CA: Monthly GDP

Tue Mar 03 07:30:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.2% 0.3% -0.2%
Year over Year 2.8% 1.9% 2.0%

Having seen total output contract an unrevised 0.2 percent in November the economy rebounded at year-end with a slightly firmer than expected monthly increase of 0.3 percent. Annual growth picked up from 2.0 percent to 2.8 percent, its strongest rise since June 2014.

December's expansion was dominated by goods producing industries where output fully reversed November's 0.6 percent monthly decline. Manufacturing followed a 1.6 percent drop with a jump of 2.5 percent and there were smaller positive contributions from agriculture, forestry, fishing and hunting (0.4 percent) and construction (0.3 percent). Mining, quarrying, and oil and gas extraction fell 0.8 percent and utilities were down 1.1 percent.

Meantime, service sector output grew 0.2 percent versus November largely thanks to strength in wholesale trade (1.6 percent), finance and insurance (1.3 percent) and transportation and warehousing (1.2 percent). Management of companies and enterprises also performed well (0.8 percent). The sharpest reversal was in retail trade (minus 1.4 percent) ahead of arts, entertainment and recreation (minus 0.5 percent).

The slightly firmer than anticipated year-end performance may be enough to tilt the balance in favour of no change at tomorrow's BoC meeting. However, with the central bank clearly in dovish mood, another 25 basis point cut in key interest rates remains a real possibility.

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.