CA: Monthly GDP

Wed Dec 23 07:30:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.2% 0.0% -0.5%
Year over Year -0.2% 0.0% 0.1%

Following an unrevised 0.5 percent contraction in September, total output was only flat at the start of the current quarter. The unexpectedly soft outturn reduced annual growth from 0.1 percent to minus 0.2 percent, its first negative print since December 2009.

The stable headline reflected zero monthly growth in both goods producing industries and services. Within the former, manufacturing output declined 0.3 percent, compounding a 1.0 percent drop in September, while utilities slumped 1.4 percent and construction dipped 0.1 percent. The overall sector would have contracted but for a 0.8 percent rise in agriculture, forestry, fishing and hunting and a 0.7 percent increase in mining, quarrying, and oil and gas extraction.

The sluggishness of services was in large part attributable to a 0.4 percent monthly drop in retail trade as well as in transportation and warehousing. Finance and insurance, wholesale trade, administrative and support, waste management and remediation services all edged 0.1 percent weaker and other services were off 0.2 percent. The main offset came via management of companies and enterprises (0.5 percent) together with real estate, and rental and leasing, educational services and arts, entertainment and recreation (all 0.3 percent).

October's disappointing performance means that the economy will very likely fall short of the BoC's current 1.5 percent (saar) fourth quarter growth forecast, especially with oil prices having fallen quite steadily since the start of the month. Speculation about a BoC tightening in 2016 has faded in recent months and any near-term risk to policy is for another cut and/or the introduction of some form of unconventional ease.

The C$ has already depreciated around 17 percent versus its U.S. counterpart so far this year but with the Fed now in tightening mode, albeit only gradual, the sluggish domestic picture suggests that further losses are probable before any real rebound.

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.