CA: Monthly GDP

Thu Apr 30 07:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -0.1% 0.0% -0.1% -0.2%
Year over Year 2.1% 2.4%

The economy failed to expand for a second consecutive month in February as a combination of unseasonably cold weather and the collapse in energy prices took their toll. An unchanged level of real GDP on the month was actually a little stronger than expected but still soft enough to reduce annual growth from 2.4 percent at the start of the year to 2.1 percent, its slowest pace since November.

Weakness was most apparent in the goods producing sector where output declined 0.2 percent versus January. Within this, manufacturing was down 0.8 percent after a 0.7 percent fall in January and there were also declines in construction (0.2 percent) and mining, quarrying, and oil and gas extraction (0.6 percent). Partial offsets were provided by gains in utilities (2.3 percent) and agriculture, forestry, fishing and hunting (1.1 percent).

Meantime services saw a 0.1 percent rise in output, dominated by a 1.5 percent surge in retail trade. Finance and insurance (0.7 percent) and real estate, and rental and leasing (0.4 percent) similarly made fresh progress. However, there were sizeable declines in a number of subsectors, notably wholesale trade (0.8 percent) and transportation and warehousing (1.0 percent).

Today's sluggish figures should not unduly surprise the BoC. Its latest MPR forecast showed real GDP only stagnating last quarter which, in the light of the February update, would imply another month of only stable output in March. Still, the economy is clearly adjusting to the fall in oil prices and while bad weather should not be an issue, the official 1.8 percent growth call for the second quarter could still be undershot. With the central bank operating with no clear policy bias at the moment financial markets will be especially alert to surprises on the data front.

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.