Growth in­dex shat­ters May ex­pec­ta­tions

Pow­ered by in­dus­try, real GDP rises 0.6%

National Post (National Edition) - - FINANCIAL POST - CRAIG WONG

OT­TAWA • Eco­nomic growth in the coun­try blew past ex­pec­ta­tions in May, pow­ered by the en­ergy sec­tor, post­ing the fastest ex­pan­sion on an an­nual ba­sis since Oc­to­ber 2000 and rais­ing ex­pec­ta­tions the Bank of Canada will raise in­ter­est rates again this fall.

Statis­tics Canada said Fri­day that real gross do­mes­tic prod­uct grew by 0.6 per cent for the month. Economists had ex­pected an in­crease of 0.2 per cent, ac­cord­ing to Thom­son Reuters.

The Bank of Canada raised its key in­ter­est rate ear­lier this month for the first time since 2010. The cen­tral bank’s tar­get for the overnight rate sits at 0.75 per cent.

TD Bank se­nior economist Brian DePratto said the eco­nomic per­for­mance was healthy across nearly ev­ery in­dus­try.

“This is only go­ing to strengthen the case for them,” he said of the cen­tral bank.

The Cana­dian dol­lar, which has been gain­ing ground since the mid­dle of last month when spec­u­la­tion of a cen­tral bank rate hike started, was trad­ing at US80.52 cents, up from an av­er­age price of US79.87 cents on Thurs­day.

The Bank of Canada’s next op­por­tu­nity to raise its key rate is in Septem­ber, but DePratto sug­gested it would wait un­til its Oc­to­ber rate an­nounce­ment when it will also up­date its eco­nomic fore­casts in its mone­tary pol­icy re­port.

Com­pared with a year ago, the econ­omy soared 4.6 per cent. The re­sult was the best since Oc­to­ber 2000 when the econ­omy posted year-overyear growth of 4.7 per cent.

“While that very im­pres­sive head­line comes with a caveat — last May was de­pressed by the Al­berta wild­fires — even ex­clud­ing that fac­tor leaves the un­der­ly­ing growth trend well above three per cent,” Bank of Mon­treal chief economist Doug Porter wrote in a note to clients.

He said the lat­est re­port puts Canada on track for roughly three per cent GDP growth this year, more than a per­cent­age point above where con­sen­sus ex­pec­ta­tions were just six months ago.

“While the blow-out head­line ad­vance no doubt ex­ag­ger­ates the un­der­ly­ing strength in growth, the fact is that ev­ery sin­gle ma­jor sur­prise for the econ­omy this year has been to the up­side,” Porter said.

Statis­tics Canada said goods-pro­duc­ing in­dus­tries rose 1.6 per cent, driven by a 4.6 per cent in­crease in the min­ing, quar­ry­ing, and oil and gas ex­trac­tion sec­tor.

The oil and gas ex­trac­tion sub­sec­tor grew 7.6 per cent, with non-con­ven­tional oil ex­trac­tion ris­ing 13 per cent due to a re­bound in ac­tiv­ity af­ter a fire at the Syn­crude Mil­dred Lake up­grader in mid-March that cur­tailed pro­duc­tion. Con­ven­tional oil and gas ex­trac­tion gained 3.2 per cent.

Ser­vice-pro­duc­ing in­dus­tries in­creased 0.2 per cent, led by fi­nance and in­sur­ance ser­vices.

COM­PARED WITH A YEAR AGO, THE ECON­OMY SOARED 4.6%.

NORM BETTS / BLOOMBERG NEWS

Statis­tics Canada re­ports the oil and gas ex­trac­tion sub­sec­tor grew 7.6 per cent in May, with non-con­ven­tional oil ex­trac­tion ris­ing 13 per cent due to a re­bound in ac­tiv­ity af­ter a mid-March fire at the Syn­crude Mil­dred Lake up­grader, pic­tured, that cur­tailed pro­duc­tion.

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