Canada’s economy stalled in May as real gross domestic product (GDP) during the month was
unchanged following a 0.3% expansion in April, according to Statistics Canada.
The slowdown in May was blamed on a combination of supply constraints and rising interest
rates. While service-producing industries grew in the month, that increase was offset by a
decline in goods-producing industries, said Statistics Canada.
A preliminary estimate for second-quarter GDP indicated annualized growth of 4.6%, up from
3.1% in this year’s first quarter.
If the initial Q2 estimate holds up, it would make Canada the fastest growing economy among
the Group of Seven (G7) leading industrialized nations through this year’s first half.
The state of the Canadian economy will influence the Bank of Canada’s next interest rate
decision, as it continues to focus on lowering inflation.
In July, Canada’s central bank raised its trendsetting interest rate by a full percentage point, the
biggest one-time rate hike in more than 20 years. The Bank of Canada next decides about
interest rates on September 7.
In May, the largest economic declines were seen in the construction and manufacturing sectors,
while transportation and warehousing saw the biggest gains.
Canada’s manufacturing sector contracted in May for the first time in eight months, with motor
vehicle manufacturing hurt by an ongoing semiconductor shortage.
Meanwhile, transportation gains were driven by growth in air travel, which rose by 14% in May.
The final results for May came in better than expected. Statistics Canada’s preliminary estimate
suggested that the Canadian economy contracted by 0.2% during the month.
