Canadian economic accounts

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The economy picked up steam in the first quarter of 2007 as real gross domestic product (GDP) advanced 0.9%, more than twice the pace of last quarter. A slight pick-up in consumer spending and an inventory build-up resulting from strong production fuelled the advance. Investment in fixed capital slowed and exports eased.

In March, economic output was up 0.3%, after increasing 0.4% in February and 0.1% in January. Service-producing industries surged ahead in March while the output of goods-producing industries fell.

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

While final domestic demand continued to provide substantial support to the economy (+0.8%), it was overtaken by growth in GDP for the first time in 10 quarters. An easing in domestic spending activity resulted from reduced investment in non-residential structures and equipment. This was partly offset by an acceleration in housing investment and by increased consumer spending, in particular on clothing, household furnishings and leisure items.

Export growth moderated, largely constrained by declines in forestry products and industrial goods and materials. With production up, and both foreign demand and domestic spending easing in the quarter, inventories accumulated.

Both the service sector (+1.0%) and goods production (+0.9%) increased in the first quarter. The growth in the production of goods followed three quarters of decline, and came mainly from the energy sector, wholesale and retail trade, the financial sector and construction. Agriculture, forestry and mining (excluding oil and natural gas) also posted gains, but these were partly offset by declines in accommodation services and arts and entertainment.

Manufacturing remained unchanged after declining for four straight quarters. Of the 21 major groups, 14 posted increases, accounting for 68% of total manufacturing value added. Manufacturing of durable goods registered its first quarterly increase since the first quarter of 2006. Industrial production (the output of utilities, mines and factories) advanced 0.7%, with mining, oil and gas as well as utilities recording significant gains. Industrial production in the United States edged up 0.2%, as manufacturers and utilities raised output and mining output contracted.

The Canadian economy recorded an annualized growth rate of 3.7%, up sharply from the fourth quarter of 2006 (+1.5%). The Canadian economy outpaced the US economy, according to an advance estimate published on April 27, 2007.

Economy-wide prices, as measured by the chain price index for GDP, rose 1.5%. Excluding energy, the index was up 0.9%.

Consumer spending remains a force in the economy

Personal spending on goods and services continued to support the economy, advancing at a steady pace (+1.0%). Purchases of durable goods, which posted an average quarterly growth of over 2% throughout 2006, grew 1.6% in the first quarter. Purchases of semi-durable goods rose 1.9% after weak growth last quarter (+0.5%). In particular, spending on clothing and footwear jumped 2.4% this quarter. Retail sales in many sectors posted strong quarterly growth.

Residential investment picks up, while investment in non-residential structures and equipment falters

Business investment in residential construction (+1.8%) recovered in the first quarter. This was the first increase since the first quarter of 2006. The value of new housing construction was essentially flat (-0.1%), after three quarters of pronounced declines. However, residential real estate resale activity was up sharply while renovation activity remained firm.

Having registered a healthy string of quarterly increases of 2.5% or more over the last two years, business investment in non-residential structures slowed this quarter (+1.3%). This occurred despite a 2.5% surge in investment in buildings, such as office buildings, factories and warehouses. Investment in machinery and equipment fell 1.5%, the first decline since 2002. Purchases of machinery and equipment have been a source of strength over the last four years, but have slowed from their peak in 2005.

Exports reflect continued soft foreign demand

Merchandise exports eased (+0.5%), continuing the moderate growth posted over the last two quarters. Foreign sales were largely constrained by declines in forestry products (-6.3%) and industrial goods and materials (-0.5%). The Canadian dollar decreased 2.8% against the US dollar in the quarter.

Exports of machinery and equipment were strong this quarter (+2.0%), after slowing considerably in the previous quarter, but were still off the quarterly pace registered in most of 2005. Foreign demand for automotive products was up 2.3% this quarter, following an increase of 7.4% last quarter, reversing the quarterly declines registered throughout most of 2006.

Inventories accumulate as domestic and foreign demand ease

Business inventories (excluding farm inventories) increased $2.8 billion in the quarter. Durable goods, especially fabricated metal, non-electrical machinery, and electrical and electronic products were built up in manufacturers' inventories, while wholesalers accumulated non-durable goods.

Corporate profits surge and personal income strengthens

Corporate profits posted substantial growth in the first quarter (+3.1%), a pace not seen since the last quarter of 2005. Spurred by profits earned in the petroleum and coal products manufacturing sector, partly resulting from rising commodity prices, as well as by increased profits in the retail sector, corporate profits in non-financial industries advanced 4.7%.

Personal income rose 2.0%, helped by strong increases in labour income, farm income, and net income from non-farm unincorporated businesses, including rent.

Labour income increased 2.0%, up from the last quarter (+1.6%) as wages and salaries increased in both goods and service producing industries. However, labour income also reflected a Quebec government pay equity settlement and a contribution from the Newfoundland and Labrador government to the Public Service Pension Plan. Excluding these special payments, labour income grew 1.6%.

GDP by industry, March 2007

Economic activity increased 0.3% in March, after growing 0.4% in February and 0.1% in January. Strength in service industries (+0.5%) more than offset a decrease in the production of goods (-0.2%). Wholesale and retail trade experienced robust growth. Gains were also registered in construction, manufacturing and the financial sector. These increases were partially offset by declines in agriculture, forestry, the energy sector and mining, excluding oil and gas.

Wholesale trade jumped 1.8% in March, owing largely to strong trade in motor vehicles. Retail trade rose sharply (+1.4%) following a drop the month before. This increase was fuelled primarily by sales of new cars.

The construction sector rose 0.1% in March. Increases in non-residential construction (+1.1%) as well as engineering and repair work (+0.2%) overshadowed the 0.6% decline in residential construction.

The manufacturing sector advanced 0.8%, as both durable (+1.0%) and non-durable (+0.4%) goods manufacturing rose. Of the 21 major manufacturing groups, 16 posted increases, accounting for 80% of the total manufacturing value added. Motor vehicle manufacturing contributed the most to the increase.

The energy sector fell 1.7% in March, following two months of strong growth. This setback was due to a drop in natural gas extraction as well as a tumble in oil and gas exploration (-12.5%). In contrast, petroleum extraction increased.

Industrial production (the output of mines, utilities and factories) retreated 0.2%. The drop in mining and the decline in utilities outweighed the gains made by manufacturers. In comparison, industrial production in the United States decreased 0.3% in March, due to a marked decline in utilities, while manufacturing and mining both advanced.

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 release from the national accounts, including additional charts and tables, can be found in the first quarter 2007 issue of Canadian Economic Accounts Quarterly Review, Vol. 6, no. 1 (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 March 2007 issue of Gross Domestic Product by Industry, Vol. 21, no. 3 (15-001-XWE, free) is now available from the Publications module of our website.

For more information or to order data, contact our dissemination officer (toll-free 1-800-887-4623; iad-info-dci@statcan.gc.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 first 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.gc.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.gc.ca), Income and Expenditure Accounts Division.

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