Canada's real GDP rose 0.3 percent in April, according to data released this morning by Statistics Canada. Growth was broad-based, with thirteen of twenty sub-sectors reporting gains. Expansion was concentrated in the goods-producing sectors of the economy, which in aggregate gained 0.9 percent in the month, compared to only 0.1 percent for services. Mining, quarrying and oil and gas extraction were particularly strong, rising 3.3 percent in the month to stand 8.5 percent higher than a year ago.
April's growth rate was down significantly from the 0.7 percent recorded in March, but that strong "handoff" from Q1, combined with the positive result for April, means that GDP growth for Q2 as a whole is likely to look healthy. That being said, StatsCan's preliminary read for GDP in May points to a 0.2 percent monthly decline, with output lower in mining, quarrying and oil and gas extraction (perhaps not surprising after the very strong data for April), as well as in manufacturing and construction.
One data point cannot be taken to indicate a trend, but the flow of data on the real economy now merits close attention, given widespread fears over the impact of tighter monetary policy on both sides of the border. The Toronto Star's business section ran an article earlier this week under the headline "Economists say a recession is unlikely -- but will it become a self-fulfilling prophecy"?
It's tempting to say that the negative tone of business coverage in the Star and elsewhere in the media has every chance of making that happen. That being said, securities markets are certainly running scared right now, and stories about the sudden reversal in real estate markets and rising use of food banks are starting to pile up. Recession in the usual sense of two consecutive quarters of falling GDP still does not seem to be the likeliest outcome for Canada, but sluggish growth in output and some weakening in labour markets seem sure to happen in the second half of the year.
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