| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -0.1% | -0.3% to -0.1% | -0.1% | -0.1% |
| Year over Year | 1.2% | 1.3% |
Highlights
As widely expected, Canada GDP contracted a further 0.1 percent in May due to weaker activity in goods-producing industries, while services were unchanged.
The advance estimate points to a 0.1 percent recovery in June, as gains in retail and wholesale trade were partly offset by a decrease in manufacturing. Should the advance estimate materialize, real GDP would be virtually unchanged in the second quarter after a strong first quarter that benefitted from a rapid export growth due to trade being pulled forward ahead of tariffs.
Overall, the BoC has already factored in a 1.5 percent GDP contraction in the second quarter at an annual rate, as the strength in exports reverses and U.S. demand for Canadian goods weakens due to tariffs.
The BoC expects tariffs and trade-related uncertainty to weigh on growth for some time. In its July Monetary Policy Report, it projects GDP growth to pick up in the second half of this year as exports stabilize under a scenario where retaliatory tariffs by Canada and China remain permanent, while other countries do not retaliate. Under this scenario, GDP is seen contracting 1.5 percent in the second quarter, before picking up 1.0 percent in the second half of 2025.
Under a de-escalation scenario where Canada and most countries remove their retaliatory tariffs, data from the central bank indicate the difference would mostly be felt in the strength of the recovery in the second half of 2025, with GDP expanding 2 percent after contracting in the second quarter.
Under an escalation scenario, where Canada and China double the value of U.S. goods subject to tariffs, the recession would last three quarters, and the recovery wouldn't start until 2026.
While GDP expanding in June, gains were concentrated concentrated in 7 of 20 sectors.
A 0.7 percent advance in manufacturing in June only partially recovered the 1.8 percent drop the previous month. Overall, manufacturing benefitted from inventory accumulation and activity was still 1.1 percent below March, before U.S. tariffs were implemented. Non-durable manufacturing was up 0.2 percent and durable up 1.2 percent. The advance GDP estimate indicates the rebound in manufacturing won't last into June.
The increase in manufacturing and was not enough to offset declines of 1.0 percent in mining, quarrying, and oil and gas extraction, 0.5 percent in agriculture, forestry, fishing and hunting, and 0.2 percent in utilities. Construction was unchanged.
In services, real estate, and rental and leasing increased 0.3 percent, transportation and warehousing and warehousing was up 0.6 percent, and accommodation and food services up 0.7 percent. By contrast, retail trade contracted 1.2 percent after two months of gains, but is expected to expand further in June according to the advance GDP estimate. Public administration was down 0.8 percent in June, erasing the previous month's advance.
The advance estimate points to a 0.1 percent recovery in June, as gains in retail and wholesale trade were partly offset by a decrease in manufacturing. Should the advance estimate materialize, real GDP would be virtually unchanged in the second quarter after a strong first quarter that benefitted from a rapid export growth due to trade being pulled forward ahead of tariffs.
Overall, the BoC has already factored in a 1.5 percent GDP contraction in the second quarter at an annual rate, as the strength in exports reverses and U.S. demand for Canadian goods weakens due to tariffs.
The BoC expects tariffs and trade-related uncertainty to weigh on growth for some time. In its July Monetary Policy Report, it projects GDP growth to pick up in the second half of this year as exports stabilize under a scenario where retaliatory tariffs by Canada and China remain permanent, while other countries do not retaliate. Under this scenario, GDP is seen contracting 1.5 percent in the second quarter, before picking up 1.0 percent in the second half of 2025.
Under a de-escalation scenario where Canada and most countries remove their retaliatory tariffs, data from the central bank indicate the difference would mostly be felt in the strength of the recovery in the second half of 2025, with GDP expanding 2 percent after contracting in the second quarter.
Under an escalation scenario, where Canada and China double the value of U.S. goods subject to tariffs, the recession would last three quarters, and the recovery wouldn't start until 2026.
While GDP expanding in June, gains were concentrated concentrated in 7 of 20 sectors.
A 0.7 percent advance in manufacturing in June only partially recovered the 1.8 percent drop the previous month. Overall, manufacturing benefitted from inventory accumulation and activity was still 1.1 percent below March, before U.S. tariffs were implemented. Non-durable manufacturing was up 0.2 percent and durable up 1.2 percent. The advance GDP estimate indicates the rebound in manufacturing won't last into June.
The increase in manufacturing and was not enough to offset declines of 1.0 percent in mining, quarrying, and oil and gas extraction, 0.5 percent in agriculture, forestry, fishing and hunting, and 0.2 percent in utilities. Construction was unchanged.
In services, real estate, and rental and leasing increased 0.3 percent, transportation and warehousing and warehousing was up 0.6 percent, and accommodation and food services up 0.7 percent. By contrast, retail trade contracted 1.2 percent after two months of gains, but is expected to expand further in June according to the advance GDP estimate. Public administration was down 0.8 percent in June, erasing the previous month's advance.
Market Consensus Before Announcement
Another sluggish showing expected, down 0.1 percent, in line with the Stats Canada projection. Forecast reflects a decline in manufacturing and retail business offset by an increase in wholesale trade.
Definition
Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. In contrast to most industrialised countries a monthly estimate is provided derived from the value added by labour and capital in transforming inputs purchased from other producers into that industry's output. Data for the reference month are usually released close to the end of the second month after the reference period.
Description
Instead of producing an advanced quarterly GDP figure and revising it the following two months, Statistics Canada releases monthly estimates of real GDP at Basic Prices. This release breaks down real output by seven goods-producing industries and twelve service-producing industries, and includes special aggregations such as business sector, non-business sector, and industrial production.
The sources of data used for monthly and quarterly estimates often differ and leads to very different estimates for certain items, such as price deflators. As a result, the monthly figures are not perfectly correlated with the quarterly numbers. However, the monthly data do give some idea of where the quarter is headed and especially in an uncertain environment, they are closely watched. While industrial production is closely watched in the U.S., it is not in Canada especially since the economy has become increasingly dominated by services. However, the goods sector is more vulnerable to wide swings in output compared to services, and exports remain dominated by industrial output.
The sources of data used for monthly and quarterly estimates often differ and leads to very different estimates for certain items, such as price deflators. As a result, the monthly figures are not perfectly correlated with the quarterly numbers. However, the monthly data do give some idea of where the quarter is headed and especially in an uncertain environment, they are closely watched. While industrial production is closely watched in the U.S., it is not in Canada especially since the economy has become increasingly dominated by services. However, the goods sector is more vulnerable to wide swings in output compared to services, and exports remain dominated by industrial output.
