Monday March 3, 2008 10:53 am
Statistics Canada has released the December and fourth quarter results for the GDP for 2007. As I had expected the GDP numbers were sharply down and turned negative for the month of December. Growth for 2007 in real GDP turned out to be only 2.7 % with growth in the fourth quarter 0.2 % down from 0.8% the previous quarter. Sharp falls in manufacturing exports and automotive plant activity were the driving force behind the slowdown. For the month of December the GDP actually fell by 0.7 %. So much for the theory of decoupling touted by some economic observers. So long as the exports of goods and services to the US is as important a part of the economy as it is -accounting for over 25 % of the GDP in real terms- a slowdown in the US will have its real consequences for our economy.
There may be a lag of several months or even a full quarter but the impact is real. The Stats Can report follows courtesy of the agency.
Monday, March 3, 2008
Canadian economic accounts
Fourth quarter 2007, December 2007 and annual 2007Previous releaseEconomic growth slowed considerably in the fourth quarter as real gross domestic product (GDP) grew 0.2%, down from 0.7% in the third quarter. Economic output contracted 0.7% in December.
A more detailed analysis is available in the Canadian Economic Accounts Quarterly Review.
Exports recorded a significant 2.2% decline in the fourth quarter, in the wake of a rising Canadian dollar and extended holiday shutdowns in several motor vehicle manufacturing facilities. Meanwhile, strong growth in final domestic demand and an accumulation of wholesale and retail inventories drove imports up 2.6%. The drop in exports was the first decline in six quarters, as Canada's international trade balance continued to deteriorate in the fourth quarter.
Consumer spending picked up in the fourth quarter of 2007, boosted by a 4.3% jump in motor vehicle purchases, higher travel spending abroad and increased purchases of air transportation. Business investment in machinery and equipment continued at a strong pace.
The output of the service industries expanded 0.7% in the fourth quarter, while the goods-producing industries contracted 0.9%. Wholesale and retail trade, along with utilities, recorded the strongest growth.
The finance and insurance sector, construction, forestry, and accommodation and food services also contributed to the overall increase. These gains were partly offset by declines in manufacturing, mining and selected transportation industries.
Corporate profits were up slightly (+0.5%), well short of the pace set in the previous three quarters. Labour income registered a strong fourth quarter. Employment and average earnings continued to grow in the quarter.
Note to readers
Percentage changes for expenditure-based and industry-based statistics (such as consumer expenditures, investment, exports, imports and output) are calculated using volume measures that are adjusted for price variations. Percentage changes for income-based statistics (such as labour income, corporate profits and farm income) are calculated using nominal values, that is, not adjusted for price variations.
The Canadian economy grew at an annualized rate of 0.8% in the fourth quarter, compared with 0.6% growth for the US economy.
Prices of goods and services produced in Canada advanced 1.1% in the fourth quarter, once again strongly influenced by higher energy prices. Excluding energy, these prices were up 0.7%. Meanwhile, import prices dropped 3.9% in the quarter. This was the third consecutive drop and left import prices 17% lower than in 2002.
Exports of goods down sharply
The decline in exports in the fourth quarter was spurred by a 2.7% decrease in international shipments of goods. Merchandise exports had averaged growth of 0.5% over the previous three quarters.
Real gross domestic product, chained (2002) dollars1
Change Annualized change Year-over-year change
%
First quarter 2007 1.0 4.0 2.1
Second quarter 2007 0.9 3.8 2.6
Third quarter 2007 0.7 3.0 3.1
Fourth quarter 2007 0.2 0.8 2.9
2007 2.7 ... 2.7
... not applicable
1. The change is the growth rate from one period to the next. The annualized change is the growth rate compounded annually. The year-over-year change is the growth rate of a given quarter compared with the same quarter in a previous year.
The drop in the export of goods was widespread. Exports of machinery and equipment as well as automotive products continued to be weak, falling 3.4% and 1.7% respectively. Industrial goods and materials (-2.7%) also declined, following two consecutive quarters of growth.
