Canada’s economy might be stronger than expected according to this week’s data. Statistics Canada (Stat Can) data shows real gross domestic product (GDP) grew in April. Even with preliminary numbers showing growth stalling in May, output is still set to outperform the central bank’s expectations. Most weakness is contained to just a few sectors, including housing—which is providing a drag despite increased state-stimulus.
Canadian economic output made a big advance in the latest report. Real GDP climbed 0.3% in April, matching the preliminary estimate a month prior. May’s preliminary data wasn’t quite as robust at 0.1%, but even just that would be enough to best the central bank’s estimate for growth.
Source: Stat Can.
“The two months combined put Q2 on track for nearly 2% annualized growth, which is a bit stronger than the BoC’s (and our) 1.5% call for the quarter, but we’ll await further data before adjusting our forecast,” wrote Douglas Porter, Chief economist at BMO.
His calculations show real growth for 2024 is so far on track for 1% annual growth. “That’s not a recession by any means, but it’s also pretty soft, especially in light of 3%+ population growth,” he explained.
The weakness in the latest numbers was almost entirely attributed to the slowdown in housing. The agency notes construction fell 0.4% in April, with residential building construction responsible for the collapse. The U.S. component fell 2.3% in the month, and is 24% lower than it was at the peak hit in April 2024. Policymakers pumping tens of billions in capital to stimulate residential construction has had the opposite of the desired effect—propping up prices and preserving the cost inefficiencies.
On the upside, more than three-quarters of components in GDP saw growth in the latest report. A rebound for resources, which saw the Mining, Quarrying, and Oil & Gas Extraction (+1.8%), was a particularly big contributor.
Canada’s economic picture is blurry these days, especially to those looking for insight on when the next rate cut is coming. Higher-than-expected real GDP growth follows an acceleration in headline and Core CPI, showing demand is far from dead.
Unemployment is rising, but that’s not due to the country adding fewer jobs—Canada has seen employment grow at a fairly robust rate over the past few years. The issue is the population’s rapid expansion has resulted in workers growing at 3x the rate jobs are added.
None of these are factors that would pressure interest rates lower.
