Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Today’s release of the monthly GDP shows that the Canadian economy contracted for a second consecutive month in May. However, while the weakness was widespread, a large proportion of the economic contraction can be attributed to temporary factors: 1) a decline in oil production due to the wildfires in Alberta and maintenance shutdowns, 2) a decrease in public administration due to a reversal of the spike in activity in April due to the Federal Election.
The preliminary estimate for June suggests that economic activity improved in June, rising by 0.1% m-o-m. As a result, GDP is estimated to have increased by 0.1% q-o-q in Q2. This is stronger than the Bank of Canada’s current tariff scenario presented in the July Monetary Policy Report.
Today’s GDP confirms our view that the Canadian economy is no longer deteriorating. With the effective tariff rate lower than initially feared back in the Spring and with some reduction in uncertainty, both business and consumer confidence have improved, leading to some increased spending. However, the level of uncertainty remains high, meaning that any improvement in economic activity will be modest, and we shouldn’t expect a strong recovery going forward. The current economic environment lends support to the patient stance from the BoC who prefers to have more clarity before taking further actions.
For Alberta, the details available in the report suggest that economic activity likely underperformed the rest of the country in May due to lower activity in oil and gas extraction and agriculture. Economic activity in the province remains supported by stronger population growth than in the rest of the country, supporting housing construction, and the tailwinds from strong oil revenues.
The monthly GDP declined to 0.1% m-o-m (+1.2% y-o-y), in line with the preliminary estimate of -0.1% m-o-m and expectations. The details show that 13 of 20 industrial sectors posted lower activity levels in May. Statistics Canada notes that good-producing industries contributed the most to this decline.
Statistics Canada’s preliminary estimate shows that GDP will rise 0.1% m-o-m in June. This suggests that growth in the second quarter of 2025 likely to be around +0.1 q-o-q ar. This is stronger than the Bank of Canada’s current tariff scenario presented in the July Monetary Policy Report.
The goods-producing side of the economy decreased by 0.1% m-o-m in May. Lower activity in natural resource extraction (-1.0% m-o-m), agriculture, forestry, fishing and hunting (-0.5% m-o-m) and utilities (-0.2% m-o-m) were the main contributors to the decline. The other sector, construction, was mostly flat, while manufacturing activity rebounded (+0.7% m-o-m), partially reversing the sharp decline seen in April after months of decline.
The services-producing side of the economy was a flat 0.0% in May. The decrease came mainly from lower activity in management of companies and enterprises (-2.7% m-o-m), retail trade (-1.2% m-o-m), public administration (-0.8% m-o-m), and admin and support services (-0.1% m-o-m). Increases were noticed in accommodation and food services (+0.7% m-o-m), transportation and warehousing (+0.6% m-o-m), real estate and rental and leasing (+0.3% m-o-m) which offset some of the decreases.
For Alberta, there is no specific data in the report. However, we can make an assessment based on activity in some key industries specific to Alberta. The decrease in oil and gas extraction and agriculture activities suggests that the Alberta economy likely underperformed the rest of the country in May.
Looking for more? Subscribe now to receive Economic updates right to your inbox here!
Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.