Canada’s GDP shrank 0.2% in May led by mines, energy and factories, according to a flash estimate from Statistics Canada on Thursday, overshadowing the official estimate showing a 0.3% April expansion.
The May decline appears to be a give-back from April's 3.3% rise in the oil, gas and mining industry that was the largest since December 2020. The industry has faced big swings over the past year related to surging prices and some maintenance shutdowns.
The overall GDP increase for April matched investor expectations, and the agency also kept the March gain at 0.7%. The April figure was also boosted by gains in personal services as Covid restrictions eased including a 20% jump for airlines, while real estate fell 0.8%, the most in two years.
The May setback is consistent with market economists who had already marked down second quarter growth predictions to 4.5% from the Bank of Canada's 6% estimate. Most economists predict the Bank will hike 75 basis points at its July 13 meeting to check the fastest inflation since 1983. Governor Tiff Macklem has said the economy has moved beyond full capacity and warned about risks of embedded price gains, while cautioning moving more than the 50bps he hiked earlier this month would be unusual.