Economic activity throughout the country is continuing to move in a "seesaw" pattern, Statistics Canada reported on Thursday. It says Canada's real gross domestic product fell slightly in May after showing a modest rise in April.
Canada's real GDP dropped 0.1 per cent in May after rising 0.4 per cent in the previous month, StatsCan reported.
"There was a significant decrease in the energy sector in May. Declines were also recorded in finance, forestry, construction and wholesale trade," Statistics Canada said.
The government agency said the energy sector output fell 0.9 per cent in May. It noted that natural gas extraction dropped, although crude oil extraction made a moderate gain.
"High levels of natural gas inventories in Canada led producers to lower their output, while production difficulties affected oil extraction on several occasions," StatsCan said.
Analysts had predicted an increase of 0.2 per cent in the real GDP.
This is "a bit of a shocker," Douglas Porter of BMO Capital Markets told The Canadian Press.
"This result is a clear disappointment, especially since almost all preliminary indications for the month were pointing to modest growth. The slide in mining looks temporary, but most of the softness in other sectors underlines the fact the economy is swimming upstream."
Although the energy sector output declined, the StatsCan reported that "conversely, manufacturing, retail trade and the public sector advanced."
However, motor vehicle and vehicle parts production fell in May by 3.6 per cent. In April, those sectors showed an increase, StatsCan said. Plastics, rubber, and clothing manufacturing also continued to fall.
Statistics Canada also reported:
- The finance and insurance sector dropped due to reduced level of activity in banking services and financial markets.
- The construction sector fell for the third consecutive month. It was down by 0.4 per cent in May.
- Real estate agent activity declined for a sixth straight month, "due to lower sales of existing homes in most provinces."
Scotiabank economist Derek Holt said the latest results could force the Bank of Canada to cut interest rates.
"While this result was surprising given the data released earlier in the month, it supports our view that economic activity in Canada in the second half of this year will be very sluggish," Holt said. "While we still expect the Bank of Canada to wait until the first quarter of 2009 to cut rates, this report raises the possibility that this move may come sooner than we expect."
With files from The Canadian Press