Consumer expenditure picks up
Consumer expenditure advanced 1.8% in the fourth quarter, up from a 1.1% increase in the third quarter.
A large jump in travel spending abroad contributed about half of the 2.1% growth in spending on services. This was the third consecutive large quarterly increase in net expenditure abroad, and reflected a surge in expenditures in the United States as well as other countries.
Durable goods, led by strong motor vehicle purchases, advanced 2.9%.
Housing investment slows
Business investment in residential construction grew 0.6% in the fourth quarter, less than half the pace of the third quarter (+1.4%). This was the fourth consecutive quarterly increase. Most of the slowdown in the quarter was the result of lower activity in the resale market (-2.6%), the second consecutive decrease.
Non-residential construction edges up
Business investment in buildings and engineering projects edged up in the fourth quarter, following two quarterly declines. Business spending on engineering projects slowed significantly in 2007 following double-digit increases in the previous two years.
Business investment in machinery and equipment still strong
Investment in machinery and equipment advanced 3.4% in the fourth quarter, similar to the 3.3% pace set the previous quarter. Except for the first quarter decline, investment in machinery and equipment has posted continuous quarterly growth since the beginning of 2003. The gain in investment in the last two quarters resulted in a 2.5% surge in imports of machinery and equipment on top of the 6.4% rise in the third quarter.
Large build-up of inventories
The last half of 2007 saw two large quarterly build-ups in inventories with a fourth quarter rise in inventories worth $19 billion, higher than the $16 billion accumulation in the previous quarter.
Retail and wholesale durable goods accounted for about half of the accumulation. Manufacturing inventories were drawn down and farm inventories were sold off as farmers cashed in on high grain prices.
Corporate profits level off
Corporate profits were up slightly in the fourth quarter (+0.5%), well short of the pace set in the previous three quarters.
Higher profits in the retail and wholesale trade industries offset lower manufacturing and mining profits. Corporate profits of financial institutions declined slightly in the fourth quarter.
Labour income pushes upward
Labour income registered a strong fourth quarter, up 1.8%, a marked acceleration from the third quarter growth of 0.4%. Mining and utilities pushed up wages in goods-producing industries (+1.9%), while education and health care contributed to growth in service producing industries (+1.7%).
Government transfers to persons moderated in the fourth quarter (+0.7%), after a strong third quarter.
An increase in personal income, combined with modest growth in income taxes, resulted in a 1.6% increase in personal disposable income. The personal saving rate slipped to 0.8% in the fourth quarter with higher personal spending.
Household debt in the form of mortgages and consumer credit edged up to 116.4% of personal disposable income. Debt servicing charges remained unchanged at about 8% of personal disposable income.
Gross domestic product by industry, December 2007
Economic output contracted 0.7% in December, after increasing 0.1% in November and 0.3% in October. Significant reductions in manufacturing activities, wholesaling, as well as in oil and gas extraction were the main sources of the December decline. Modest gains were recorded in mining, excluding oil and gas, and the financial sector, while construction remained unchanged.
Manufacturing activity tumbled 3.2% in December, reaching its lowest level since December 2001. Motor vehicle production dropped 27%, the largest monthly decline since production cutbacks in January 1990 caused a 37% reduction in activity. The major drop in motor vehicle production in December was primarily due to extended holiday shutdowns related to inventory control and retooling for new models. Excluding motor vehicle and parts production, economic output contracted 0.4% in December. Preliminary information for January 2008 indicates a partial rebound in motor vehicle production from its December level.
Declines in the manufacturing sector were widespread, with 17 of the 21 major groups decreasing. Both the manufacturing of durable (-4.8%) and non-durable goods (-0.9%) fell. Other notable drops were recorded in wood products, machinery, and non-metallic mineral product manufacturing.
Some transportation industries were affected by the downturn in manufacturing, such as rail and truck transportation, as was the wholesale trade sector.
Wholesaling activities fell 2.0% in December. This decline was largely due to the fall in the trade of automotive products, food and beverage products, and machinery and electronic equipment. Value added in the retail trade sector edged down 0.1%.
