The Canadian economy expanded by 0.3% in both April and May. Growth in May was fuelled by exploration and utilities in the energy sector and by increased investment-related production, such as wholesaling of machinery and equipment and non-residential building construction. Growth was somewhat restrained by a sharp drop in new car sales and by a further reduction in residential construction.

Industrial production (the output of factories, mines and utilities) advanced by 0.6% due to a 1.7% jump in the output of the mining, oil and gas extraction sector, a 0.2% increase in manufacturing output, and a 1.2% increase in utilities. Much of the strength in the mining sector and in utilities was due to energy-related industries. The energy sector increased by 1.3% overall. In the United States, the index of industrial production climbed 0.3% with increases in the manufacturing and mining sectors, while output of utilities receded.

Oil exploration propels the mining sector

Output in the mining, oil and gas extraction sector jumped 1.7% in May propelled by oil exploration which vaulted 14% as unfavourable weather delayed drilling and rigging activities in April. Oil and gas extraction edged down 0.1% as a reduction in natural gas extraction overshadowed increased production of crude oil. Pipeline transportation of crude petroleum and of other products increased 2.6%. Natural gas distribution bounced back 7.2% after a warmer than usual April.

Mining activities excluding oil and gas extraction climbed 3.6% in May despite a 21% drop in iron mines production due to strike activity. The output of non-metallic mineral mines (which includes diamonds and potash) increased 9.3%, and the production of other metal ore mines (mostly uranium) gained 14%.

Non-residential building construction picks up speed

Construction activity was flat in May as a pick-up in non-residential buildings and engineering and repairs construction was offset by a further decline in residential dwellings. After receding through much of 2004, non-residential building construction advanced 1.0% in May 2005 for a sixth consecutive monthly gain. There were increases in all types of structures (commercial, industrial and institutional). Engineering and repair construction activities advanced 1.1%.

Residential building construction decreased by a further 1.8%, marking a fifth consecutive monthly decline, bringing its level of activity close to that of a year ago. In May, an increase in the construction of dwellings in multi-unit structures was more than offset by a decrease in single detached dwellings. Housing starts in urban areas decreased in Quebec and Ontario, but increased in the Atlantic Provinces, the Prairies and in British Columbia.

New car sales pull down retailing activities while wholesaling advances

Output of the retail sector was down 1.1% in May mostly due to a sharp decrease in sales of new motor vehicles. Cutbacks on financial incentives offered by some auto manufacturers were partly behind this decline. The number of cars sold in May fell 6.9% but preliminary figures indicate that June unit sales are back up.

Retailing activity, excluding new motor vehicle sales, edged down 0.1% in May. Increases in food and beverage stores, at used and recreational motor vehicle and parts dealers and in pharmacies were offset by decrease activity at clothing stores, furniture stores and general merchandise stores.

Wholesaling activity advanced 0.3% on the strength of machinery and electronic equipment, motor vehicle products, as well as wholesaling of other products (such as chemical products, paper products, etc.). The largest decreases were recorded by wholesalers of food, beverage and tobacco products and of building materials.

Output of the manufacturing sector edges up

Output of the manufacturing sector edged up 0.2% in May, with only 9 of the 21 major groups accounting for 56% of total manufacturing production advancing. Motor vehicle manufacturing bounced back 2.6% from its April decline, but production of motor vehicle parts decreased 1.3% led by motor vehicle engines. Output of primary metal products was up 1.6% with most types reporting increases, while fabricated metal products declined 0.8%.

The production of beverage and tobacco products increased 2.7%. Output of sawmills decreased by 1.7% in May. Paper products manufacturing however advanced 1.1% with most types recording gains. Output of pharmaceutical products declined for a third consecutive month (-2.4%).

Other sectors

Some tourism-related industries gained from increases in Canadians travelling abroad and in tourists from overseas. Air transportation advanced 2.1% in May, while the food services industry climbed 0.7%. Real estate agents and brokers (+3.0%) and the legal and accounting industry (+1.2%) benefited from an increase in the resale market of existing homes.