Friday, August 31, 2007

Canadian economic accounts

The Canadian economy posted a second consecutive quarter of strong growth. Real gross domestic product (GDP) was up 0.8% in the second quarter of 2007, easing from the pace set in the first quarter (+1.0%). This strength was widespread as consumer and investment expenditures accelerated from the first quarter, while businesses also continued to add to inventories. Despite a substantial appreciation of the Canadian dollar relative to its US counterpart, exports also increased, outpacing first-quarter gains.

The economy grew at a 3.4% annualized rate in the second quarter, down slightly from the strong pace set in the first quarter. This growth was similar to that of the US economy (+4.0%), which gained substantial momentum in the second quarter.

Growth was concentrated in the latter two-thirds of the second quarter. Economic activity increased 0.2% in June, after growing 0.3% in May and remaining essentially unchanged in April. A significant increase in natural gas extraction and a rebound in oil and gas exploration propelled the growth in June.

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 is, 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.

A more detailed analysis is available in the Canadian Economic Accounts Quarterly Review.

Final domestic demand picked up steam in the second quarter of 2007 (+1.1%), outpacing the GDP. Consumer spending, led by purchases of durable goods, was the largest contributor to growth. Residential construction continued to build on first-quarter gains by expanding 1.3% in the second quarter. Business investment in machinery and equipment rebounded following a sharp drop in the first quarter.

Both the services- and goods-producing industries' output grew in the second quarter, increasing 0.9% and 0.3% respectively. Growth came mainly from retail and wholesale trade, utilities, the finance and insurance sector, and construction. The manufacturing sector posted its first quarterly increase since the fourth quarter of 2005. However, these gains were partly offset by declines in oil and gas exploration, accommodation and food services, agriculture, and forestry.

Industrial production (the output of utilities, mines and factories) advanced 0.4%. Utilities posted significant gains, while manufacturing moved ahead slightly. Mining receded as a result of the decline in oil and gas exploration. Industrial production in the United States rose 0.8%, as manufacturing and mining posted gains, while utilities slipped.

Real gross domestic product, chained (2002) dollars1
	Change	Annualized change	Year-over-year change
	%
First quarter 2006	0.8	3.4	3.6
Second quarter 2006	0.4	1.5	3.1
Third quarter 2006	0.3	1.3	2.4
Fourth quarter 2006	0.4	1.5	1.9
First quarter 2007	1.0	3.9	2.0
Second quarter 2007	0.8	3.4	2.5
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.

Economy-wide prices in Canada, as measured by the chain price index for the GDP, rose 1.4% (+1.7% excluding energy) in the second quarter following an energy-related increase of 1.6% in the first quarter.

Consumer spending picks up

Personal expenditure rose 1.2% in the second quarter, fuelled by gains in income. Consumers opened their pocket books to finance a surge in purchases of goods, notably motor vehicles, household appliances and recreational, sporting and camping equipment. Retail sales were particularly strong in May.

Residential investment remains strong for a second consecutive quarter

Despite increases in mortgage rates, Canadians continued to invest in housing in the second quarter. Investment increased 1.3% following a strong 2.0% increase in the first quarter. The main source of strength continued to be the resale market as ownership transfer costs accounted for more than half of the increase.

Machinery and equipment spending rebounds while business non-residential spending slows

After faltering in the first quarter, business investment in machinery and equipment rebounded 1.5% in the second quarter. A sharp gain in the Canadian dollar relative to the US currency reduced the cost of imports from the US.

Business investment in non-residential structures was up 0.5% in the second quarter. After registering strong advances in 2006, engineering construction was flat in the second quarter with weak drilling activity recorded in the mining sector. Building investment, on the other hand, advanced 2.2%.

Non-farm inventories continue to accumulate

Another $4.8 billion was added to inventories in the second quarter, following a $3.2 billion addition in the first quarter. Non-durable manufactured goods swelled in the second quarter, after two quarterly declines. Conversely, motor vehicle stocks in the retail sector were down sharply, reflecting the increased sales of these products.

Exports re-energize

After pausing in the first quarter, exports of goods and services advanced 0.7% in the second quarter. Energy products surged 3.3%. Manufactured goods registered mixed results as automotive products fell 2.7% while industrial goods and materials advanced 1.2%, recouping the losses of the first quarter.

Spurred by the jump in the Canadian dollar and strong domestic demand, imports rose 1.6%, following a small decline in the first quarter. Business demand for machinery and equipment bounced back in the second quarter, as these assets accounted for over one-third of the overall increase in imports. Imports of consumer goods, which have grown every quarter since the second quarter of 2005, also rose substantially, reflecting the increases in personal expenditure. Automotive product imports dropped 1.4%, moderating these increases.

Labour income continues strong

After a robust first quarter (+2.2%), labour income (in nominal terms) remained strong in the second quarter, rising 1.8%. High employment rates provided a solid foundation for these gains. Pay equity payments in Quebec and special pension contributions in Newfoundland and Labrador contributed to the growth in both the first and second quarters. Removing the effect of these special payments from both quarters, labour income would have risen 1.7% in the second quarter and 1.8% in the first quarter.

