Last week, we asserted that Canada’s surprisingly strong May wholesale trade numbers augured a reacceleration for the overall economy after April’s disappointing performance.

And according to the latest data from Statistics Canada (StatCan), the country’s economy did just that. Gross domestic product (GDP) grew a seasonally adjusted 0.4 percent month over month in May, or 2.3 percent year over year, in line with the consensus forecast among economists. Also of note, this was the fifth consecutive monthly increase.

The service sector, which accounts for nearly 70 percent of GDP, climbed 0.4 percent, with 11 of 15 subsectors posting gains.

In addition to wholesale trade, real estate, which is the single largest subsector among services-producing industries, also delivered a strong performance, rising 0.6 percent month over month and 3.2 percent year over year.

To get a sense of where longer-term investment trends might be emerging, we like to look at which sectors boasted the strongest growth over the past year.

On a year-over-year basis, transportation and warehousing was the single strongest performer among services industries, with a rise of 4.0 percent. It also had a solid increase of 1.0 percent month over month in May.

StatCan notes that growth here was mainly driven by increases in rail and air transportation services. Canada’s transportation industry is often a beneficiary of production and export activity from the resource and agricultural spaces.

The goods-producing sector, which accounts for about 30 percent of the economy, was up 0.5 percent in May, with gains reported in three out of five subsectors.

The strongest performer was the manufacturing sector, which rose 0.8 percent month over month following April’s 0.2 percent decline. On a year-over-year basis, manufacturing is up 2.9 percent.

The Bank of Canada (BoC) is closely monitoring the country’s manufacturing industry, particularly exporters. The central bank believes a rise in export activity from the country’s beleaguered manufacturing sector will help the economy transition away from its dependence on consumer spending and kick off a virtuous cycle of business investment and job creation.

Although the industry’s year-over-year growth of 2.9 percent doesn’t sound all that impressive, it was actually the second-fastest pace among the five goods-producing subsectors.

According to StatCan, durable-goods manufacturing grew 0.9 percent, largely thanks to a 13 percent jump in motor vehicle production. And non-durable goods manufacturing grew 0.7 percent, with notable gains in the manufacturing of chemical, petroleum, and coal products.

Given Canada’s resource riches, it should come as no surprise that the next strongest performer among goods-producing industries was the mining, quarrying, and oil and gas extraction category, which climbed 0.7 percent month over month. The industry had previously dropped by a revised 0.3 percent in April, owing to the idling of a number of refineries for maintenance.

StatCan observed that oil and gas extraction advanced 0.7 percent, due to increases in both crude oil and natural gas production. And support for mining and oil and gas extraction rose 4.3 percent, as the result of greater drilling and rigging activity.

And on a year-over-year basis, the resource space grew 9.6 percent, the single strongest gain by far among all of Canada’s industries, regardless of the sector of the economy in which they operate.

We’re pleased with the economy’s overall performance, especially since economists with CIBC World Markets note that the April and May numbers put the economy on track to meet the BoC’s forecast of 2.5 percent growth for the second quarter.

That’s the minimum growth threshold the bank previously cited as necessary to remove excess capacity from the economy. And it would also be a significant three-tenths of a percentage point better than the current consensus among private-sector economists, according to data aggregated by Bloomberg.

Canada also got good news from its neighbor to the south. The US Bureau of Labor Statistics reported that US second-quarter GDP grew at a stronger-than-expected 4.0 percent annualized, a full percentage point better than forecast, based on economists surveyed by Bloomberg. Given that the US absorbs roughly three-quarters of Canada’s exports, a resurgent US economy will flow through to Canada as well.

Portfolio Update

Conservative Holding DH Corp (TSX: DH, OTC: DHIFF), which provides technology solutions to North America’s financial services industry, reported second-quarter revenue of CAD285.96 million, up 45.1 percent from a year ago. And net income jumped 119.5 percent, to CAD29.9 million.

Management said solid cash flows allowed the firm to increase investments in new product development and technology integration, while also enabling it to reduce leverage through the repayment of debt.

Recent acquisitions, including US-based Harland Financial Services, have contributed strongly to growth, with the company’s US segment now accounting for 42 percent of adjusted revenue, compared to just 14 percent a year ago. The company also noted that lending processing and banking technology services delivered 74 percent of adjusted revenue, up from 60 percent a year ago.

Based on adjusted EBITDA (earnings before interest, taxation, depreciation and amortization), the company’s margins improved 2.2 percentage points year over year, to 31.8 percent.

Management forecasts full-year 2014 capital spending of CAD50 million to CAD55 million to target new growth opportunities.

According to Bloomberg, DH Corp’s earnings per share exceeded analyst estimates by 9.8 percent, making this the fourth quarter out of the past five in which the company beat expectations for this metric.

On a sales basis, however, the company fell short of projections by 2.3 percent, the third time in the past four quarters in which revenue has missed expectations.

Nevertheless, the stock jumped 5.8 percent on the news and is up 32.3 percent over the trailing year on a price basis in local currency terms. By contrast, the S&P/TSX Composite Index (SPTSX) has risen 22.8 percent on a price basis over the trailing year.

On Bay Street, most of the analysts who track the stock have already reaffirmed their ratings. Bloomberg reports the current mix of analyst sentiment remains neutral with a bullish tilt, at three “buys,” five “holds,” and one “sell.”

However, the consensus 12-month target price has improved slightly in the wake of its earnings report and now stands at CAD33.93, up 1.5 percent from the CAD33.43 consensus that prevailed just prior to the release. The new consensus target price suggests potential appreciation of 3.4 percent above the current share price.

For full-year 2014, analysts forecast that adjusted earnings per share will grow 11 percent year over year, to CAD2.25, while revenue is projected to jump 35 percent, to CAD1.13 billion.

DH Corp is a buy below USD22.