Economic growth slow in May

Real gross domestic product rose just 0.1% in May after flatlining in April, adding to evidence Canada’s economic recovery has slowed to a crawl.

Losses in the construction, utilities and service sectors held back modest gains in the mining, agriculture, fishing and forestry industries, Statistics Canada said Friday. The overall numbers were in line with projections from Scotia Economics.

Growth in May was considerably less robust than the monthly average rate of 0.46% that characterize the first quarter, noted HSBC Canada economist Stewart Hall.

“Canada, an economic wonder child no more,” Hall said in a note.

“To be certain, the economic recovery is decelerating to a level consistent with more moderate rates of economic growth.”

May marked the second consecutive weak month for service-producing professionals, as activity by real estate agents dropped off dramatically.

That’s because sales of existing homes fell sharply in several parts of the country in May, resulting in an 11.3% drop in the output of real estate agents and brokers. Canada’s real estate agents have now seen five straight declines.

On the upside, the finance and insurance sector as well as the retail trade sector advanced in the month.

Canada’s economy began to emerge from recession late last year, growing at an annualized rate of 4.9% in the fourth quarter. By the first quarter of 2010, the recovery was barreling ahead at 6.1% clip, the fastest growth in a decade.

GDP will need to pick again if Canada is to meet the central bank’s projections of 3% growth in the upcoming quarter.

South of the border, data showed U.S. GDP slowed more than expected in the second quarter. Imports grew at a pace not seen since 1984 as businesses ramped up capital investment. American consumers on the other hand remained more cautious on spending.

Hall expects business and external demand in Canada to step up in time.

“Indeed, if Canada is to look forward to a sustainable economic recovery it is going to have to experience a roll over in demand away from its reliance upon consumer spending and government transfusions,” he said.