Canada’s gross domestic product expanded by 0.2 per cent in May, led by predictable sectors such as construction and manufacturing. But the economy also got a bigger-than-usual boost from the Toronto Raptors’ run to the NBA championship.
The economy grew by more than economists were expecting during the month, thanks in small part to a 0.5 per cent jump in the arts and entertainment industry, and a 0.4 per cent bump in accommodation and food services.
Those are two sectors that would include spending on things like playoff tickets, or at restaurants and bars for those not lucky enough to snag a seat at the big game.
The data agency credited “higher attendance at spectator sports” with the spending bump, and it’s not hard to see how it added up.
The Raptors’ run to their championship that captivated the entire country was in full swing during the month, something that can’t be said of the three Canadian NHL teams that made the playoffs: the Winnipeg Jets, the Calgary Flames and the Toronto Maple Leafs were all bounced in the first round, which ended in April.
Before that happened, though, “bars, restaurants and hotels were among the spinoff beneficiaries of the Raptors’ playoff success and the three Canadian NHL teams that were in the playoffs,” as Scotiabank economist Derek Holt put it.
Once Canada’s Stanley Cup hopes were dashed for the 25th year in a row, the Raptors were the only game in town, and the fan spending seems to have really taken off.
By the NBA Finals in June, tickets to the game were going for $120,000 a pair, money that filtered down into the GDP numbers.
While all that playoff money may have been a nice shot in the arm for any bar with a TV and sports package, in terms of the overall economy, the bump can’t possibly last, Holt warned.
“The sectors that benefited through stronger than typically seasonal activity probably face greater than seasonally normal downside risk in subsequent months as this sports effect drops out,” he said.
Rest of the economy
Even stripping out the Raptors’ impact, there were lots of other positives in the monthly GDP report.
The closely watched manufacturing sector grew by 1.2 per cent, the third straight month of growth for a key part of Canada’s economy.
Construction activity grew by 0.9 per cent, led by the strongest month for residential home building in more than a year.
“Much of the strength in today’s report can be put down to two sectors (manufacturing and real estate) coming back to life after earlier setbacks,” TD Bank economist Brian DePratto said. “That said, a recovery is a recovery.”
Transportation and warehousing grew by one per cent, led by the rail sector, which grew by 4.9 per cent on the back of increased demand to ship car parts, coal, petroleum, chemicals, metals and minerals.
On the down side, wholesale and retail trade both shrank, as did the mining, quarrying and oil and gas sector.
The finance and insurance sector shrank, as did utilities. But those declines were offset by slight growth in agriculture, forestry and fishing, and the aforementioned bump in arts and entertainment.
On an annualized basis, the economy grew at a 1.4 per cent pace during the month. That’s slightly better than the 1.3 per cent that economists were expecting.