Yahoo Finance Canada's economy grew in April, with growth expected to continue in May
Canada's economy grew in April, Statistics Canada said on Friday, in line with advance estimates and analyst expectations.
Real gross domestic product (GDP) grew 1.1 per cent annually in April. On a monthly basis, GDP increased 0.3 per cent in April, with growth increasing in 15 of 20 sectors. Analysts polled by Reuters had forecast 0.3 per cent growth in the month.
Advanced estimates show GDP grew 0.1 per cent in May, due to increases in manufacturing, real estate, rental and leasing, finance and insurance. The growth was partially offset by decreases in retail and wholesale trade, Statistics Canada said.
The data leaves second quarter growth tracking at an annualized rate 1.8 per cent, above the Bank of Canada's projection of 1.5 per cent. However, GDP increased 1.7 per cent in the first quarter, short of the central bank's forecast of 2.8 per cent.
"On balance, growth is holding up a touch better than widely expected in 2024, but remains generally lacklustre," BMO chief economist Douglas Porter wrote in a note on Friday.
"For the Bank of Canada, this doesn't change much, as growth is still a bit below potential, which likely means some further back-up in the unemployment rate and some further moderation in underlying inflation. As long as the latter holds true, more rate cuts will come, eventually."
April's growth was driven by rebounds in wholesale trade, mining, quarrying and oil and gas extraction and manufacturing, the federal data agency said. Retail trade was also a top driver of growth, led by food and beverage retailers and gasoline stations, which had posted declines in March.
"Growth within the Canadian economy was good, but not great, over the spring, particularly when viewed in the context of strong labour force and population growth," CIBC economist Andrew Grantham wrote in a research note on Friday.
Grantham also said the monthly slowdown in May suggests the reacceleration of inflation in the same month "likely reflected supply issues or volatility in the data, rather than demand pressures." The consumer price index (CPI) reaccelerated unexpectedly to 2.9 per cent in May while measures of core inflation also increased, reducing the odds of a Bank of Canada rate cut in July.
"We continue to view next week's employment data, and next month's CPI figures as more important in determining whether the Bank of Canada will trim interest rates by a further 25 basis points at the late-July meeting," Grantham wrote.
"(A) follow-up interest rate cut at the July meeting is still possible if core inflationary pressures cool again next month."
Friday's data did little to change the odds of a July cut. Money markets trimmed bets earlier this week after inflation data came in hotter than expected, reducing chances of a July cut from 75 per cent on Monday to around 40 per cent after the Tuesday data release. Following Friday's GDP print, the bets moved up slightly to 42 per cent, Reuters said.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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