By Robb M. Stewart
OTTAWA--Canada's economy is on firmer footing as it moves through the second quarter, with a slight rise in activity last month on the heels of the strongest growth in nine months in April.
Industry-level gross domestic product rose 0.5% from the month before in April, a recovery after a 0.1% contraction the month before, and Statistics Canada's advance data indicates output ticked up 0.1% in May.
This puts the economy on track for a resumption of growth this quarter after shrinking in each of the previous two quarters. The recovery, alongside indications that core inflation remains contained, supports the central bank's decision to ride out higher oil prices and leave interest rates steady.
The national data agency said early information for May showed increased activity in finance and insurance as well as in insurance and real estate was partially offset by weakness in wholesale trade, and agriculture, forestry, fishing and hunting. Prior data from Statistics Canada estimated factory sales rose a fourth straight month in May, while retail trade was up for a sixth consecutive month.
Industry accounts showed April's rebound was driven by a recovery in goods-producing industries and a third rise in a row for services producers. Economists had expected overall growth of 0.4% for the month, matching Statistics Canada's earlier estimate.
The Bank of Canada's most recent projection is for annualized growth of 1.5% in the second quarter and 1.2% over the course of the year, though its forecasts are due to be updated with the governing council's next policy meeting mid-July. The council earlier this month again left the central bank's benchmark interest rate unchanged as members balanced risks to inflation and a struggling economy.
A retreat in global oil prices in recent weeks limits the threat of inflation spreading beyond energy costs and eases the pressure this has put on household budgets. Still, continued uncertainty over trade with the U.S. and a slowdown in immigration remain headwinds for the economy.
Oil and gas extraction drove the economy in April with the strongest monthly growth since February 2024, which more than offset weakness the month before. Activity was up strongly in the oil sands sector of Western Canada following longer-than-anticipated unscheduled maintenance that had tempered growth through the first three months of the year.
After declining in March, manufacturing activity expanded with a rise in metalworking and industrial machinery that coincided with a lift in exports of industrial machinery, equipment and parts, Statistics Canada said.
Canadian construction advanced for the first time in five months, helped by a rise in residential building, with increased activity in alterations and improvements and in the construction of multi-unit homes.
The public sector recorded widespread increases, led for a second straight month by public administration and higher activity across all levels of government for the month.
Transportation and warehousing activity was up for a second time in three months, buoyed by increases in rail and pipeline transportation.
Finance and insurance were up in April, more than countering a contraction in March, while real estate, and rental and leasing activity grew for a third consecutive month.
Write to Robb M. Stewart at robb.stewart@wsj.com