- Canadian GDP jumped by 0.5% month-on-month (m/m) in April, a tick higher than Statistics Canada’s advanced guidance and market expectations.
- Growth was broad-based with 14 of 20 industries registering an increase on the month. Goods industries (+1.2% m/m) reversed last months decline, while the services sector grew for a third consecutive month by 0.3% m/m.
- On the goods side, oil & gas extraction (+3.7% m/m) contributed most to growth while modest gains in construction and manufacturing also pitched in on the headline gain.
- On the services side, the public sector aggregate expanded 0.4% m/m, led by gains in public administration. Transportation and warehousing also jumped by a decent 0.9% m/m while the real estate sector ticked higher for a third consecutive month.
- Advanced guidance for May points to a small 0.1% m/m gain. A lift in the finance/insurance/real estate sector is expected to be counterbalanced by a drag in wholesale trade.
Key Implications
- April’s stronger-than-expected print points to a better handoff into the second quarter with Q2 growth now tracking above 2.0% annualized. Zooming out, that leaves the first-quarter stumble looking more like a temporary soft patch than the start of a deeper downturn, broadly in line with the Bank of Canada’s view that growth should resume in Q2 even if the economy remains in excess supply.
- The bigger message here is that this reading should take some air out of the recent “technical recession” narrative. The economy is grinding through a soft patch, but household demand is still providing support to activity, while trade exposed industries are pointing to a tentative recovery. For the Bank of Canada, this argues for patience rather than a pivot. Firmer near-term growth lowers the urgency to ease, while inflation pressures that remain contained for now give the Bank cover to stay on the sidelines.
