CA: Monthly GDP

Wed Sep 30 07:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.2% 0.3% 0.5% 0.4%
Year over Year 0.8% 0.6% 0.5%

July saw the Canadian economy achieve its first back-to-back growth since September/October 2014. A 0.3 percent monthly rise in total output was short of June's downwardly revised 0.4 percent posting but still slightly stronger than market expectations and enough to see annual growth accelerate from 0.5 percent to 0.8 percent.

The expansion at the start of the quarter was largely attributable to strength in goods production which was up a healthy 0.8 percent on the month after a 0.7 percent bounce in June. Within this, manufacturing (0.6 percent) had another good month as did mining, quarrying and oil and gas extraction (2.9 percent) which benefited in particular from a 9.1 percent gain in non-conventional oil extraction. However, construction slipped 0.1 percent and there were sizeable decreases in agriculture, forestry, fishing and hunting (1.3 percent) and utilities (1.9 percent).

Services slowed, recording a modest 0.2 percent rise after a 0.3 percent gain last time. Finance and insurance and transportation and warehousing (both 0.8 percent) were the best performing subsectors ahead of administrative and support, waste management and remediation services (0.5 percent). The steepest declines were in arts, entertainment and recreation (1.9 percent) and management of companies and enterprises (0.6 percent). Wholesale trade was also down 0.4 percent.

Following June's useful hand-off, July's gain in real GDP makes for acquired growth of 0.6 percent so far this quarter. The BoC's August MPR forecast a 1.5 percent (saar) rate for the period as a whole so the economy seems to be broadly on track as far as monetary policy is concerned. Interest rates look likely to be on hold for some time, irrespective of any Fed tightening.

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.