CA: Monthly GDP

Thu Mar 31 07:30:00 CDT 2016

Consensus Actual Previous Revised
Month over Month 0.3% 0.6% 0.2%
Year over Year 1.5% 0.5% 0.6%

The economy expanded at a 0.6 percent monthly rate in January. The increase was significantly stronger than expected, the largest since July 2013 and, following an unrevised 0.2 percent rate in December, suggests that the recovery is gaining momentum. With the benefit of positive base effects, annual growth accelerated from 0.6 percent to 1.5 percent, equalling its best performance since January 2015.

January's rise in total output was led by the goods producing sector which saw a 1.2 percent monthly gain. Within this, manufacturing was up a solid 1.9 percent and utilities an even more robust 2.7 percent. In addition, mining, quarrying, and oil and gas extraction rose 0.9 percent and agriculture, forestry, fishing and hunting 0.3 percent.

By comparison, a 0.4 percent advance in service sector output was relatively modest. Even so, there were sizeable gains in both retail trade (1.5 percent) and transportation and warehousing (1.4 percent). Finance and insurance (0.6 percent) also posted a disproportionately large increase. The main offset came from arts, entertainment and recreation (minus 1.2 percent) although there were also declines in management of companies and enterprises (0.3 percent), administrative and support, waste management and remediation services (0.2 percent) and other services (0.1 percent).

Today's GDP update will cement the view that the BoC's current 1.0 percent (saar) first quarter growth forecast is too pessimistic. Indeed, with last week's Budget expected to provide a fiscal boost worth about 0.5 percent of GDP over the coming year, pressure for additional near-term monetary easing has now receded significantly. Only a couple of months ago there was a sizeable portion of the market anticipating a 25 basis point cut in BoC interest rates. As it is, the central bank's decision to hold steady is increasingly looking like the correct call.

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.