Canada GDP rises 0.2 percent in May, second quarter looks soft

Wed Jul 31, 2013 10:02am EDT
 
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By Randall Palmer

OTTAWA (Reuters) - The Canadian economy grew by 0.2 percent in May from April, according to Statistics Canada data on Wednesday, below forecasts and dampening expectations for the second quarter.

The fifth consecutive monthly increase beat the 0.1 percent rate registered in April, but the median forecast in a Reuters survey was for 0.3 percent growth, ahead of what is expected to be a poor June reading due to floods and a Quebec labor strike.

The headline figure for May was rounded down from a more precise reading of 0.24 percent growth.

Some economists had begun to question whether the Bank of Canada's prediction for second-quarter growth of an annualized 1.0 percent would turn out to be too low. But the weaker-than-expected May data might send them back to the drawing board.

"We had been moving up our Q2 growth forecast as results rolled in for May, but this report will likely reverse those revisions," said CIBC World Markets chief economist Avery Shenfeld.

However, BMO Capital Markets chief economist Doug Porter focused on momentum: "While a shade light in May, Canadian growth still had slightly more underlying momentum than initially expected in the spring, helping it ride through some nasty short-term shocks in June and early July."

Porter added: "Still, the pullback in energy output restrained overall activity, leaving our broader forecast unchanged at this point."

The Bank of Canada predicted this month that third-quarter annualized growth would jump to 3.8 percent, as the economy bounces back from the floods and strike.   Continued...

 
Bombardier q400 airplanes are seen being assembled at the Bombardier aircraft manufacturing facility in Toronto, November 25, 2010. REUTERS/Mark Blinch