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Canada GDP: Economy shrank in May but picked up in June with reopening

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Yellow bobcat on a construction site
Yellow bobcat on a construction site (Getty)

Statistics Canada says real gross domestic product (GDP) contracted 0.3 per cent in May during lockdowns, after a 0.5 per cent decline in April.

The decline in May is in line with economists' expectations and 12 of 20 sectors were down.

Construction decreased 2.3 per cent; residential construction dropped 4.2 per cent for the first contraction since November 2020.

Real estate and rental and leasing contracted 0.4 per cent, following a 0.8 per cent decline in April for the first back-to-back contraction since March-April 2020. Repair construction decreased 3.7 per cent. Real estate agent and broker output fell 7.2 per cent, following a 10.7 per cent drop in April, to levels similar to July 2020.

Also See: The latest real estate news for housing prices, mortgage rates, markets, luxury properties and more at Yahoo Finance Canada.

Manufacturing, as well as food and accommodation, continued their declines.

An early estimate calls for an approximate 0.7 per cent increase in real GDP for June, in large part due to loosened public health restrictions in retail as well as food and accommodation services. As a result, Statistics Canada's flash estimate calls for a 0.6 per cent increase in real GDP in the second quarter of 2021.

"The significant underperformance of Canada's economy in the spring reflects the particular timing of third-wave restrictions, and we look for Canada to snap back with roughly 6 per cent annualized growth in both Q3 and Q4 on reopening; today's big gain in June GDP points right in that direction," said BMO chief economist Doug Porter.

Porter says Canada's economic recovery would be even stronger if it wasn't for events occurring outside of its borders.

"After the spring's rocky road, we look for growth to pick back up to a solid 6 per cent clip in H2; the outlook would be even peppier if not for the multitude of global supply chain issues and the chill elsewhere from the spread of the Delta variant," he said.

The loonie barely blinked following the release of the data, instead taking a wait-and-see approach.

"The dollar-Canada exchange rate shifted by less than 10 basis points in the minutes after the release, with markets remaining skeptical of data collected prior to the economy's reopening," said Cambridge Global Payments currency strategist Hector Demarco. 

U.S. GDP missed estimates yesterday with seasonally adjusted annualized quarter-over-quarter growth of 6.5 per cent vs. 8.4 per cent expected and a downwardly revised 6.3 per cent in Q1.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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