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Wednesday, November 30, 2005
Canadian economic accountsThird quarter 2005 and September 2005
Economic growth accelerated slightly during the third quarter thanks to a sharp rebound in exports, mainly automotive products and agriculture and fishing products.
Real gross domestic product (GDP) increased 0.9% in the third quarter, compared with advances of 0.8% in the second and 0.5% in the first.
Final domestic demand grew 1.0%, matching the growth registered in the second quarter. Much of the strength in real GDP in the first two quarters was from domestic demand. Growth in the third quarter received an added boost from exports which advanced 2.5%.
The third quarter was affected by a very active energy sector which pushed up business investment, corporate profits, output in the goods-producing industries and economy-wide prices. Automobile manufacturers also had a strong quarter with output increasing 6.0%.
Industrial production (the output of mines, factories and utilities) increased 1.3%. The mining, oil and gas extraction sector increased 3.2%, manufacturing output rose by 0.8%, while utilities advanced 0.4%.
Economy-wide prices, as measured by the chain price index for GDP, increased 1.9% in the third quarter, the largest quarterly increase since the early 1980s. Excluding energy, economy wide prices increased 0.5%.
Overall, economic output was unchanged in September, after increasing 0.5% in August and 0.3% in July.
The Canadian economy grew at an annualized rate of 3.6% in the third quarter of the year, compared to 3.4% last quarter.
Exports rebound following second quarter decline
Incentive-induced automotive sales south of the border had a substantial impact on Canadian exports. A 7% jump in automotive exports helped to push up total exports 2.5%, rebounding from the 0.2% decline in the second quarter and well above the 1.3% growth registered in the first.
The resource sector also fared well in the third quarter as exports of agriculture and fish products and energy products registered a strong showing. Exports of agricultural and fish products skyrocketed in the third quarter (+6.4%), helped by the easing of border restrictions on Canadian live cattle in July.
The one dark cloud in the otherwise rosy resource picture remains the forestry sector, which saw its exports fall 0.5%, a fifth consecutive quarterly decline. Output of wood products excluding sawmills (-5.2%) and paper products (-0.9%) both fell.
A bustling mining and oil and gas extraction industry helped push up output in the goods-producing industries. This gain, combined with a 4.9% hike in the production of motor vehicles and a 2.8% increase in automotive parts, helped push growth in the goods-producing industries (+1.3%) ahead of the service sector (+0.9%) for the first time this year.
Output of the manufacturing sector increased 0.8% in the third quarter. Only 9 of the 21 major groups advanced, accounting for 51% of total manufacturing output. Major contributors were transportation equipment (+3.1%), chemical products (+2.3%) and plastic products (+2.8%).
Labour income posted another solid gain
Overall growth in wages and salaries remained strong in the third quarter and has been climbing steadily for over a year. Much of this growth is coming from the service industries where the growth in wages and salaries has outpaced goods-producing industries in each of the last three quarters.
While growth in wages and salaries in the goods-producing industries has been moderate in 2005, the mining and oil and gas extraction industry has seen tremendous growth. Labour shortages in this industry and buoyant economic conditions have boosted average weekly earnings, driving up wages and salaries an average of 3.1% per quarter in 2005, compared to 1.5% for all industries.
Consumer spending slows
Personal expenditures, the main source of growth in GDP for much of the year, continued to slow in the third quarter (+0.6%), following a strong showing in the first quarter.
A warm summer drove up expenditures on electricity which climbed 1.9% in the third quarter. In addition, purchases of food and non-alcoholic beverages, drugs and pharmaceutical products, and recreational equipment all recorded large quarterly increases contributing to overall growth.
A wave of automotive dealer incentives helped to push up personal expenditures on new motor vehicles which advanced 1.4%, with the growth occurring in July. Much of the increase was attributable to purchases of fuel efficient passenger cars as the jump in the price of gasoline in late August and early September dampened purchases of sports utility vehicles.
