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Hélène Bégin
Principal Economist
Quebec's Economic Growth Continued to Slow in May with a 0.1% Uptick in Real GDP
Highlights
- After jumping by an impressive 0.5% in April, real GDP edged up 0.1% in May, which is more typical for a growth phase.
- Most of this increase was the result of a substantial 0.6% pickup in goods production. This was mainly driven by three sectors: oil and gas (+3.4%), utilities (+1.7%) and goods manufacturing (+0.8%).
- Meanwhile the services sector flatlined in May. Declines in wholesale (-1.5%) and retail (-0.7%) trade offset gains in a few other sectors. (See table 1 for more details.)
- More than half of the top 20 sectors saw production accelerate in May, so the 0.1% total increase is fairly well-distributed.
- Real GDP by industry across Canada grew 0.2% in May, similar to the uptick in Quebec.
- But the cumulative increase for the first 5 months of 2024 was bigger in Canada as a whole (+0.9%) than in the province (+0.5%).
Comments
After quickly regaining all the ground lost last year, Quebec's economy entered a new growth phase. The 0.1% uptick in real GDP was modest, but we expected growth to slow after rebounding sharply in April. The province is at a different stage of the economic cycle than the country as a whole, which is experiencing a slowdown but didn't see real GDP contract for any length of time last year. Even though both economies have gone through similar cycles in the past, sometimes their paths diverge, as is happening right now.
Although Quebec's economy is still in a growth phase, the job market External link. is going through a soft patch and continues to slacken slightly. First, the lagged effects of the real GDP contraction in 2023 are still being felt. Second, many businesses find themselves in delicate financial situations External link. (in French only), which is limiting hiring and sometimes even leads to layoffs.
These conditions may persist for a few more months, until the Bank of Canada cuts key interest rates enough to ease the burden on businesses and highly indebted households. Sunnier economic prospects should also boost demand for goods and services and help the labour market recover over the next few quarters.
Implications
Even though real GDP didn't grow by much in May, Quebec's economy is still on an uptrend. This is great news, as the US economy is beginning to show signs of cooling while Canada as a whole is facing some economic challenges. But the province will have to navigate international economic and financial uncertainty while coping with Canada's railway disruptions, which will continue for several weeks longer even though employees have returned to work.