Economy grew in May despite wildfire effects, looks to have slowed in June

Economy grew in May despite wildfire effects, looks to have slowed in June

The Canadian economy grew by 0.3 per cent in May despite downward pressure from wildfire-hit oil and gas production but it looks to have slowed in June, Statistics Canada said Friday.

The energy sector was down 2.1 per cent in May, the release shows.

“This was the sector’s first decline in five months and its largest since August 2020,” the agency said.

The modest GDP increase in May was driven in part by a rebound in the public administration sector as most federal public servants on strike returned to work by the end of April.

However, that modest growth is unlikely to hold, as the federal agency’s preliminary estimate for June suggests the economy contracted by 0.2 per cent.

The slowdown comes as the Bank of Canada’s key interest rate sits at five per cent, the highest it’s been since 2001. The interest rate spike is expected to slow the economy down, though it has generally performed better than expected this year.

The real estate sector, for example, is expected to continue to grow in June despite high interest rates.

In May, home resales in most of Canada’s largest markets led to an industry increase of 7.6 per cent.

But the the pullback in June will likely help support a hold on the Bank of Canada’s key policy rate in September after announcing a hike this month, said TD economist Marc Ercolao.