Canada on Track to Shrink in Q2 With Back-To-Back GDP Contractions in April, May, Says Desjardins

09:02 AM EDT, 06/27/2025 (MT Newswires) -- The latest reading in Canadian April gross domestic product pointed to a decline of 0.1% month over month in activity, following an upwardly revised 0.2% pace of growth in March, said Desjardins after Friday's data.

Just 10 of the 20 industrial sectors posted growth in April. Broad-based weakness in manufacturing was the biggest contributor to the drop, as tariff-related uncertainty led to scaled-back operations, noted the bank. Economic activity tied to the federal election meant that public administration provided the largest positive contribution to growth in April.

However, strength in that category was reversed in May, depressing Statistics Canada's flash estimate for the month, stated Desjardins.

Overall, StatsCan believes that the economy contracted 0.1% month over month in May too.

It's been almost three years since the economy posted consecutive monthly declines in activity, added the bank. Before the pandemic, the last such instance was in 2017.

The bank's tracking for Q2 GDP now more clearly points to a slight contraction. Desjardins continues to believe the Bank of Canada will reduce rates next month, with the stickiness in core inflation measures due mostly to unusual volatility in the April reading.

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