OTTAWA—The Canadian economy remained in low gear in April as the key resource and construction sectors were stuck in the spring mud.
Statistics Canada said on June 30 that the economy grew by 0.1 percent in April, the same pace as in March.
Economists had expected a gain of 0.2 percent, according to Thomson Reuters.
CIBC economist Nick Exarhos noted that the drop in the resource sector should be temporary, but added the weakness in construction was a bit of a surprise.
“Even if some of April’s weakness should prove temporary, and thus likely to influence the next month’s readings positively, the disappointment means that growth is likely to come in closer to 2 percent than 2.5 percent (the Bank of Canada’s prior forecast) in the second quarter,” Exarhos wrote in a note to clients.
“An undershoot in growth is likely to give governor Stephen Poloz enough reason to stay on his current policy stance, even with inflation readings heating up.”
Statistics Canada said the output of service industries increased 0.3 percent in April, led by wholesale and retail trade. However, the output of goods-producing industries fell 0.3 percent as all the major sub-sectors except manufacturing fell.
A bitterly cold winter had been blamed for a slow start to the year, and it appeared as if the sluggishness seen in the first three months carried over to April.
Economists have been hoping that strength in the U.S. economy would help things pick up in the second quarter. Last week, revised data suggested the U.S. economy shrank at an annual rate of 2.9 percent in the first quarter of the year, a move not seen since the financial crisis.
“The Canadian economy is trudging along at a pace of right around 2 percent, simply not strong enough to cut into the unemployment rate or to get any pulses racing,” said BMO Capital Markets chief economist Douglas Porter.
“What’s required now is for the U.S. economy to find a higher gear, because the domestic sources of growth in Canada are looking pretty tired,” Porter said.