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Canada’s GDP Jumps 0.4% in May on Ramped Up Auto Output

July 31 (Bloomberg) -- Canada’s gross domestic product jumped in May at the fastest pace in four months as carmakers ramped up production.

Output rose 0.4 percent, following a 0.1 percent gain in April, Statistics Canada said today in Ottawa. The result matched the median forecast in a Bloomberg economist survey with 18 responses.

The fifth straight monthly gain in domestic output adds to signs the economy is making progress on what Bank of Canada Governor Stephen Poloz said will be a two-year recovery toward full output. The central bank on July 16 estimated annualized growth of 2.5 percent in the April-to-June period after expansion slowed to a 1.2 percent pace in the first quarter.

“It’s a pretty good report,” David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto, said by phone from Toronto. “It was generally broad-based gains. The key to our outlook is seeing how the U.S. economy performs as we get into the second half.”

U.S. gross domestic product rose at a 4 percent annualized rate in the second quarter after shrinking 2.1 percent from January through March, Commerce Department figures showed yesterday.

Tulk said the report confirms economic growth is “tracking” the Bank of Canada’s second-quarter forecast.

Canada’s currency dropped 0.1 percent to C$1.0917 versus its U.S. counterpart at 9:17 a.m. in Toronto. The yield on government benchmark five-year bonds rose 2 basis points to 1.54 percent.

Factory Increase

Manufacturing increased 0.8 percent, led by a 13 percent surge in motor vehicle production. The rise in car output, the fastest since January 2011, follows maintenance shutdowns at some plants in April, Statistics Canada said.

Wholesalers recorded a 1.2 percent jump in output in May, making the sector the second largest contributor of growth during the month. The expansion was broad-based, with goods-producing industries growing 0.5 percent and services-producing industries up 0.4 percent.

The central bank earlier this month cut its forecasts for Canada’s growth, to 2.2 percent from 2.3 percent for this year and to 2.4 percent from 2.5 percent next year, in part due to what it called “serial disappointment” in global growth.

The economy grew 2.3 percent in May from a year earlier.

Canada’s economy has emerged from a harsh winter that slowed orders and damped growth at the beginning of the year, giving little scope for the central bank to raise interest rates. The central bank has kept its key lending rate at 1 percent since September 2010, the longest pause since the 1950s.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editors responsible for this story: Paul Badertscher at pbadertscher@bloomberg.net Chris Fournier

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