The Canadian economy continued to keep its head just above water in May, growing 0.2%, led by expansions in manufacturing and the public sector.<\/p>\n
Statistics Canada’s gross domestic product report on Wednesday said retail and wholesale trade as well as the oil and gas sector weighed on growth.<\/p>\n
However, it highlighted the Trans Mountain pipeline expansion’s contribution to economic growth that month.<\/p>\n
“The crude oil and other pipeline transportation industry rose 1.5%, reflecting in part commencement of the expanded Trans Mountain pipeline as the first tankers carrying Western Canadian oil departed from the Port of Vancouver in late May,” the report says.<\/p>\n
Economists noted while the latest data came in slightly stronger than expected, it reaffirms the fact that economic growth is tepid, warranting a continued reduction in interest rates from the Bank of Canada.<\/p>\n
The federal agency estimates that growth was tempered slightly in June to 0.1%, with growth in construction, real estate and rental and leasing, and finance and insurance partially offset by decreases in manufacturing and wholesale trade.<\/p>\n
For the second quarter, Statistics Canada expects real gross domestic product grew at an annualized rate of 2.2%.<\/p>\n
“Canada\u2019s economy did marginally better than we expected in the closing months of the second quarter, while not registering a medal-winning performance when judged in terms of per capita output gains,” wrote CIBC chief economist Avery Shenfeld.<\/p>\n
“The data will likely see some small upward adjustments to forecasts for Q2 GDP, but not enough to stand in the way of a further BoC rate cut in September, which is more tied to the progress seen in inflation readings.”<\/p>\n
The latest economic growth figures come one week after the Bank of Canada lowered its key interest rate for a second time in a row.<\/p>\n
Governor Tiff Macklem said the central bank’s decision was partly driven by weakening economic conditions.<\/p>\n
“That need for growth to pick up was something that was part of our decision to cut the policy interest rate,” Macklem said on July 24.<\/p>\n
While the economy has not dipped into a recession, growth has been meagre, particularly when taking population growth into account.<\/p>\n
The labour market has also felt the weight of high borrowing costs, with graduates and newcomers particularly affected by dwindling job opportunities.<\/p>\n
The unemployment rate has steadily climbed over the last year, reaching 6.4% in June.<\/p>\n
The Bank of Canada’s interest rate cuts are expected to take some of the pressure off of the economy, though at 4.5%, its benchmark rate continues to restrict economic growth.<\/p>\n
Many forecasters expect the Bank of Canada to follow up with another interest rate reduction in September.<\/p>\n
“We think the economic backdrop should give the Bank of Canada room to deliver another interest rate cut in their next meeting in September,” wrote RBC economist Abbey Xu in a client note Wednesday.<\/p>\n
The Bank of Canada was the first central bank in the G7 to begin lowering interest rates this year.<\/p>\n