This week is anticipated to be significant for the Canadian economy with key events on the horizon. The deadline for the renewal of the Canada-U.S.-Mexico Agreement is approaching, likely to pass on Wednesday amidst a flurry of opinions and criticisms. Preceding this, the latest GDP figures for April will be released on Tuesday.
The Canadian economy has been facing challenges, having seen consecutive quarters of economic decline at the end of last year and the beginning of this year, sparking discussions about a potential technical recession. It is evident that Canada’s economy is fragile, exacerbated by the impact of the trade war initiated by U.S. President Donald Trump. Despite being weak even before these events, the economy has shown no growth over the past year.
In a glimmer of hope, Statistics Canada has reported a 0.4% increase in real GDP for April. While this may seem modest, sustained monthly growth at this rate would signify a robust economy. Since the summer of 2022, Canada has only experienced 0.4% monthly growth on six occasions.
According to RBC economists Nathan Janzen and Claire Fan, early indications suggest a notable rise in non-conventional oil extraction and oil drilling in April. Coupled with an uptick in manufacturing GDP, it is likely that overall goods-producing sectors expanded by one percent.
However, caution is advised as recent data releases have been subject to significant revisions. The unreliability of monthly GDP data as an economic indicator has been highlighted, with revisions becoming more frequent and unpredictable in recent years. These revisions can impact various economic indicators, such as job numbers and retail sales figures, making them less dependable for assessing the economy.
The upcoming GDP figures on Tuesday carry weight for several reasons. They coincide with the CUSMA renewal deadline, are expected to show a rebound after a period of negative growth, and are likely to introduce new revisions that could alter previous reports and reshape perceptions of the economy in challenging times.