The energy sector slipped 1.2% in December. The oil and gas extraction industry contracted 1.7%, dragged down by a decrease in petroleum extraction. The production of electricity fell 1.2% in December.
Industrial production (the output of mines, utilities and factories) dropped 2.4% in December, with all three sectors declining. In the United States, industrial production edged up 0.1% in December as manufacturing increased, while mining and utilities contracted.
The construction sector was unchanged in December, as activity may have been restrained by heavy snowfalls in some parts of the country. The increases in non-residential building construction (+0.1%) and engineering and repair work (+0.1%) were neutralized by the 0.4% decline in residential construction. The home resale market continued to cool. As a result, the real estate agents and brokers industry fell 2.1% for the month.
Year-end review
Real GDP grew 2.7% in 2007, a slight deceleration from 2006. The growth rate for 2007 matches the average growth of the past five years. The economy slowed over the course of 2007 with the lowest growth recorded in the fourth quarter.
The year was marked by a further large appreciation of the Canadian dollar with respect to the US currency. Imports surged ahead while exports edged up at a pace similar to 2006. Personal income and consumer spending remained strong as final domestic demand advanced 4.3%.
Finance and insurance, retail and wholesale trade, and construction were the main sectors contributing to growth in 2007. The energy sector also continued to expand with growth being restrained by a reduction in support activities for mining and oil and gas extraction (which includes exploration).
Although it started the year on a positive note, manufacturing was once again hit hard in 2007 (-1.1%) with decreases in both durable and non-durable goods producing industries. Significant declines were also experienced in forestry and logging and their associated support activities.
Consumer spending, up 4.7% in 2007, was a driving force in the economy. This was the largest gain since 1985. Strong employment and income growth, along with low inflation and low interest rates kept conditions favourable for consumers.
Travel spending continued to push expenditures on services up in 2007. Travel spending abroad registered another large increase with the strong Canadian dollar making travel to foreign destinations more attractive.
Business investment in residential construction contributed to overall growth as it increased 3.2% in 2007, a slight pickup from 2006.
Businesses continued to invest heavily in plant and equipment in 2007, up 4.4%, adding another year to the string of substantial increases.
Business investment in machinery and equipment grew 5.1% in 2007, down from increases of more than 7.0% in 2005 and 2006.
Corporate profits maintained steady growth in 2007 up 5.8%, slightly above growth of 5.0% in 2006.
Exports edged up in 2007, while imports registered another strong year of growth (+5.7%), the fourth consecutive year that growth was five percent or more. Although Canadian international exports continued to benefit from high commodity prices, the trade surplus narrowed in nominal terms.
Inventories continued to accumulate in 2007 ($11 billion), just above the level recorded in 2006 ($10 billion).
Labour income grew 6.1% in 2007, little changed from 6.2% in 2006.
Prices of goods and services produced in Canada advanced 3.1% in 2007, up from 2.4% in 2006. Import prices declined 2.2% resulting in a level that was 12.5% lower than in 2002, reflecting the continued appreciation of the Canadian dollar.
Products, services and contact information
Detailed analysis and tables
The National economic accounts module, accessible from the home page of the agency's website, features an up-to-date portrait of national and provincial economies and their structure.
More detailed analysis on today's releases from the national accounts, including additional charts and tables, can be found in the fourth quarter 2007 issue of Canadian Economic Accounts Quarterly Review, Vol. 6, no. 4 (13-010-XWE, free) from the Publications module of our website.
Gross domestic product by industry
Available on CANSIM: table 379-0027.
Definitions, data sources and methods: survey numbers, including related surveys, 1301, 1804, 1901 and 2602.
The December 2007 issue of Gross Domestic Product by Industry, Vol. 21, no. 12 (15-001-XWE, free) is now available from the Publications module of our website.
For general information or to order data, contact our dissemination officer (toll-free 1-800-887-4623; iad-info-dci@statcan.ca). To enquire about the concepts, methods or data quality of this release, contact Bernard Lefrançois (613-951-3622), Industry Accounts Division.
