Search

GDP Stalls as Oil Slicks and Retail Slips

Canadian Economics

By: Walter Bolduc

    

Real gross domestic product edged down 0.1 per cent in May 2025, following a 0.1 per cent decline in April.

  • Goods-producing industries declined in May, with mining, quarrying, and oil and gas extraction down 1.0 per cent, led by a 3.0 per cent drop in oil sands extraction due to ongoing maintenance in Alberta.
  • Manufacturing expanded by 0.7 per cent, rebounding from April’s 1.8 per cent contraction. Durable goods rose 1.2 per cent, led by fabricated metal products (+2.8 per cent). Non-durable goods increased by 0.2 per cent, driven by a 3.2 per cent gain in chemical manufacturing, including an 8.0 per cent increase in pharmaceuticals.
  • Services-producing industries were flat. Gains in real estate (+0.3 per cent) and transportation (+0.6 per cent) were offset by weakness in retail and public services.
  • Retail trade contracted 1.2 per cent, with declines in motor vehicle and parts dealers (–4.8 per cent), food and beverage stores (–2.5 per cent), and gasoline stations (–3.1 per cent).
  • Transportation and warehousing rose 0.6 per cent. Pipeline transportation rose 1.3 per cent due to increased activity at the Keystone oil pipeline, which was shut down for a few days in April following a rupture in North Dakota.
  • Real estate and rental and leasing posted its second monthly gain (+0.3 per cent), with real estate agents and brokers up 3.5 per cent, reflecting improved resale activity in major markets like the Greater Toronto Area.
  • Public administration declined 0.8 per cent, with a 3.2 per cent drop in federal government activity following election-related spikes in April.
  • Arts, entertainment and recreation grew 0.2 per cent, supported by the NHL postseason. In May, three Canadian teams played in the second round of the playoffs—the first time since 2004.
  • Advance estimate for June points to a 0.1 per cent GDP increase, led by rebounds in retail and wholesale trade, though manufacturing is expected to decline again.

Key Insights

Consumer confidence has been strained under the elevated uncertainty in the economy and is weighing on the retail trade industry. In May, our Index of Consumer Confidence continued to languish, increasing from its record low recorded in March but remaining concerningly low by historical standards. Consumers were particularly sour on large purchases, with only 12.5 per cent of consumers viewing it as a good time for a major purchase. This position is evident by May’s 4.8 per cent contraction in motor vehicle and parts dealers, a figure which was also hurt by concerns over tariff-related costs on new motor vehicles. Looking ahead, the diminished confidence will continue to weigh on retail trade and the Canadian economy more broadly.

Despite today’s release, the Canadian economy is showing resilience. Following two months of negative GDP growth in the second quarter, June’s employment numbers were a pleasant surprise with the economy adding 83,000 jobs, the first employment increase since January. Early estimates also indicate the Canadian economy expanded 0.1 per cent in June, outperforming our own expectations.

All eyes continue to be on a potential U.S.–Canada trade deal. Looking toward the coming months, Canada’s economic growth will hinge on the evolution of the Canada–U.S. trade relationship. The two countries agreed on a deadline to reach a new economic and security deal by August 1, but with that day nearly upon us, it seems likely that the trade dispute will continue to drag. The sooner the two countries can reach a deal—even if it includes some level of tariffs—the better for the Canadian economy as it would provide clarity for both consumers and businesses.

To learn more about Canada’s economic outlooks for the long-term or the next five year’s, please consult our Canadian Outlook.

Related Insights

See More Insights

Comments