By Paul Vieira
OTTAWA--Canadian economic output slowed in April from the previous month, as strong growth in the country's commodity and hospitality sectors offset a marked decline in housing. Early estimates point to the economy contracting in May.
Gross domestic product, or the broadest measure of goods and services produced in the economy, rose 0.3% month-over-month in April to 2.053 trillion Canadian dollars, or the equivalent of $1.594 trillion, Statistics Canada said Thursday. The April gain matched market expectations, as provided by TD Securities. On a one-year basis, GDP rose 5.0%.
The data agency said early indicators suggest GDP in May fell 0.2%, the first visible sign that inflation and aggressive interest-rate increases are weighing on economic activity. Statistics Canada said advance information suggest the energy, mining, manufacturing and construction sectors declined in May. The May GDP data are scheduled for release on July 29. Economists have in recent weeks revised downward Canadian growth prospects for the second half of 2022 and next year.
Annual inflation in Canada rose in May to a 39-year high of 7.7%, and analysts say the consumer-price index could surpass 8% in June. As a result, the Bank of Canada -- which has a mandate to set policy to achieve and maintain 2% inflation -- is widely expected to match the Federal Reserve's 0.75-point rate increase when it issues a decision on July 13, and then lift its policy rate toward or above 3% by the fall. The policy rate began the year at 0.25%.
The interest rate increases have reverberated through Canada's housing sector, which last year accounted for one-fifth of the country's GDP growth. Canadian benchmark house prices have dropped for two straight months, and sales activity has declined to prepandemic levels. Statistics Canada said the real-estate sector fell 0.8% in April, or the largest decline in two years, or the start of the Covid-19 pandemic. Excluding the pandemic, the decline in real estate is the biggest since late 2008, or during the global financial crisis.
Driving economic growth in April were commodities, and the accommodation and food sector. The component covering mining and energy extraction advanced 3.3%, or the biggest gain in 16 months, mostly due to oil and gas production. The accommodation and food services sector expanded 4.6% in April, up for a third consecutive month. The data agency said activity at bars and restaurants -- among the hardest hit due to public-health restrictions -- surpassed prepandemic levels in the month.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
06-30-22 0846ET
