CA: Monthly GDP

Tue Mar 31 07:30:00 CDT 2015

Consensus Actual Previous
Month over Month -0.2% -0.1% 0.3%
Year over Year 2.4% 2.8%

Having expanded at a respectable clip at the end of 2014 the economy shrank at the start of 2015. However, while a 0.1 percent monthly dip in total output was the second contraction since October, it was at least shallower than expected and at 2.4 percent, annual growth only dropped back to its October rate.

January's reversal was wholly attributable to a 0.3 percent decrease in service sector activity. This was largely due to a 2.6 percent slump in wholesale trade and a 1.0 percent fall in retail trade although transportation and warehousing (minus 0.8 percent) and accommodation and food (also minus 0.8 percent) endured a poor period too. The only increase of any note was in arts, entertainment and recreation (0.7 percent).

By contrast, the goods producing sector saw output expand 0.3 percent on the month although this masked a 0.7 percent drop in manufacturing and a 0.4 percent decrease in construction. Support was provided by agriculture, forestry, fishing and hunting (1.9 percent), mining, quarrying, and oil and gas extraction (1.4 percent) and utilities (also 1.4 percent).

Real GDP's disappointing, if marginally stronger than expected, start to 2015 should ensure that the BoC retains a dovish bias ahead of next month's revised Monetary Policy Report and policy setting meeting. An actual rate cut then is certainly a possibility but the BoC warned a while ago that the oil price shock would hit the first quarter hard. As such, it may well want to wait to see some early evidence of next quarter before pulling any trigger on a monetary ease.

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.