In recent week the Canadian media have been all but gagging for the economy to go into a recession, and doing their level best to talk it into one*. You're going to have to wait a little longer, guys! Statistics Canada announced this morning that real GDP was unchanged in May, and its preliminary estimate points to 0.1 percent growth in June. If this latter figure is confirmed when the final data are computed, it would mean that real growth on a quarterly basis actually accelerated from Q1 to Q2, in sharp contrast to what's happening south of the border.
The sectoral breakdown reveals that fourteen of the twenty sub-sectors tracked by StatsCan recorded higher output in May, led by the services sector. Goods producing sectors as a whole saw lower output, with manufacturing down by 1.7 percent, led by declines in production of durable goods. This was the first decline in manufacturing output in eight months, but the preliminary data for June appear to show an immediate rebound.
The oldest saying in Canadian economics is that when the US sneezes, Canada gets pneumonia. The apparent onset of a mild recession in the US, confirmed by yesterday's GDP data, is certainly cause for concern. However, the unusual make-up of the decline in US GDP, centered on inventory adjustment and public sector spending, may mean that Canada will largely be spared this time around, as long as US consumption continues to grow. What is quite certain is that there is nothing in today's numbers to deter the Bank of Canada from continuing its efforts to bring inflation back towards the 2 percent target.
* Think I'm exaggerating? Check this out.
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