GDP by industry for April 2022: A decent month, but dark clouds on the horizon?

June 30, 2022

Canada’s real GDP increased 0.3% in April, led by oil and gas and client-facing sectors, which was slightly better than expected. Unfortunately, StatCan’s advanced estimate for May shows a decline of 0.2%, which puts real GDP growth on pace for an annualized 3.9% in 2022Q2. This is good growth, but below the Bank of Canada’s most recent forecast (6.0%). On its own, this early warning sign is unlikely to deter the Bank from following through with another big interest rate increase in July.

KEY TAKEAWAYS

Canada’s real gross domestic product (GDP) increased 0.3% in April, led by oil and gas and client-facing sectors. This result was slightly better than the earlier advanced estimate (0.2%).
Unfortunately, StatCan’s advanced estimate shows a decline of 0.2% for May. Building in this anticipated drop in May, puts real GDP growth on pace for an annualized 3.9% in 2022Q2 — good growth, but below the Bank of Canada’s most recent forecast (6.0%). On its own, this early warning sign is unlikely to deter the Bank from following through with another big rate increase in July.
Output gains in April were relatively broad-based with increases in 13 of 20 sectors. Goods-producing sectors led the wayrising by 0.9%,while services were up only 0.1%.
The biggest movers of the month were:
- “Client-facing” services continue to recover, with COVID restrictions significantly eased across the country.
  - Air transportation (20%) rose as travelers returned to the skies (and long lines).
  - Arts, entertainment and recreation was up(7.0%, with many hockey seasons extended — aside from the Leafs).
  - Accommodation and food services grew(4.6%) and has finally recovered its pre-pandemic level of activity!

Mining, oil and gas continued to enjoy gains (3.3%), which is unsurprising, given the recent strength of prices.
Real estate fell (-0.8%) for the second straight month, as the housing market correction appears to be gaining steam.
Finance and insurance pulled back (-0.7%). Financial conditions have started to tighten, as the Bank of Canada is aggressively raising interest rates to bring inflation under control.