CA: Monthly GDP

Fri Oct 30 07:30:00 CDT 2015

Consensus Actual Previous
Month over Month 0.1% 0.1% 0.3%
Year over Year 0.9% 0.8%

The real economy slowed in August. A minimal 0.1 percent monthly rise in total output was in line with expectations and the worst performance since May's 0.2 percent contraction but favourable base effects still helped to lift annual growth from 0.8 percent to 0.9 percent, its fastest pace since April.

What increase there was in GDP was evenly spread between the goods producing and service sectors. In the former, manufacturing output was up 0.4 percent after a 0.6 percent rise in July and there were equivalent gains in mining, quarrying, and oil and gas extraction and in agriculture, forestry, fishing and hunting. Elsewhere, utilities expanded 0.8 percent but construction was only flat.

Services were boosted by a 0.6 percent increase in both retail trade and transportation and warehousing as well as a 0.5 percent advance in professional, scientific and technical services. Other advances were relatively mild and there were partially offsetting declines in arts, entertainment and recreation (0.9 percent), wholesale trade (0.5 percent) and accommodation and food (0.4 percent).

In last week's Monetary Policy Report the BoC indicated that it saw recent domestic economic developments as being broadly in line with its own expectations and today's GDP update is unlikely to impact that view. In large part thanks to a solid hand-off from June and a decent July, third quarter growth was already on course for respectability. The August data put the acquired rate at 2.2 percent (saar) and so roughly on track meet the central bank's new 2.5 percent estimate. There is nothing here to impact BoC policy which, on current trends, looks likely to be on hold well into 2016.

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.