After contracting in April, Canada’s economy grew by a slim 0.1% in May, Statistics Canada reported Wednesday.

May’s figure matched economists’ expectations for growth.

“The economy gained strength from sharply higher sales of motor vehicles, which propelled the retailing and wholesaling sectors,” Statistics Canada said.

On an annualized basis, the economy grew by 1.8% between May 2003 and the same month last year.

Bruised by the impact from the outbreak of severe acute respiratory syndrome affected Canada’s hospitality sector and weakness in the manufacturing sector, the economy shrank by 0.2% in April. That marked the first contraction since Sept. 11.

For May, the financial sector expanded as a result of the stock market’s recovery, while real estate agent and brokerage industry benefited from a stronger resale housing market, StatsCan said.

Improving weather in western Canada helped the agricultural sector increase crop production following two years of drought.

Results from the tourism sector were mixed in the wake of the SARS outbreak.

“Restaurants posted gains, hotels were flat and airlines and travel agents continued to register lower activity levels,” Statistics Canada said.

BMO Nesbitt Burns says that the overall increase in activity represents a partial rebound, at best. It warns that mad cow disease “seems set to weigh heavily on agriculture in the fall, but did likely impact May manufacturing activity. Manufacturing as a whole was still weak, dropping for the second straight month.”

CIBC World Markets says that it would take a healthy 0.3% advance in June just to allow Q2 output to break even. “While Q3 will get a bounce off of SARS-depressed GDP levels in Q2, we expect real GDP to grow by a rather pedestrian 2% in the second half of the year. That’s back of the economy’s non-inflationary potential growth rate (which is at least 3%), leading to a widening of the output gap and a further easing in the trend for core inflation.”

CIBC says that markets remain primed for further Bank of Canada interest rate relief. “With still-significant growth hurdles ahead, and inflation receding rapidly, we’d expect to see two more quarter-point trimmings before year-end.”