Personal expenditures on clothing and household furnishing have slowed considerably in the last two quarters. Following eight quarters of strong growth, personal expenditures on furniture, carpets and other floor coverings have now declined for two successive quarters, falling 1.0% in the third.
New housing construction stalls
The drop in personal expenditures on household furnishing has been partly driven by a weakening housing market in which output in the residential construction sector fell 0.2%, its second quarterly decline this year. The overall value of new house construction has fallen 2.7% since its peak in the fourth quarter of 2004.
While sales of new dwellings declined significantly in the quarter, sales of existing homes remained strong. Ownership transfer costs have now posted three consecutive quarters of stellar growth, with gains of 4.7% in the third quarter, 7.3% in the second and 2.6% in the first.
Overall growth in business investment continued its steady climb. The deceleration in the growth in residential investment was more than offset by accelerated growth in non-residential structures and equipment, with significant investment occurring in the oil and gas industry.
National saving rate increases
The national saving rate sat at 12.3% in the third quarter, up from 11.0% in the second. A large increase in saving by the corporate sector was responsible for the growth. For more information on the calculation of the national saving rate and the relationship between saving in the different sectors of the economy see the publication Trends in Saving and Net Lending in the National Accounts (13-604-MIE2005049, free).
GDP by industry: Highlights for September
Economic growth was flat in September following a 0.5% increase in August. Industrial production (the output of factories, mines and utilities) retreated by 0.5% in September on the weakness of manufacturing while both the mining and utilities sectors grew.
Manufacturing output dropped 1.0%, with the largest declines recorded by manufacturers of transportation equipment (-2.0%), machinery (-2.7%) and chemicals (-2.2%). Manufacturers of fabricated metal, and plastic products registered significant gains.
The energy sector recorded a 0.6% increase in September, primarily driven by oil and gas exploration (+4.9%), electricity generation (+1.3%) and the transportation of natural gas by pipeline (+0.9%). Oil and gas extraction, however, edged down 0.1%.
Retail sales of new motor vehicles retracted sharply in August and September following a jump in July. The decline paralleled the end of special incentive programs by auto makers. The retail trade sector declined 1.5% in September on that weakness, as retailing activities excluding new motor vehicle dealers grew 0.9%. Wholesale trade activity, however, increased 1.2%, mainly on the strength of motor vehicles. Excluding motor vehicles and parts, wholesale trade grew only 0.4%.
Detailed analysis and tables
More detailed analysis on today's releases from the national accounts, including additional charts and tables, can be found in the third quarter 2005 issue of Canadian Economic Accounts Quarterly Review, Vol. 4, no. 3 (13-010-XIE, free). From the Our products and services page, under Browse our Internet publications, choose Free, then National accounts.
Products, services and contact information
Gross domestic product by industry
Available on CANSIM: tables 379-0017 to 379-0022.
The September issue of Gross Domestic Product by Industry, Vol. 19, no. 9 (15-001-XIE, $12/$118) is now available. A print-on-demand version is available at a different price.
For general information or to order data, contact Yolande Chantigny (1-800-887-IMAD; email@example.com). To enquire about the concepts, methods or data quality of this release, contact Bernard Lefrançois (613-951-3622; firstname.lastname@example.org), Industry Accounts Division.
National economic and financial accounts
The third quarter issue of National Income and Expenditure Accounts, Quarterly Estimates (13-001-XIB, $36/$117) will soon be available. A print-on-demand version will also be available at a different price.
Detailed printed tables of unadjusted and seasonally adjusted quarterly 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 income and expenditure accounts, financial flow accounts, and monthly estimates of labour income data sets can be obtained on computer diskette. The diskettes (13-001-DDB, $134/$535; 13-014-DDB, $321/$1284; and 13F0016DDB, $134/$535) 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; email@example.com), 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,firstname.lastname@example.org), Income and Expenditure Accounts Division.