After racing ahead in April, the Canadian economy stalled in May, leaving GDP unchanged during the month. Economists, however, still see Canada running ahead the U.S. economy.

Statistics Canada reported that consumers pulled back on their purchases of non-house-related goods and services. This resulted in a 1% decline in retailing activity. However, residential construction rose 1.3%.

CIBC World Markets says that the result amounts to, “a small victory given the sharp declines reported across a host of sectors in the lead-up to this report.” BMO Nesbitt Burns also notes that the result beat expectations of a small GDP decline.

Although, CIBC says that, “were it not for thousands of public sector workers returning to their jobs, Canada would have suffered its first monthly decline since terrorist attacks sent the economy into a tailspin last September.”

The flat month can be blamed primarily on the slumping goods sector, CIBC says. Goods-producing industries were off 0.5%, led lower by mining/oil & gas and manufacturing. Service-sector output was up 0.3%, but that was due to resurgent public sector output.

Looking ahead, BMO says that early results suggest that June will be slightly stronger, pointing to Q2 GDP growth of just over 4%, compared to the U.S. rise of 1.1%. It notes that department store sales rebounded 3.0% in June, indicating that the May drop in retail sales was an outlier.

RBC Financial reports, “Overall real GDP was unchanged from April’s strong level. It is still 3.5% above the low point reached last September and remains on target to reach an annualized rate of growth of 4.5 to 5% in the second quarter of this year.”

All told, CIBC says that second quarter GDP, “is assured to be much healthier than the U.S., where the economy limped ahead at a 1.1% pace, as imports, including those from Canada, took up all of the available demand gain.”

BMO concludes, “While hardly a show of strength, the GDP report adds further evidence that Canadian growth far outpaced the U.S. in Q2. The gap should narrow in the second half.”