CA: Monthly GDP

Fri Jul 28 07:30:00 CDT 2017

Consensus Actual Previous
Month over Month 0.2% 0.6% 0.2%
Year over Year 4.6% 3.3%

May real gross domestic product (GDP) grew a greater than expected 0.6 percent on the month. Of the 20 industrial sectors, 14 were higher. This was the seventh consecutive monthly increase for the series, a streak that was last matched between September 2009 and March 2010. Goods producing industries rose 1.6 percent, led by mining, quarrying and oil & gas extraction. Services were up 0.2 percent after increasing 0.3 percent in April, led by finance and insurance services.

The mining, quarrying and oil & gas extraction sector grew for the fourth time in five months, up 4.6 percent in May. The oil & gas extraction subsector expanded 7.6 percent, with non-conventional oil extraction rising 13 percent following two months of declines. Mining and quarrying (except oil and gas) was unchanged from April.

The manufacturing sector was up 1.1 percent -- most subsectors grew. Manufacturing has been alternating between increases and decreases since the beginning of 2017. Non-durable manufacturing rose 0.8 percent, offsetting the decline in April. Five of eight subsectors gained, led by manufacturers of petroleum & coal products, printing & related support activities and paper.

Durable manufacturing was up 1.4 percent as 6 of 10 subsectors grew. Leading the growth was the transportation equipment manufacturing subsector on higher output by manufacturers of motor vehicles, motor vehicle parts and miscellaneous transportation equipment. Machinery was up 2.9 percent while electrical equipment manufacturing increased 6.8 percent. Miscellaneous manufacturing increased 0.4 percent, following six consecutive monthly declines.

The finance and insurance sector increased 0.9 percent. Depository credit intermediation and monetary authorities grew 1.5 percent on increased activity at banking, monetary authorities and other depository credit intermediaries. Insurance carriers and related activities edged up 0.2 percent while financial investment services, funds and other financial vehicles were virtually unchanged. Retail trade was up 0.9 percent in May with 8 of 12 subsectors increasing.

Construction was down 0.6 percent in May, as a strike in the last week of the month affected unionized construction workers in Quebec. Real estate and rental and leasing declined 0.2 percent in May after five consecutive months of growth.

The Bank of Canada should be pleased with the widespread gains in this report. It backs its more positive outlook. It might feed expectations of a more aggressive data-dependent BoC.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. In contrast to most industrialised countries a monthly estimate is provided derived from the value added by labour and capital in transforming inputs purchased from other producers into that industry's output. Data for the reference month are usually released close to the end of the second month after the reference period.

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.