Profits ease, unincorporated income remains firm

Corporate profits (in nominal terms) grew 1.2% in the second quarter following a 2.2% increase in the first quarter. Wholesale and retail trade saw large gains boosted by personal spending. With mineral prices on the rise, profits were also strong in the mining sector. On the other hand, earnings of manufacturers, specifically motor vehicles and parts manufacturers as well as wood and paper producers, slipped. Chartered banks, and property and casualty insurers also saw their profits decline in the second quarter.

Income of non-farm unincorporated business remained firm (+1.6%). After two years of low earnings, farm operators have registered some significant income increases in 2007. An upward movement in prices for many crops has been instrumental in these gains.

Government sector saving advances sharply

Government sector saving expanded sharply in the second quarter, largely as a result of increased income. Personal income taxes registered a 5.9% gain, fuelled by sustained growth in labour income and a large increase in taxes paid on interest and capital gains. Taxes on products also advanced on the strength of retail sales.

GDP by industry, June 2007

Economic activity increased 0.2% in June, its average pace since the beginning of the year, after growing 0.3% in May and remaining essentially unchanged in April. Both the goods- and services-producing industries advanced. A significant increase in natural gas extraction and a rebound in oil and gas exploration largely contributed to the overall growth. Gains were also registered in construction, the financial sector and in personal and business service industries, notably the gambling industry and food services. These increases were partially offset by declines in manufacturing, retail trade, agriculture, forestry, as well as utilities.

The energy sector advanced 1.5% in June, after declining in May. Natural gas extraction grew sharply, helped by the strengthening of demand in the United States and the return to normal levels of storage in both countries. Domestic demand has remained relatively stable over the last several months. Crude oil production rose slightly. Oil and gas exploration grew strongly (+10%) after three months of significant decline, but its level is about one-third lower than that of January.

The construction sector rose 0.4% in June. Residential (+0.4%) and non-residential building (+0.7%) construction as well as engineering and repair work (+0.3%) all posted increases for the month. The construction of single-family homes, which rose for the second consecutive month after a prolonged decline, largely contributed to the advance in residential construction in June.

Retail trade retreated 0.6% in June, following a very strong May (+2.3%). Sales by new car dealers remained high but returned to their April level. Used car and recreational motor vehicle dealers also saw their sales reduced. Wholesale trade was stagnant in June, following a robust May (+1.5%).

Monthly gross domestic product by industry at basic prices in chained (1997) dollars
	January 2007r	February 2007r	March 2007r	April 2007r	May 2007r	June 2007p
	Seasonally adjusted
	month-to-month % change
All industries	0.2	0.4	0.4	-0.0	0.3	0.2
Goods-producing industries	0.1	0.9	0.0	-0.0	-0.1	0.3
Services-producing industries	0.2	0.2	0.6	-0.0	0.5	0.2
Industrial production	0.0	1.3	0.1	-0.0	-0.2	0.4
Manufacturing	-1.3	0.4	0.8	-0.2	0.0	-0.4
Retail trade	-0.1	-0.7	1.7	0.3	2.3	-0.6
Energy sector	2.6	2.8	-1.2	0.3	-0.8	1.5
r revised p preliminary

The manufacturing sector slipped 0.4%. The 0.8% reduction in the production of durable goods overshadowed the 0.3% increase in non-durable goods. Of the 21 major manufacturing groups, 13 decreased, accounting for 61% of total manufacturing value added. Recording their third consecutive monthly decrease, motor vehicle manufacturing (-5.3%) and associated parts production (-1.1%) led the decline in June.

Industrial production (the output of mines, utilities and factories) rose 0.4% in June. The robust showing of mining outweighed the declines reported by factories and utilities. In comparison, all three sectors increased in the United States, resulting in an overall gain of 0.6% in June.

Products, services and contact information

Detailed analysis and tables

The National economic accounts module, accessible from the home page of our 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 second quarter 2007 issue of Canadian Economic Accounts Quarterly Review, Vol. 6, no. 2 (13-010-XWE, free), available from the Publications module of our website.

Gross domestic product by industry

Available on CANSIM: tables 379-0017 to 379-0022.

Definitions, data sources and methods: survey numbers, including related surveys, 1301, 1804, 1901 and 2602.

The June 2007 issue of Gross Domestic Product by Industry, Vol. 21, no. 6 (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 second 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.

