According to ActionForex, analysts at TD Bank Financial Group note that the Canadian economy returned to growth in May as real GDP rose 4.5% month-on-month.
"May’s growth was a fair bit stronger than both Statistics Canada’s initial nowcast of a 3% gain and market expectations of a 3.5% climb. Growth was fairly widespread, as 17 of 20 major sectors reported increased activity."
"Statistics Canada provided an early nowcast for June, forecasting a further 5% climb. This would leave the level of economic activity 10.4% below February’s reading, and implies roughly a 12% drop for the second quarter as a whole, or about -40% annualized."
"That latter figure is perhaps a less useful way of presenting things given the unique nature of the shock – the notion of a ‘run rate’ implied by an annualized figure isn’t as helpful when the trend has already reversed itself (as implied by the May data and June nowcast). Regardless of how you calculate it, the story is the same: COVID-19 hit the Canadian economy like a wrecking ball."
"Output in the goods producing sectors, which had been hardest hit over March and April, rose 8%, but despite the strong performance, the level of activity was still 15% below February’s reading. Construction stood out, up 17.6% as restrictions on activity were eased in Quebec and Ontario. Manufacturing activity rose 7.4%, with transportation equipment in the driver’s seat as auto plants began to re-open from mid-month."
"In contrast, the much larger service sector rose a more modest 3.3%, and was 14.4% below February levels in May. There were some standout performers: retail trade rose 16.4%, driven by motor vehicle and parts dealers, but with 11 of 12 subsectors expanding, the bigger story appears to have been the re-openings as the month progressed."
"As expected, the May GDP data gave us further confirmation that at least in aggregate, the immediate economic impact of the pandemic is now behind us. A solid nowcast for June, and a combination of further re-openings and encouraging early data for July all point to an ongoing recovery from the earlier hit."
"There is no understating the scale of that hit. Even with May and June set to be the strongest two months of growth recorded under the current definition, the economy was still about 10% shy of its pre-pandemic level of activity in early summer. The June forecast and early July indicators augur for a decent pop-back of activity this quarter, but once the initial effect of re-openings fades, we’re likely to enter a more gradual phase of recovery."
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