Analysis:Canada May GDP +0.6%,Tops Expectatns;Ex Energy +0.2%>

By Yali N'Diaye

     OTTAWA (MNI) - Canada GDP expanded 0.6% in May, lifting the 

12-month growth rate to 4.6%, the highest since October 2000, Statistics 

Canada reported Friday. 

     Analysts' forecasts in a MNI had centered on a 0.2% gain on the 

month. 

     Gains were led by goods-producing industries, which were up 1.6% in 

May after being flat in April, marking the largest increase since June 

2016, and representing an 8.8% gain from May 2016. 

     May was the seventh consecutive increase, a streak that was last 

matched between September 2009 and March 2010. 

     Estimates for April and March were unrevised at 0.2% and 0.5%, 

respectively. 

     Growth in the services sector slowed to 0.2% from 0.3% the previous 

month, leaving the 12-month rate unchanged at 3.0%. Still, services have 

been constantly posting gains since September 2015. 

     The report should provide comfort to the Bank of Canada's more 

positive outlook and perhaps even feed expectations of a more aggressive 

data-dependent central bank, especially with gains being widespread. 

     Statistics Canada indeed reported that output increased in 14 of 20 

industrial sectors in May, representing about 69% of total GDP. 

     In its July economic projections, the BOC had already revised up 

its third quarter annualized GDP estimate to 3.0% from 2.5%, although it 

expects a slowdown to 2.0% in the fourth quarter. 

     Still, energy, with a 4.4% gain on the month and a record 25.2% 

increase year-over-year, was largely responsible for May's performance. 

     GDP excluding energy rose 0.2% on the month, which was still an 

acceleration from 0.1% in April. 

     Mining, quarrying, and oil and gas extraction was up 4.6%, the 

largest gain since July 2016 and the third consecutive increase. 

     Oil and gas extraction led the gain with a 7.6% increase led by a 

13% rebound in non-conventional oil extraction after activity had been 

affected by "production difficulties" at an upgrader facility in Alberta 

due to a fire and explosion in March, the report said. 

     Mining and quarrying production was unchanged on the month. 

     Goods producing industries also benefitted from a strong 

manufacturing showing, with a 1.1% gain on the month unmatched since 

last November. Durable manufacturing was up 1.4% and non-durable up 

0.8%. 

     Construction was the only major goods-producing sector to post a 

decline (-0.6%), as it was affected by a strike by unionized 

construction workers in Quebec in the last week of the month. 

     On the services side, retail trade rose 0.9%, wholesale trade was 

up 0.7% in May, public administration was flat, while signs of a housing 

cool down were apparent. 

     Real estate and rental and leasing indeed contracted 0.2% after 

five months of gains. 

     "Following a 0.6% decline in April, activity at offices of real 

estate agents and brokers declined 6.3% in May as housing resale 

activity slowed in the Greater Toronto Area following new provincial 

housing regulations introduced on April 20th," the report said. 

--MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

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