CA: Monthly GDP

Fri Jan 30 07:30:00 CST 2015

Consensus Actual Previous
Month over Month 0.1% -0.2% 0.3%
Year over Year 1.9% 2.3%

November was not a good month for the Canadian economy. Real GDP comfortably undershot market expectations with a 0.2 percent monthly contraction, its worst performance since a weather-impacted 0.4 percent slump in December 2013. Annual growth decelerated from 2.3 percent in October to 1.9 percent, its first sub-2 percent print in eight months.

Headline weakness reflected a 0.8 percent monthly nosedive in the goods producing sector. Manufacturing was down some 1.9 percent, its heftiest drop since January 2009, and mining, quarrying, and oil and gas extraction shrank 1.5 percent. The sector fall would have been steeper still but for a 2.4 percent bounce in utilities and a 0.8 percent increase in agriculture, forestry, fishing and hunting.

Service sector output held up a good deal better and posted no change from October when it rose 0.3 percent. The main areas of strength were arts, entertainment and recreation, which saw a 1.1 percent increase, and management of companies and enterprises, which advanced 1.0 percent. Retail trade (0.9 percent) also enjoyed a good month. However, gains here were offset by relatively small falls in a number of other categories amongst which wholesale trade (0.6 percent) and finance and insurance (0.4 percent stood out.

November's decline in total output leaves fourth quarter real GDP growth on course for something short of the BoC's 2.5 percent (saar) estimate. However, having only just cut interest rates and, in any event, expecting a further deceleration to a 1.5 percent growth rate this quarter, the central bank is unlikely to be too concerned. Nonetheless, as the impact of oil price weakness unfolds, financial markets will be on the lookout for signs that this month's monetary ease might not be the last.

Gross domestic product by industry is the value added by labor and capital in transforming inputs purchased from other producers into that industry's output. Monthly GDP consists of chained volume estimates with 2007 as the reference year. This means that the data for each industry and each aggregate are obtained from a chained volume index multiplied by the industry's value added in 2007.

Instead of producing an advanced quarterly GDP figure and revising it the following two months, Statistics Canada releases monthly estimates of real GDP at Basic Prices. This release breaks down real output by seven goods-producing industries and twelve service-producing industries, and includes special aggregations such as business sector, non-business sector, and industrial production.

The sources of data used for monthly and quarterly estimates often differ and leads to very different estimates for certain items, such as price deflators. As a result, the monthly figures are not perfectly correlated with the quarterly numbers. However, the monthly data do give some idea of where the quarter is headed and especially in an uncertain environment, they are closely watched. While industrial production is closely watched in the U.S., it is not in Canada especially since the economy has become increasingly dominated by services. However, the goods sector is more vulnerable to wide swings in output compared to services, and exports remain dominated by industrial output.