Manufacturing took the most important hit, although a brief carry from federal election exercise and the NHL playoffs helped cushion the general decline.
StatsCan’s advance estimate for Might suggests a second consecutive month-to-month decline of 0.1%, pointing to a stalled second quarter for development.
Most economists now count on a gentle contraction in Q2 GDP, notably as output in tariff-sensitive sectors like manufacturing and wholesale commerce continues to say no in response to weaker demand
Items sector contracts sharply, providers fail to carry general GDP
April’s weak point was concentrated within the goods-producing sector, which fell 0.6% — its largest month-to-month decline since January 2024. Manufacturing contracted 1.9%, led by a 5.2% drop in motorized vehicle manufacturing. Sturdy items manufacturing was down 2.2%, whereas meals and petroleum manufacturing pulled non-durable items down 1.6%.
Wholesale commerce additionally dropped 1.9%, with motorized vehicle wholesaling down 6.8%. Andrew Grantham of CIBC famous that the biggest declines have been in transportation-related sub-sectors, reinforcing the influence of front-loaded exercise and ongoing tariff fallout.
“Sadly, there’s most likely additional weak point to come back in that sector given
continued tariff uncertainty and stories of sure industries scaling again operations,” Grantham stated.
In the meantime, providers eked out a 0.1% acquire, helped by a 0.8% rise in public administration tied to the spring federal election. Arts and leisure additionally climbed 2.8%, lifted by the NHL playoffs and robust attendance at video games.
BMO’s Douglas Porter referred to as April “a month of excessive drama,” noting that with out the election and playoff boosts, GDP would have declined 0.2%.
Outlook: extra weak point in Might and a flat Q2
StatsCan’s flash estimate for Might reveals one other 0.1% decline, pushed by decrease output in mining, public administration and retail. Although manufacturing wasn’t cited as a contributor, current information on manufacturing unit gross sales and wholesale exercise recommend ongoing softness.
Marc Ercolao at TD says draw back dangers to development are beginning to materialize: “The direct influence from tariffs is including to the headwinds from plunging enterprise and client sentiment.”
Implications for the Financial institution of Canada
With actual GDP now monitoring wherever from a 0.3% to 0.5% contraction in Q2, the information lands between the BoC’s April MPR eventualities: 0.0% for baseline and -1.3% for its draw back case.
Whereas that’s “definitely not excellent news,” wrote BMO’s Porter, he added that it’s additionally a “much less dire” final result than anticipated a number of months again.
Economists are largely in settlement that the softening development backdrop offers the central financial institution room to chop once more.
“We predict the BoC has headroom to chop the coverage fee two extra instances this yr,” Ercolao stated, although extra proof on inflation and jobs is required forward of the following fee choice in July.
Porter added that whereas the information is “mildly dovish,” sticky core inflation stays a hurdle: “We nonetheless have precisely one month of information earlier than the following choice.”
Market pricing has modestly elevated the chances of a July lower following the GDP miss, whereas bond yields have edged decrease.
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Final modified: June 27, 2025
