Canada GDP Jumps 0.5% in April, May Growth Confirmed

Canada's economy grew faster than expected in April, with real GDP rising 0.5% month-on-month after March's 0.1% contraction. The print beat the 0.4% consensus estimate, according to Statistics Canada data released Tuesday.

Fourteen of 20 industrial sectors posted gains. Goods-producing industries led, expanding 1.2% on the month, driven by mining, quarrying, and oil and gas extraction. Services-producing industries rose 0.3% for a third straight monthly increase, supported by the public sector and transportation and warehousing.

The breadth of the expansion suggests the economy regained steam after March's modest dip. Statistics Canada's advance estimate for May points to a further 0.1% gain, though at a slower pace. Strength in finance, insurance, real estate and rental and leasing was partly offset by declines in wholesale trade and agriculture.

The data gives the Bank of Canada room to hold its policy rate steady at 4.75% at the July 24 decision, after cutting 25 basis points in June. Markets had priced roughly a 50% chance of a second consecutive cut before the GDP release, according to overnight index swap pricing. The stronger April print and the May advance estimate both argue against back-to-back easing.

Traders will watch the June jobs report, due July 5, and the July CPI print, due July 16, for the next signals on whether the Bank of Canada resumes cutting in September or waits until October.