Canada’s real GDP fell 0.1% in May, marking the second straight monthly decline, according to Statistics Canada. The decline roughly matches the expectations of economists.
Twelve of the 20 industries saw a decline in May, while seven industries saw a decline in growth, the agency said. The press release said that the industry that produces commodities has “basically no change.”
The most dramatic declines were seen in retail trade (-1.2%), mining, quarry and oil and gas extraction (-1.0%) and public administration (-0.8%). In mining, the gravel sector (excluding oil and gas) has decreased by 2.1%, while oil and gas extraction has decreased by 0.8%, marking the first back-to-back decline since April and May 2023.
Some trade exposure departments showed signs of life in May. Manufacturing output rose 0.7%, the third increase in five months – driven primarily by inventory accumulation. But Oxford Economics warns that the rise may not indicate lasting momentum, calling it a “temporary rebound from low levels, rather than a sign of sustained recovery.”
When U.S. tariffs on Canadian goods came into effect, output in the industry remained below March levels.
Other areas of the economy have also made little profits. Real estate and lease leasing grew for the second time in a row, up 0.3% in May. Transportation and warehouses grew by 0.6%, recovering from a slight decline in the previous month, with rail transport (+1.9%) leading the industry’s growth.
Economists have seen widespread softness in the Canadian economy as most sectors show a decline in May. However, Canada seems to have entered a peak of trade uncertainty with an overall positive attitude. “The good news here is that during the biggest trade uncertainty, the Canadian economy appears to have already done less damage to soldiers than originally expected,” Douglas Porter of BMO wrote in a research note.
CIBC’s Andrew Grantham agrees that the economy is more important than expected, although he warns that the upcoming data may paint a weaker situation.
“While today’s data suggests that the economy is treading water instead of sinking in the second quarter, we suspect spending data will be slightly weaker next month and show a modest contraction,” he wrote.
June GDP is poised to rise, but the outlook for the second quarter remains blurred amid trade tensions
Canada’s June statistics are estimated at 0.1%, and the overall speed in the second quarter is expected to be “basically unchanged”.
By contrast, the Bank of Canada predicted a 1.5% second-quarter contraction in its latest monetary policy report, citing weaker U.S. demand and exports earlier this year.
So what explains the difference?
According to Porter, Statcan’s monthly GDP estimates are based on output on industry side, while Canadian banks’ forecasts rely on spending-side data.
“Output and expenditure estimates are not always consistent, especially when imports and imports change dramatically, like every quarter of the past two quarters,” Porter noted. He added that the bank’s forecast “can be more accurate overall” as it may not be possible to fully capture export declines in monthly data.
TD’s Marc Ercolao also effectively treats Q2 GDP as flat based on industry data, but warns that the appearance remains uncertain.
“In the past, the outlook still faced considerable uncertainty, especially since Canadian and U.S. officials have not yet reached a trade deal,” he wrote.
As for interest rates, Ercolao noted that even though Bank of Canada set its policy rate at 2.75% this week, further cuts are still possible.
“We think there is room for policy rates to be lowered later this year due to excessive supply in the economy and some signs of containment in inflation,” he said.
Visited 99 times today, 99 times
Andrew Grantham Dashboard DOUGLAS PORTER Economic Data Economic Indicators Economic News GDP Marc Ercolao Oxford Economics Statcan Statcan Statcan Statcan Statcan GDP Canada Statistics Canada GDP
Last modified: July 31, 2025
