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Canadian dollar jumps as GDP grows for seventh straight month

Canada’s economy grew for a seventh straight month in May – its best run since 2014 – underscoring the central bank’s decision to raise rates earlier this month and helping the Canadian dollar to surge against its US counterpart.

Gross domestic product for May grew 0.6 per cent from the previous month, according to Statistics Canada, well ahead of analyst expectations for a 0.2 per cent rise. It is also well above the rate of growth in April, when GDP grew 0.2 per cent year on year. It left year-on-year growth at 4.6 per cent.

The Canadian dollar rose 0.9 per cent against the US dollar in response, helped in part by the continued retreat of the greenback, leading it to flirt with two-year highs.

The figures come after the Bank of Canada raised its rates for the first time since 2010 earlier this month, lifting rates by a quarter point to 0.75 per cent. The move was seen as a reaction to rapid job growth and buoyant property prices, and followed the Federal Reserve, which in June increased rates for the fourth time since December 2015.

Canada’s mining, quarrying, and oil and gas extraction sectors performed particularly strongly, up 4.6 per cent, while the oil and gas extraction subsector expanded 7.6 per cent.

The manufacturing sector was up 1.1 per cent in May as most subsectors grew, while the finance and insurance sector increased 0.9 per cent.

(Chart: Bloomberg)