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Canada: Economy flatlines in May
GDP reading: GDP was flat in month-on-month seasonally adjusted terms in May, following April’s 0.1% decrease. On an annual basis, monthly GDP rose at a more moderate pace of 1.2% in May (April: +1.4% yoy), the worst result since March 2024.
Drivers: Goods-producing industries contracted in May, mainly due to a decline in mining, quarrying, and oil and gas, though manufacturing grew. Service industries were broadly flat, with gains in real estate and transportation offset by drops in retail and public administration.
GDP outlook: Preliminary data suggests real GDP rose 0.1% in June, with gains in retail and wholesale trade partly offset by a drop in manufacturing. Based on this estimate, the economy showed little overall change in Q2 2025 compared to Q1 2025—a resilient performance given the imposition of U.S. tariffs on some Canadian imports from March.
Panelist insight: TD Economics’ Marc Ercolao said:
“May’s weak GDP reading came as no surprise as tariff-related headwinds continue to blow. For the time being, industry data suggest Q2 GDP effectively flat. While this would represent a sharp pullback from Q1 growth, it would be a better outcome than the BoC’s most recent guidance for second quarter growth. Past this, the outlook continues to face considerable uncertainty.”
