CA: Monthly GDP

Fri Sep 29 07:30:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.1% 0.0% 0.3%
Year over Year 3.8% 4.3% 4.4%

The economy slowed more than expected in July. Following an unrevised 0.3 percent monthly rise in June, total output was only flat, its weakest performance since last October. Annual growth was 3.8 percent, down from 4.4 percent last time.

However, the lack of any headline monthly growth in July masked a second successive 0.2 percent monthly increase in the service sector, largely reflecting a sizeable gain in wholesale trade (2.0 percent) but also a decent performance by professional, scientific and technical services (0.5 percent). By contrast, retail trade (minus 0.1 percent) had a poor month as did finance and insurance (minus 0.6 percent) and arts, entertainment and recreation (also minus 0.6 percent).

Meantime, goods producing industries posted a 0.5 percent monthly contraction, their first decline since February. Manufacturing (minus 0.4 percent) struggled alongside and construction (minus 0.5 percent) although this did follow a 1.7 percent bounce in June. Otherwise, there were falls in agriculture, forestry, fishing and hunting (0.4 percent) and mining, quarrying, and oil and gas extraction (1.2 percent) but utilities (1.7 percent) made fresh ground.

While the July slowdown in economic growth will come as no big surprise, it probably sets the tone for a deceleration in activity rates this quarter. Accordingly, it also strengthens the case for expecting a less aggressive approach to monetary tightening from the BoC over coming months.

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.