CA: Monthly GDP

Fri May 29 07:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.2% -0.2% 0.0% -0.1%
Year over Year 1.5% 2.1% 1.9%

Following a downward revision to February (now minus 0.1 percent), the economy contracted for a third consecutive month at the end of last quarter. A 0.2 percent decline in total output contrasted with expectations for a modest gain and reduced annual real GDP growth by 0.4 percentage points to 1.5 percent, its weakest outturn since January 2013.

March's surprise decline was wholly attributable to a 1.0 percent monthly drop in goods production that compounded falls of 0.2 percent and 0.6 percent in January and February respectively. In March alone, manufacturing actually expanded 0.1 percent but this was easily more than offset by a 2.5 percent slump in mining, quarrying, and oil and gas extraction together with a 1.6 percent slide in utilities and a second consecutive 0.8 percent decrease in construction.

By contrast, services expanded 0.2 percent versus February, in large part due to a 0.8 percent rise in wholesale trade and a 0.9 percent increase in transportation and warehousing. Arts, entertainment and recreation also expanded 1.1 percent. The only fall of note was in the management of companies and enterprises (0.5 percent).

The slump in oil prices clearly hit the economy hard last quarter. Moreover, despite their subsequent modest rebound, prices are still low enough to ensure that capital spending plans will act as a significant brake on growth for some time yet. Combined with tighter provincial budgets, the chances are that economic momentum will accelerate only quite slowly over the next quarter or so. The BoC has indicated that its expects the impact of the oil price crash to be quite heavily front-end loaded but the dynamics are highly uncertain and the risk is that economic adjustment takes rather longer than the central bank anticipates.

In any event, near-term risks on official interest rates are on the downside and any eventual hike in rates is likely to lag well behind the Fed's first move.

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.