The Canadian economy contracted again in May, Statistics Canada said Thursday, but signs of a rebound in June could see growth hold flat for the quarter overall.
Real gross domestic product fell 0.1 per cent in May, matching the decline in April.
The agency said goods-producing sectors were to blame for the drop, particularly in mining, quarrying and oil and gas extraction.
Manufacturing posted growth of 0.7 per cent in the month however, partially offsetting a decline of 1.8 per cent in April when tariffs from the United States took full effect. StatCan noted that manufacturing activity remained 1.1 per cent lower in May than in March.
Transportation and warehousing also rebounded from an April decline.
“The good news here is that the Canadian economy seems to have soldiered through the period of maximum trade uncertainty with less damage than initially expected,” wrote BMO chief economist Doug Porter in a note to clients Thursday.
StatCan said a busier month for home resales, particularly in Toronto, saw activity tick up in the real estate and rental industry.
With three Canadian teams advancing to the second round of the NHL playoffs, StatCan said the spectator sports industry was on the rise in May as well.
The public sector meanwhile saw declines after a run-up of activity tied to the federal election in April.
StatCan’s early estimates for June show an expected rebound of 0.1 per cent in real GDP. The agency pointed to strength in retail and wholesale trade driving the growth, while manufacturing is expected to have declined last month.
Taken together, StatCan said its advance reading for the second quarter of the year shows the economy was essentially flat. The agency’s early estimates will be updated with the release of the June GDP figures next month.
The Bank of Canada said in its monetary policy report Wednesday that it expects real GDP fell 1.5 per cent on an annual basis in the second quarter amid considerable uncertainty tied to U.S. tariffs.
Porter noted that the StatCan monthly GDP figures measure output by industry, while the Bank of Canada’s estimates will track actual spending in the economy.
“The output and spending estimates don’t always line up, especially when there is a big change in exports and imports, as was certainly the case in each of the past two quarters,” he wrote.
Porter said a sharp drop in Canada’s export volumes tied to the U.S. trade disruption will likely drag down second quarter GDP based on spending — figures StatCan will release at the end of August.
CIBC senior economist Andrew Grantham also cautioned reading too much into StatCan’s preliminary estimates for the second quarter.
“We will need to wait and see next month’s quarterly GDP release to know whether the economy is really outperforming the Bank’s expectations, and the implication that may have for the probability of future interest rate cuts,” he said in a note.
The Bank of Canada held its policy rate steady at 2.75 per cent for a third consecutive time on Wednesday amid what it called signs of resilience in the Canadian economy.
This report by The Canadian Press was first published July 31, 2025.
By Craig Lord