National economic and financial accounts
Available on CANSIM: tables 378-0001, 378-0002, 380-0001 to 380-0017, 380-0019 to 380-0035, 380-0056, 380-0059, 380-0060 and 382-0006.
The fourth quarter 2007 issue of National Income and Expenditure Accounts, Quarterly Estimates (13-001-XIB, free) will soon be available.
Detailed printed tables of unadjusted and seasonally adjusted quarterly National Income and Expenditure Accounts (13-001-PPB, $54/$193), Financial Flow Accounts (13-014-PPB, $54/$193) and Estimates of Labour Income (13F0016XPB, $22/$70), including supplementary analytical tables and charts are now available.
At 8:30 a.m. on release day, the complete seasonally adjusted quarterly National Income and Expenditure Accounts (13-001-DDB, $134/$535), Financial Flow Accounts (13-014-DDB, $321/$1,284), and monthly Estimates of Labour Income (13F0016DDB, $134/$535) data sets can be obtained on computer diskette.
These diskettes can also be purchased at a lower cost seven business days after the official release date (13-001-XDB, $27/$107; 13-014-XDB, $65/$257; and 13F0016XDB, $27/$107). To purchase any of these products, contact Client Services (613-951-3810; iead-info-dcrd@statcan.ca), Income and Expenditure Accounts Division.
For more information, or to enquire about the concepts, methods or data quality of this release, contact the information officer (613-951-3640, iead-info-dcrd@statcan.ca), Income and Expenditure Accounts Division.
Monthly gross domestic product by industry at basic prices, chained (2002) dollars
July 2007r August 2007r September 2007r October 2007r November 2007r December 2007p
Seasonally adjusted
month-to-month % change
All industries 0.1 0.2 -0.0 0.3 0.1 -0.7
Goods-producing industries -0.4 0.2 -0.4 0.1 -0.2 -1.8
Service-producing industries 0.3 0.2 0.2 0.4 0.3 -0.2
Industrial production -0.4 0.0 -0.7 0.1 -0.4 -2.4
Manufacturing 0.2 -0.5 -1.0 0.7 -0.6 -3.2
Wholesale trade 1.6 -0.1 0.8 1.6 -0.0 -2.0
Energy sector -1.4 0.4 -0.2 -0.7 0.1 -1.2
r revised
p preliminary
Canadian economic accounts key indicators1
Third quarter 2006 Fourth quarter 2006 First quarter 2007 Second quarter 2007 Third quarter 2007 Fourth quarter 2007 2006 2007
Seasonally adjusted at annual rates
$ millions at current prices
Gross domestic product by income and by expenditure
Wages, salaries and supplementary labour income 739,764 751,268 767,700 780,552 783,488 797,420 737,382 782,290
1.2 1.6 2.2 1.7 0.4 1.8 6.2 6.1
Corporation profits before taxes 201,864 201,464 205,984 208,840 212,864 214,016 198,859 210,426
2.2 -0.2 2.2 1.4 1.9 0.5 5.0 5.8
Interest and miscellaneous investment income 65,464 64,304 67,032 69,516 69,036 69,152 65,310 68,684
-0.6 -1.8 4.2 3.7 -0.7 0.2 6.9 5.2
Net income of unincorporated business 86,408 87,200 88,864 90,268 90,604 91,700 86,324 90,359
0.4 0.9 1.9 1.6 0.4 1.2 1.6 4.7
Taxes less subsidies 160,384 160,040 163,740 167,008 168,220 169,360 161,582 167,082
-2.3 -0.2 2.3 2.0 0.7 0.7 3.5 3.4
Personal disposable income 844,976 856,616 876,060 881,804 892,316 906,224 842,302 889,101
1.4 1.4 2.3 0.7 1.2 1.6 6.4 5.6
Personal saving rate2 1.8 2.2 2.6 1.3 1.3 0.8 2.3 1.5
... ... ... ... ... ... ... ...
