Canada’s economy grew by 0.6% in May, surpassing economists expectations of 0.2% growth.
The rate of growth in April was 0.2%, unrevised from previous estimates.
According to BNN, the May figures could increase the odds of another interest rate increase from the Bank of Canada.
However, a closer look at the stats reveals a more complicated picture.
Of the 0.6% growth, 0.4 percentage points were from the oil and gas sector. And as noted by BNN, “Oil and gas extraction surged 7.6 per cent as activity at a facility in Alberta recovered after a fire and explosion in March that caused production difficulties, the statistics agency said.”
So, most of the growth came from the oil & gas sector because of the recovery a damaged facility. That represents the recovery of previously lost growth, not an expansion.
Meanwhile, manufacturing rose 1.1%, and the retail sector grew 0.9%.
Despite the recovery of a facility and minimal growth elsewhere, there are concerns looming on the horizon. According to Statistics Canada, there was a 6.3% fall in activity at real estate agent and brokers offices, a sign of a pending downturn in Canada’s housing market.
There are also looming debt problems, with household debt reaching record levels. As I’ve said before, any economy can achieve temporary growth based upon massive government spending and growing debt levels. Of course, that growth is not sustainable, and a focus on month-to-month figures can distract from bigger long-term trends. Those trends do not bode well for the Canadian economy.