Canadian economic accounts key indicators1
	First quarter 2006	Second quarter 2006	Third quarter 2006	Fourth quarter 2006	First quarter 2007	Second quarter 2007	2005	2006
	Seasonally adjusted at annual rates
	$ millions at current prices
GDP by income and by expenditure
Wages, salaries and supplementary labour income	727,568	730,928	739,764	751,268	767,796	781,992	694,041	737,382
	2.4	0.5	1.2	1.6	2.2	1.8	6.0	6.2
Corporation profits before taxes	194,664	197,444	201,864	201,464	205,872	208,244	189,357	198,859
	-4.0	1.4	2.2	-0.2	2.2	1.2	11.9	5.0
Interest and miscellaneous investment income	65,592	65,880	65,464	64,304	66,568	69,380	61,070	65,310
	-3.6	0.4	-0.6	-1.8	3.5	4.2	12.9	6.9
Net income of unincorporated business	85,624	86,064	86,408	87,200	89,280	91,664	84,957	86,324
	0.2	0.5	0.4	0.9	2.4	2.7	1.0	1.6
Taxes less subsidies	161,812	164,092	160,384	160,040	163,780	167,748	156,181	161,582
	2.2	1.4	-2.3	-0.2	2.3	2.4	4.9	3.5
Personal disposable income	834,500	833,116	844,976	856,616	874,912	882,180	791,486	842,302
	3.5	-0.2	1.4	1.4	2.1	0.8	4.3	6.4
Personal saving rate2	3.3	1.7	1.8	2.2	2.7	1.8	1.6	2.3
	...	...	...	...	...	...	...	...
	millions of chained (2002) dollars
Personal expenditure on consumer goods and services	743,529	750,550	759,897	766,839	773,201	782,554	724,942	755,204
	1.4	0.9	1.2	0.9	0.8	1.2	3.8	4.2
Government current expenditure on goods and services	248,187	250,155	251,113	252,961	254,463	256,078	242,557	250,604
	1.2	0.8	0.4	0.7	0.6	0.6	2.2	3.3
Gross fixed capital formation	295,807	297,993	300,447	303,625	304,806	307,913	279,345	299,468
	2.2	0.7	0.8	1.1	0.4	1.0	8.5	7.2
Investment in inventories	10,321	17,572	12,838	61	3,210	4,750	13,575	10,198
	...	...	...	...	...	...	...	...
Exports of goods and services	504,602	502,355	505,539	508,881	509,900	513,582	501,732	505,344
	-1.8	-0.4	0.6	0.7	0.2	0.7	2.2	0.7
Imports of goods and services	532,055	544,582	552,820	551,615	551,016	559,672	519,435	545,268
	-0.7	2.4	1.5	-0.2	-0.1	1.6	7.5	5.0
Gross domestic product at market prices	1,275,510	1,280,142	1,284,213	1,288,949	1,301,284	1,312,257	1,247,780	1,282,204
	0.8	0.4	0.3	0.4	1.0	0.8	3.1	2.8
	millions of chained (1997) dollars
GDP by industry at basic prices
Goods-producing industries	336,461	334,306	333,961	332,332	335,127	336,203	331,595	334,265
	0.1	-0.6	-0.1	-0.5	0.8	0.3	2.0	0.8
Industrial production	245,094	242,426	241,942	239,131	241,022	242,076	243,485	242,148
	-0.5	-1.1	-0.2	-1.2	0.8	0.4	1.0	-0.5
Energy sector	64,519	64,294	64,721	63,337	64,681	64,961	63,767	64,218
	-0.9	-0.3	0.7	-2.1	2.1	0.4	1.5	0.7
Manufacturing	175,853	173,170	171,664	169,868	169,875	170,409	174,987	172,639
	-0.3	-1.5	-0.9	-1.0	0.0	0.3	0.7	-1.3
Non-durable manufacturing	70,451	69,339	68,814	68,208	67,739	68,384	71,317	69,203
	-1.0	-1.6	-0.8	-0.9	-0.7	1.0	-1.2	-3.0
Durable manufacturing	105,277	103,709	102,727	101,536	102,024	101,903	103,516	103,312
	0.2	-1.5	-0.9	-1.2	0.5	-0.1	2.1	-0.2
Construction	67,248	67,995	68,694	69,790	70,578	71,124	63,689	68,432
	2.6	1.1	1.0	1.6	1.1	0.8	5.7	7.4
Services-producing industries	749,690	756,852	761,889	766,930	774,755	781,349	732,506	758,840
	1.2	1.0	0.7	0.7	1.0	0.9	3.2	3.6
Wholesale trade	69,501	70,592	71,192	70,349	72,009	72,471	65,997	70,408
	2.3	1.6	0.9	-1.2	2.4	0.6	6.9	6.7
Retail trade	64,164	65,425	65,992	66,187	66,990	68,695	62,219	65,442
	2.3	2.0	0.9	0.3	1.2	2.5	4.7	5.2
Transportation and warehousing	52,460	52,791	52,893	52,910	53,372	53,502	51,241	52,764
	0.7	0.6	0.2	0.0	0.9	0.2	3.5	3.0
Finance, insurance, real estate and renting	218,613	220,840	223,318	225,958	228,996	231,699	213,985	222,182
	1.1	1.0	1.1	1.2	1.3	1.2	3.7	3.8
Information and communication technologies	64,023	64,712	65,393	65,948	66,676	67,534	62,359	65,019
	1.2	1.1	1.1	0.8	1.1	1.3	5.2	4.3
... 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.

---

Send this article to another person
E-mail to:
Your name:
Your e-mail: