Canadian real GDP recorded its strongest gain in seven months in May, up 0.3%. Although the unexpected jump surprised economists, they say the gains do not look sustainable, and economic growth will slow in the second half of the year.

The gain was driven by a number of temporary factors, including the federal government’s census and the return of striking public sector employees in Newfoundland and Ontario. The other half of the gain was due to a temporary burst in manufacturing.

“This report is not nearly as strong as the headline would suggest,” says CIBC World Markets. “The non-business sector will be hard pressed to lead growth higher in the coming months, while private sector output (particularly manufacturing) is still contending with anemic global demand.”

“Even with the solid monthly gain, the year-over-year trend in GDP slipped 0.5% to just 1.7%, the slowest pace in five years, outside of a strike-related stall in July 1998,” says BMO Nesbitt Burns. “Growth for the second quarter as a whole will struggle to top a 1.5% annual pace. This compares with average growth of over 4% in each of the past two years. While the slowdown has been a little less dramatic than the braking in the U.S. economy, activity has nonetheless cooled considerably.”

BMO suggests that, “the areas of strength in this report do not look sustainable, and growth will likely revert to a slow-motion trend in the second half of the year. This report will not sway the Bank of Canada, and another 25 basis point trim in rates at the end of August looks likely.” CIBC concurs, “With growth trending lower and the Bank increasingly concerned about mounting global economic weakness, look for rates to be cut again in August.”