Canada's Economy Faces Turbulence: GDP Shrinks in May but Optimism for June Growth

Canada's Gross Domestic Product (GDP) witnessed a reduction of 0.1% in May, in line with expectations, though a recovery is anticipated in June, according to data released on Thursday. An advanced estimate suggests GDP could show an increase of 0.1% for June, and the same growth rate on an annualized basis for the second quarter, per Statistics Canada.

This forecast diverges from the broader anticipation of a second-quarter downturn. The retail trade sector suffered the most in May, contracting by 1.2%, as reported by StatsCan, with activity shrinking across seven out of twelve subsectors. Retail trade is vital, comprising part of the larger services sector that makes up 75% of the GDP.

Despite a 1% dip in mining, quarrying, and oil and gas extraction within the 25% goods-producing industries, manufacturing saw a slight uptick of 0.7%, following a steep decline in April. On Wednesday, the Bank of Canada held interest rates at 2.75%, predicting a 1.5% economic contraction for Q2. Despite challenges, money markets now see an 89% chance the BoC will sustain rates in September. Concurrent U.S.-Canada trade discussions aim to ease tariffs, though meeting the deadline remains uncertain.

(With inputs from agencies.)