As we continue to look for signs of a slowing economy, the latest GDP report shows that economic activity was strong in May, but we might actually see a decline in June.

Canada’s real GDP increased by 0.3% in May and was the fifth month-over-month increase in a row despite the dampening effects of higher interest rates.

May was a bit of an odd month with wildfires reducing oil and gas output, but the end of the public sector workers strike boosting public administration’s contribution.

The preliminary estimate for June, however, is for GDP to decrease by 0.2% on weakening wholesale trade and manufacturing output with the bounceback in the oil and gas sector from the May wildfires not enough to keep the economy in the black.

Putting it all together, annualized GDP growth in the second quarter is estimated* to have been around 1.0%.

This is lower than the Bank of Canada’s most recent forecast of 1.5% and, if the estimate holds, will reduce (but not eliminate) the pressure on the Bank to announce more interest rate hikes. The Bank will still want to see weakness in other economic indicators such as employment, consumer spending and, of course, the inflation rate itself.

Notwithstanding the resiliency of consumers and the housing market, history suggests that higher borrowing costs will cause the economy to slow over the second half of the year and into 2024. Even assuming the landing is soft, it is hard to foresee any direction for Canada’s economic growth other than down.

*Please note that “owing to their preliminary nature, these estimates will be updated on September 1, 2023, with the release of the official GDP data for June and the second quarter.”

Answer to the previous trivia question: The minimum salary of a Canadian Football League player is $70,000 as of the 2023 season.

Today’s trivia question: How many public sector workers are represented by the Public Service Alliance of Canada?