Canada's economy edged up only 0.1% in May
Published Tuesday, July 31, 2012 8:57AM EDT
Last Updated Tuesday, July 31, 2012 5:52PM EDT
Economic growth in Canada fell short of expectations in May, with the nation’s real gross domestic product ticking up only 0.1 per cent.
The modest gain released by Statistics Canada on Tuesday comes after an expansion of 0.3 per cent in April.
Slight gains were made in mining, gas extraction and some service industries but those increases were offset by slowing manufacturing and construction activity, the agency reported.
Hopes for more considerable growth in May had been buoyed by positive projections for areas such as sales, manufacturing and wholesale trade, The Canadian Press reported.
Some economists believe the disappointing May result, however, has set the stage for second-quarter growth below two per cent.
In an interview with CP, Scotiabank economist Derek Holt surmised that based on available information, the April-June period could come in as low as 1.4 per cent annualized.
Factoring in continuing financial woes in Europe and weakness in the United States, economists anticipate future growth, at least for the rest of the year, will be modest.
Economist Paul Ashworth of Capital Economics echoed this sentiment in a statement issued Tuesday in which he predicted there would be little opportunity for the economy to rebound.
“Indeed, with all levels of government also tightening fiscal policy, it is more likely that GDP growth will slow further,” he said, after predicting the global economic slowdown would restrain exports while a slump in the housing market would hurt housing investments.
Service industries managed to edge up 0.1 per cent in May, while transportation and warehousing services fell 0.5 per cent. Statistics Canada attributes the latter result to a decline in rail services, partially attributed to a strike at Canadian Pacific Railway Ltd. during that time.
Mining, oil and gas extraction continued to enjoy growth in May, expanding by 0.6 per cent. The healthy gain follows a 2.0 per cent leap for the sector in April.
Manufacturing, however, declined 0.5 per cent in May. The result has been attributed to lower manufacturing of machinery, computers and other electronics, as well as primary metal.
Construction was also down by 0.2 per cent, highlighting a slowdown in residential housing construction. Gains in engineering and repair work were not enough to offset the decline.
Ashworth anticipates that Canada’s economy will continue to slow “from its current sub-par rate” and, as a result, nudge the unemployment rate up.
“At that point we would expect to see the Bank of Canada changing tack, dropping any suggestion that monetary policy might be tightened and maybe even hinting at a further easing."