Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Today’s release of the monthly GDP shows that despite robust growth in April, the preliminary estimate suggests that economic activity remains lacklustre. As such, economic activity is estimated to have increased by +1.8% q-o-q ar in 2024Q2, slower than in Q1, suggesting an increase in excess supply and another decline in GDP per capita.
Today’s GDP number suggests that growth in Q2 will be roughly in line with BoC’s April MPR forecast of 1.5% q-o-q ar. and is unlikely to impact its thinking of the economy. The continued increase in the amount of slack in the economy suggests that the upside surprise in inflation in April was likely noise. Our view remains that the BoC should cut again in July before pausing to see how the economy reacts to lower rates. Whether the central bank agrees with this view is more uncertain and likely depends on inflation easing in May.
For Alberta, the details available in the report suggest that economic activity likely outperformed the rest of the country in May due to stronger activity in oil and gas extraction and pipeline activity in preparation for the opening of the TMX pipeline. High energy prices remain a tailwind to the Alberta economy this year, but not as much as in the past decade (see Where’s the boom? How the impact of oil on Alberta may have permanently weakened). Moreover, continued strong population growth in the province continues to push economic activity higher.
The monthly GDP increased 0.3% in April (+1.1% y-o-y), in line with expectations. The details show that 15 of 20 industrial sectors posted gains on the month. Despite the overall economy being 4.7 percentage points above its pre-pandemic level, 6 out of 20 industrial sectors still have economic activity below their pre-pandemic levels, namely utilities, transportation and warehousing, management of companies, administration and support services, arts, entertainment and recreation, and accommodation and food services.
Statistics Canada’s preliminary estimate shows that GDP rose slightly in May. This suggests that growth in the second quarter of 2024 is likely to be around +1.8% q-o-q ar., slower than in Q1. With growth in Q2 likely weaker than population growth, GDP per capita is likely to decrease again.
The goods-producing side of the economy increased 0.3% m-o-m in April. Higher activity in the natural resources extraction (+1.8% m-o-m), agriculture (+0.6% m-o-m), and manufacturing (+0.4% m-o-m) were the main sources of higher activity. These gains were partly offset by a decline in construction (-0.4% m-o-m) and utilities (-0.2% m-o-m).
The services-producing side of the economy rose by 0.3% in April. Higher activity in wholesale trade (+2.0% m-o-m), accommodation and food (+1.2% m-o-m), arts, entertainment, and recreation (+0.9% m-o-m), retail trade (+0.5% m-o-m), and finance and insurance (+0.4% m-o-m) were the main sources of growth. The higher activity was partly offset by declines in management of companies (-1.9% m-o-m), administration and support services (-0.4$ m-o-m), and real estate (-0.1% m-o-m).
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 stronger activity in oil and gas extraction and pipeline suggests that Alberta likely outperformed the rest of the country in April.
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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.