CA: Monthly GDP

Tue Jun 30 07:30:00 CDT 2015

Consensus Actual Previous
Month over Month 0.1% -0.1% -0.2%
Year over Year 1.2% 1.5%

The hoped for rebound in economic activity in April failed to materialise as real GDP surprisingly contracted a monthly 0.1 percent, its fourth decline in a row. Annual growth slowed to 1.2 percent, its worst performance since December 2012.

April's disappointing outturn was wholly attributable to weakness in the goods producing sector where output decreased 0.8 percent on the month for a cumulative decline of some 3 percent since the start of the year. Mining, quarrying and oil and gas extraction (minus 2.6 percent) again did most of the damage but manufacturing was down a further 0.2 percent, utilities dropped 0.7 percent and construction was off 0.1 percent. The overall sector fall would have been steeper but for a 0.5 percent gain in agriculture, forestry, fishing and hunting.

Services, up 0.3 percent, posted their third advance in as many months led by a 1.6 percent bounce in wholesale trade and a 1.2 percent increase in accommodation and food. Other decent gains were recorded by real estate, rental and leasing (0.6 percent) and professional, scientific and technical services (0.4 percent. The only decreases of note were in arts, entertainment and recreation alongside finance and insurance (both 0.6 percent).

Following three successive months of falling total output through March, April's setback will probably come as a nasty shock to the BoC. The central bank's latest MPR forecast pencilled in second quarter GDP growth at 1.8 percent (saar) but today's data leave this looking increasingly optimistic. True the central bank has already indicated that it expected the damage caused by the oil price slump to be front-end loaded but the risk now is that the economy falls back into recession this quarter. A more dovish central bank is certainly on the cards without a solid bounce-back in output in May.

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.