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(Bloomberg) — Canada’s economy is set to rebound sharply in the second quarter amid a spike in oil production, breaking a half-year of stagnation.
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Gross domestic product expanded 0.1% in May, according to a flash estimate from Statistics Canada released Tuesday. It rose 0.5% in April, higher than the 0.4% growth expected by economists in a Bloomberg survey, and the fastest pace since July of last year.
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Assuming no growth in June, the industry-based output data suggest Canada’s economy will rise at a 2.3% annualized pace in the second quarter, a major acceleration after a half-year of flattened industrial output.
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The data will dispel claims the northern nation is in the midst of prolonged downturn. In May, the statistics agency reported that expenditure-based GDP contracted for two consecutive quarters starting at the ending of last year, satisfying one condition of a recession.
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While most economists and the central bank have rejected that label, US trade policy and an abrupt slowdown in immigration of non-permanent residents have led to weaker, choppier growth. The Bank of Canada expects the economy will be in excess supply through most of 2026.
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The two-year Canadian government bond yield rose after the release to 2.733% as of 8:58 a.m. in Ottawa. The loonie was about 0.1% weaker at C$1.4230 per US dollar.
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“Today’s data show that the Canadian economy sprang back to life,” Andrew Grantham, senior economist at Canadian Imperial Bank of Commerce, said by email.
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While the projected rebound in the second quarter would be above the Bank of Canada’s latest estimate of 1.5%, it still wouldn’t make up for the first-quarter miss when it comes to the output gap, Grantham said.
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“We continue to forecast no change in the Bank of Canada’s overnight rate this year,” he said.
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Goods-producing industries rose 1.2% in April, Statistics Canada reported, driven by oil and gas extraction. The increase in petroleum output was due to a rebound in higher synthetic crude oil production, which the agency said followed longer-than-anticipated unscheduled maintenance that tempered growth through the first three months of the year.
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Oil and gas extraction also ramped up off the country’s Atlantic coast, coinciding with the global spike in petroleum prices due to the war in the Middle East.
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The country’s manufacturing sector expanded 0.6% in April. Construction output rose for the first time in five months. Real estate also grew, reflecting an increase in housing resale activity, the agency said, particularly in Toronto.
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—With assistance from Mario Baker Ramirez.
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(Adds market, economist reaction starting in the sixth paragraph.)
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English (US)