CA: Monthly GDP

Tue Dec 01 07:30:00 CST 2015

Consensus Actual Previous
Month over Month 0.1% -0.5% 0.1%
Year over Year 0.0% 0.9%

The economy closed out the third quarter on a worryingly soft note. Real GDP contracted fully 0.5 percent on the month, its worst performance since March 2009. Annual growth decelerated from 0.9 percent to zero.

The nosedive in total output was dominated by a 1.5 percent monthly slump in goods production, itself reflecting a 5.1 percent slide in mining, quarrying, and oil and gas extraction. However, manufacturing posted a 0.6 percent fall and construction was only flat. Agriculture, forestry, fishing and hunting (0.3 percent) and utilities (also 0.3 percent) were the only subsectors to keep their head above water.

Services fared rather better but even here output was still 0.1 percent short of its August level. Most of the damage was done by arts, entertainment and recreation (minus 2.0 percent) but wholesale trade, transport and warehousing, and finance and insurance all posted a 0.3 percent fall. The only increase of any size was in management of companies and enterprises (0.6 percent), ahead of retail trade (0.3 percent).

Having grown 0.3 percent in July, the economic recovery steadily lost momentum over the rest of the quarter and September's surprisingly sharp setback provides a miserable entry point for the current quarter. The BoC's latest forecasts showed the central bank expecting growth to slow to just 1.5 percent (saar) in the fourth quarter and this may now prove overly optimistic.

Still, evidence of sustained weakness will be needed for the central bank to pull the trigger on interest rates again. Policy will almost certainly be left steady at tomorrow's central bank meeting but financial markets should now be at least a little more alert to the possibility of another easing further out if upcoming data continue to disappoint.

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.