Fresh GDP data released by Statistics Canada this morning suggest that the economy remains on track for the much-desired soft landing. Real GDP, which was unchanged in March, rose 0.3 percent in April, and preliminary figures suggest a further 0.1 percent increase in May. The growth in April was broad-based, with both goods and services output rising 0.3 percent; 15 of the 20 sub-sectors tracked by StatsCan posted gains. Of note, the manufacturing sector, which had contracted in the two preceding months, posted higher output in both April and May.
Today's data are unlikely to exert any major influence on the Bank of Canada's rate decision a month from now. Other items on the upcoming release schedule, including employment and CPI data for June, are likely to have much more importance for the Bank. However, there was one other data release today that may keep the possibility of an early rate cut alive. Payroll employment reportedly fell in April, and reported job vacancies fell in the month, their third consecutive decline. Moreover, the year-on-year increase in average weekly earnings fell to 3.7 percent in April from 4.1 percent in March. This report is not nearly as widely followed as the monthly jobs and unemployment data, but it does appear to support the Bank of Canada's belief that a certain degree of slack is appearing in the labour market.
While it is good news that the economy is still edging ahead, the kind of GDP growth seen in the most recent three months falls far short of the rate of growth in Canada's population, which continues to be boosted by high immigration levels. Real GDP per head is still falling. That fact, together with Canada's desultory productivity growth, is sure to be a key issue as and when the next Federal election is called.
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