August 24, 2010
Economy at a Glance
Canada’s GDP up a modest 0.1% in May
The nation’s gross domestic product (GDP) increased by 0.1% in May versus April, according to Statistics Canada. There were much higher figures earlier in the year – +0.6% in both January and March, with February’s +0.2% squeezed in between – but April’s level had been 0.0%
The annualized rate of change in May was +1.2%. The annualized rate of change of the three months ending with May was +2.8%. These represent significant slowdowns from the first quarter’s annualized GDP growth rate of +6.1%.
The output of goods-producing industries is a little more than one quarter (28%) of the total. The services-producing sector accounts for slightly less than three quarters (72%).
On a month-to-month basis, the output of goods-producing industries climbed 0.6% in May. Oil and gas extraction led the way, followed by a slight pickup in manufacturing.
Mining made a positive contribution to GDP in the latest month. Copper, nickel, lead and zinc mines all raised their production levels.
Construction and utilities fell back. The construction weakness was centered in housing starts and renovation activity.
Services-producing industries experienced a 0.1% month-to-month decline in activity levels. Wholesale trade (-1.8% month to month) and residential real estate transactions (-11.3% month to month) were the problem areas.
The finance and insurance sector advanced (+0.5%) due to more banking intermediation (i.e., deposits and loans) and higher volumes of stock market trading.
The bottom line is that the economy is not growing as rapidly as earlier in the recovery phase. And this is still recovery for Canada, not expansion yet, since total constant dollar GDP remains slightly below its pre-recession level of mid-2008.
Canada is caught up in circumstances beyond its control. The U.S. economy continues to sputter, particularly with respect to job creation and housing markets. Europe is hunkering down in austerity to clean up debt problems. And even China may be about to experience a moderation in growth brought on by credit tightening.
In essence, Canada’s outlook varies according to two primary influences: 1) Trade with the U.S.; and 2) the international demand for and price of commodities. Neither of these is busting out of the gate at this time.
The Bank of Canada has raised its policy-setting interest rate, the target overnight rate, twice in the past two months, on June 1 and July 20. It is increasingly unlikely that further hikes will be initiated until there is better economic news forthcoming from the far corners of the earth.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com
Three-month moving averages of month-to-month per cent changes, placed in latest period.
Data source: Statistics Canada. Chart: Reed Construction Data - CanaData.
