We expect next Friday’s Canadian growth domestic product data will show slowing growth following a jump in the first quarter that was largely driven by front-running tariffs.
GDP is expected to have eked out a 0.1% increase in April, matching Statistics Canada’s preliminary estimate from a month ago. The trade-exposed manufacturing sector softened with sales falling sharply in subsectors targeted directly by U.S. tariffs including transportation equipment, and metal products. However, retail sales volumes edged up in April, and early data indicates a jump in oil production in Alberta.
The advance estimate for May output will be closely watched as early indicators are mixed. Trade-reliant sectors like manufacturing continued to weaken with contracting hours worked and employment declining. But, other parts of the economy provided offset and overall employment still edged higher in May. Data from Indeed.com showed hiring demand stabilizing into June.
Tariffs have impacted production and employment in certain sectors, but it’s likely too soon to see substantial effects in consumer prices. Some import-reliant categories like food and autos have experienced accelerating price growth, but recent upside surprises in consumer prices have predominantly come from domestically produced and consumed services.
For May, we expect Canadian consumer price index growth to edge up 1.8% year-over-year from April’s 1.7% with excluding food and energy price growth holding steady at 2.6%. The removal of the consumer carbon tax in April in most provinces will continue to keep energy prices well below levels from a year ago. The Bank of Canada’s preferred core measures (which exclude indirect taxes like the carbon tax) likely eased slightly after exceeding 3% in April.