millions of chained (2002) dollars
Personal expenditure on consumer goods and services 759,897 766,839 774,461 785,385 794,109 808,418 755,204 790,593
1.2 0.9 1.0 1.4 1.1 1.8 4.2 4.7
Government current expenditure on goods and services 251,113 252,961 254,570 257,150 261,069 265,490 250,604 259,570
0.4 0.7 0.6 1.0 1.5 1.7 3.3 3.6
Gross fixed capital formation 300,447 303,625 305,656 309,197 313,770 317,979 299,468 311,651
0.8 1.1 0.7 1.2 1.5 1.3 7.2 4.1
Investment in inventories 12,838 61 3,342 4,740 16,468 18,722 10,198 10,818
... ... ... ... ... ... ... ...
Exports of goods and services 505,539 508,881 510,175 513,082 513,997 502,724 505,344 509,995
0.6 0.7 0.3 0.6 0.2 -2.2 0.7 0.9
Imports of goods and services 552,820 551,615 552,977 562,766 587,039 602,388 545,268 576,293
1.5 -0.2 0.2 1.8 4.3 2.6 5.0 5.7
Gross domestic product at market prices 1,284,213 1,288,949 1,301,681 1,313,733 1,323,426 1,326,034 1,282,204 1,316,219
0.3 0.4 1.0 0.9 0.7 0.2 2.8 2.7
Gross domestic product by industry
Goods producing industries 374,480 373,421 378,409 380,107 379,349 375,935 375,489 378,450
-0.3 -0.3 1.3 0.4 -0.2 -0.9 1.2 0.8
Industrial production 273,486 271,364 275,451 277,059 275,866 272,105 274,357 275,120
-0.4 -0.8 1.5 0.6 -0.4 -1.4 -0.2 0.3
Energy sector 86,638 84,925 86,774 87,612 87,543 86,648 85,876 87,144
1.0 -2.0 2.2 1.0 -0.1 -1.0 1.0 1.5
Manufacturing 184,920 183,590 185,714 186,331 184,806 181,822 186,631 184,668
-1.3 -0.7 1.2 0.3 -0.8 -1.6 -1.0 -1.1
Non-durable manufacturing 74,031 73,355 72,594 73,271 72,789 71,563 74,329 72,554
-0.6 -0.9 -1.0 0.9 -0.7 -1.7 -1.9 -2.4
Durable manufacturing 111,038 110,392 113,349 113,270 112,220 110,461 112,470 112,325
-1.8 -0.6 2.7 -0.1 -0.9 -1.6 -0.3 -0.1
Construction 74,369 75,536 76,369 76,809 77,588 78,146 74,087 77,228
1.1 1.6 1.1 0.6 1.0 0.7 8.1 4.2
Services producing industries 822,022 827,148 834,588 843,180 850,919 857,009 818,862 846,424
0.6 0.6 0.9 1.0 0.9 0.7 3.8 3.4
Wholesale trade 69,239 68,298 69,245 70,503 72,338 73,296 68,383 71,346
0.9 -1.4 1.4 1.8 2.6 1.3 7.1 4.3
Retail trade 69,647 69,847 71,264 72,874 73,313 74,071 69,015 72,881
1.0 0.3 2.0 2.3 0.6 1.0 6.0 5.6
Transportation and warehousing 55,565 55,683 55,888 56,275 56,850 56,606 55,501 56,405
0.1 0.2 0.4 0.7 1.0 -0.4 3.2 1.6
Finance, insurance, real estate and renting 231,525 234,023 236,704 239,207 241,131 242,780 230,362 239,956
1.1 1.1 1.1 1.1 0.8 0.7 3.8 4.2
Information and communication technologies 54,744 55,151 55,850 56,743 56,975 57,405 54,485 56,743
0.9 0.7 1.3 1.6 0.4 0.8 4.3 4.1
... not applicable
1. The first line is the series itself expressed in millions of dollars, seasonally adjusted at annual rates. The second line is the quarter to quarter percentage change at quarterly rates.
2. Actual rate
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