Canada's Economy Surges in May, Outpacing Bank of Canada Forecasts

According to Statistics Canada's latest report, the country's economy showed significant growth in May, following a mild contraction in the first quarter of this year. The real estate sector saw a notable increase of 5.1% in activity during May, its largest monthly jump since October 2024.

The spring housing market was warming up in May, particularly in Ontario and British Columbia, as the cold snap ended. This growth, along with increases in construction, manufacturing, finance, and insurance sectors, all contributed to a second consecutive month of expansion for these industries.

Additionally, the public sector also expanded in May. The preliminary estimate for GDP in June calls for a 0.2% gain, driven by expected growth in wholesale, retail trade, and finance and insurance. If this holds true, it would mark a significant rebound from the first quarter's contraction.

TD Bank economist Marc Ercolao believes that the stalling of growth in the first quarter was temporary and not reflective of underlying activity. However, BMO chief economist Doug Porter expects growth to moderate in the second half of this year due to high fuel costs and potential tariff threats from the US.