Economy shrank in May, fifth consecutive monthly decline, Statistics Canada says

The drop in the economy came as goods-producing industries fell 0.6 per cent in May, including weakness in manufacturing and the oilpatch.

The consensus of economists was for a flat reading for gross domestic product in May, following a 0.1-per-cent decline the previous month.

The federal agency says the drop was mostly a result of contractions in manufacturing, mining, quarrying and oil and gas extraction as well as wholesale trade.

The Canadian economy’s now five-month contraction puts it on course for a technical recession – generally seen a two consecutive quarterly declines.

The Bank of Canada, which lowered its key overnight interest rate to 0.50% earlier this month, has said it anticipates improvements during the second half of the year based on expectations for a pickup in non-resource exports.

“There is no sugar-coating this one”, said BMO chief economist Douglas Porter in a note to clients. U.S. GDP, in contrast, rose by 0.6 percent in the first quarter and 2.3 percent in the second. The services side of the economy, which accounts for over two-thirds of total output, slipped 0.1%.

Mining, quarrying and oil and gas extraction fell 0.7% in May, marking the seventh consecutive month of declines. The trendsetting rate is now at 0.5 per cent, but analysts have not ruled out additional cuts in the oil sector does not begin recovering.

The Canadian economy continued to contract in May, new data released by Statistics Canada on Friday showed.

The declines in May were offset by 1.0% growth in construction and a 0.5% increase in retail trade. And the federal budget, tabled as recently as April, was forecasting an economic performance for the year that’s well above what Statistics Canada data suggests is happening.

But Prime Minister Stephen Harper said last week that his government was “well ahead” of its own forecast for a balanced budget despite the economic struggles.