The economy continues to roll in Canada, however slowly, as new information rolling in from Statistics Canada indicated progress in May.
For the month before last, real Gross Domestic Product increased by 0.2% continuing the streak of gains recorded since January. The rise was, however, slightly less than market expectations for a 0.3% gain. The weaker showing largely reflected a second consecutive drop in output in the mining and oil/gas industries. This decline however was more than offset by strength in service-producing industries where activity rose 0.5%.
The nation's number crunchers also said strength in services in May was relatively broadly based with the most significant contributions coming from retail and wholesale trade, in line with earlier reports. Activity in wholesale trade jumped by 1.4% in May while retail sales rose 1.8%. Solid gains were also recorded in real estate, professional services and education and healthcare output. Transportation and warehousing activity slipped in May recording a 0.4% decline.
The 0.3% decline in goods-producing industries' output was led by a 1.7% drop in the mining and oil/gas component reflecting a 2.2% decrease in oil and gas extraction in part due to maintenance at some facilities. Mining and quarrying output was unchanged in the month. Utilities output fell by 0.4% following two months of solid gains. The manufacturing industries' output increased by 0.3% in May while construction activity was largely unchanged.
According to experts at RBC Economics, "with the slowing in the economy in June largely due to special factors," such as flooding in Alberta and the construction sector strike in Quebec, "and a sharp recovery anticipated in the third quarter, the most likely course for the Bank of Canada is to keep the policy rate at 1.0% for the remainder of 2013 and maintain its mild tightening bias.
"Looking to 2014," the bank concludes, "the economy is expected to maintain the faster momentum built in the second half of 2013 setting up for the Bank to begin to reduce policy stimulus with the first hike likely in the middle of next year."
