatively broadly based. The earlier-reported strength in wholesale and retail trade were reflected in today’s release with these sectors rising 0.6% and 0.5%, respectively. Solid gains were also recorded in finance and insurance (0.6%) and transportation and warehousing (0.5%). The arts and entertainment component jumped 3.4% reflecting the hockey season extending longer than usual because of the labour dispute at the start of the season. Some offset was provided by a 0.2% drop in administrative and support services.
According to experts at RBC Economics, "continued growth in April GDP is encouraging, though it does represent a slowing relative to gains over the previous two months. This earlier strength bodes well for the Canadian economy continuing to grow in the second quarter, though the April data does imply a slowing relative to the Q1 gain of 2.5%. Growth in the second quarter will likely also be impaired by the recent flooding in Alberta that both contributed to shutdown of Calgary’s downtown core and impaired drilling activity in the petroleum and gas sector.
"Our expectation," the bank continues, "is that these floods will subtract 0.2 percentage points from growth in June. The combined effect of these factors is expected to moderate Q2 growth to 2.1% from the 2.5% recorded in the first quarter. However, the hit to growth in June due to the floods is expected to be quickly reversed in July both as shutdown operations reopen and as the repair and rebuilding of damaged facilities gets underway.
"This factor along with a strengthening U.S. economy," the bank concludes, "is expected to send Canadian growth higher by a full percentage point over the second half of this year."
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