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The Daily

Friday, August 29, 2008
Second quarter 2008 and June 2008

Real gross domestic product (GDP) edged up 0.1% in the second quarter of 2008, following a 0.2% decline (revised from -0.1%) in the first quarter. Real GDP advanced 0.1% in June. While final domestic demand continued to outpace GDP, growing 0.5% in the quarter, foreign demand for Canadian goods and services registered its fourth consecutive quarterly decline.

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A more detailed analysis and additional data tables are available in Canadian Economic Accounts Quarterly Review.

Production in the service industries was up 0.6% during the second quarter, led by gains in the public sector, finance and insurance, accommodation, retail trade and transportation. Significant declines in the energy sector, notably natural gas production, and continued contractions in manufacturing activities, albeit at a much reduced pace compared to previous quarters, were behind the 1.0% decline in the goods-producing sector.

Note to readers

Percentage changes for expenditure-based and industry-based statistics (such as personal expenditure, 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 new reference manual, Guide to the Income and Expenditure Accounts, is now available. This guide provides an overview, an outline of the concepts and definitions, an explanation of the sources of information and statistical methods, a glossary of terms, and a broad compilation of other facts about the accounts.

Consumer and government spending on goods and services advanced. Businesses increased their inventories and reduced their expenditures on fixed capital. Corporate profits grew significantly as prices, particularly for energy products, jumped. The international trade surplus, measured in nominal values, increased as exporters benefited from higher commodity prices. Nonetheless, the volume of exports declined in the quarter.

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The Canadian economy grew at an annualized rate of 0.3% in the second quarter, compared with 3.3% growth for the US economy.

Real gross domestic product, chained (2002) dollars1
  Change Annualized change Year-over-year change
First quarter 2007 1.0 4.1 2.2
Second quarter 2007 1.0 3.9 2.8
Third quarter 2007 0.6 2.3 3.1
Fourth quarter 2007 0.2 0.8 2.8
First quarter 2008 -0.2 -0.8 1.6
Second quarter 2008 0.1 0.3 0.7
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.

Export volume continues to fall

The volume of exports of goods and services fell 1.5% in the second quarter, the fourth consecutive decline, leaving their level 4.7% lower than in the second quarter of 2007. The decline in the second quarter of 2008 was widespread, as international sales of forestry products, machinery and equipment, and automotive products continued to fall reflecting, in part, declining US expenditures on these goods. The volume of energy exports decreased 3.7%, following a jump in the first quarter.

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The volume of imports of goods and services advanced 0.6%, after falling 2.3% in the first quarter. After a downturn in the first quarter, machinery and equipment imports grew, continuing the upward trend that began in 2003. The volume of international purchases of energy products jumped, mostly due to increased imports of crude petroleum. Energy imports have posted an average quarterly growth of 9.8% in the first half of 2008.

Personal spending moderates

Personal spending grew 0.6% in the second quarter, continuing to moderate after gains of 1.8% and 0.8% in the previous two quarters. The slowdown reflects the drop in spending on durable goods. Notably, purchases of motor vehicles declined after substantial increases in the previous two quarters.

Conversely, purchases of clothing and footwear remained strong. Personal expenditure on furniture, furnishings and household equipment posted a sixth consecutive quarterly increase of over 1%.

Housing investment declines

Business investment in residential construction declined 1.0%, following a 1.7% drop in the first quarter.

The downturn in the second quarter affected all areas of housing investment. Renovation activity posted its first quarterly decline since the third quarter of 1999, as home building material stores registered weaker sales.

Businesses reduce investment in plant and equipment

Business investment in plant and equipment declined 0.4% in the second quarter. Engineering construction increased 0.2% whereas capital spending on non-residential buildings dropped by 1.9%.

Investment in machinery and equipment was down 0.3%.

Inventories accumulate

Inventory accumulation picked up after easing in the first quarter. Businesses have been accumulating inventories since the third quarter of 2004. Manufacturing inventories were built up after a reduction in the first quarter. Retailers reduced their stocks, particularly of motor vehicles.

Corporate profits strengthen

Corporations recorded a significant profit increase in the second quarter (+8.3%), spurred by price increases, particularly for crude petroleum, natural gas and coal. This was the strongest gain in profits since the first quarter of 2004. While non-financial corporation profits jumped 10%, financial corporations registered a marginal gain.

In addition, farmers nearly doubled their net income in the second quarter, as grain and oilseed prices continued to increase.

Personal income advances

Labour income advanced 1.1%, as growth in services-producing industries remained strong. Employment was up 0.3% while average hours worked declined.

Personal income growth slowed to 0.6%, from 2.0% in the previous quarter, when large one-time government transfers boosted income. Personal disposable income increased 1.1%. Personal outlays outpaced income growth and the saving rate slipped to 2.8%.

Households carried $1.25 of debt for every dollar of personal disposable income. Debt servicing charges remained unchanged at about 8% of personal disposable income.

Jump in export prices fuels GDP price increase

The price of goods and services produced in Canada, as measured by the chain price index for GDP, increased 2.5% in the second quarter, the largest quarterly gain since the first quarter of 1982. Export prices advanced sharply (+8.2%), providing an income boost for exporters, particularly energy producers. Excluding energy, overall prices advanced 0.7%.

Gross domestic product by industry, June 2008

Real gross domestic product increased 0.1% in June, after declining 0.1% in May and growing 0.4% in April. There were increases in construction, wholesale trade, the public sector as well as in transportation services, and declines in natural gas extraction, manufacturing and forestry. The finance and insurance sector and some tourism-related industries were unchanged.

The construction sector increased 0.4% in June. The strong gain in engineering and repair work (+1.1%) and the slight increase in residential building construction more than offset the decline in non-residential building construction (-1.4%). The output of real estate agents and brokers continued to decline, reflecting the slowdown in the real estate market that started in December 2007.

Wholesaling activity advanced 0.5% in June. There was a notable increase in the wholesaling of motor vehicles and parts. Value added in the retail trade sector rose 0.1%.

Output of the energy sector decreased 0.6% in June. Oil and gas extraction fell 1.6% due to the decline in natural gas extraction. Canadian storage of natural gas rose for the second consecutive month, as facilities replenished their stocks.

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Manufacturing production slipped 0.1% in June. The decline in non-durable manufacturing eclipsed the increase in durable manufacturing. Printing and related support activities, and paper product manufacturing, retreated. Conversely, motor vehicle production rebounded following a May drop. Manufacturing of machinery posted an increase.

The finance and insurance sector remained unchanged in June. Banking services advanced slightly during the month, while the level of activity in insurance, non-deposit credit intermediation and stock brokerages fell.

Activity in the forestry industry fell 3.4%, as the industry continued to suffer from a weak international demand for its products.

Products, services and contact information

Detailed analysis and tables

The National economic accounts module of 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 2008 issue of Canadian Economic Accounts Quarterly Review, Vol. 7, no. 2 (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 June 2008 issue of Gross Domestic Product by Industry, Vol. 22, 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; 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.

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

The second quarter 2008 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, Quarterly Estimates, second quarter 2008, Vol. 56, no. 2 (13-001-PPB, $54/$193), Financial Flow Accounts, Quarterly Estimates, second quarter 2008 (13-014-PPB, $54/$193) and Estimates of Labour Income, Monthly Estimates, June 2008 (13F0016XPB, $22/$70), including supplementary analytical tables and charts are now available. To purchase any of these products, contact Client Services (613-951-3810;, Income and Expenditure Accounts Division.

The complete seasonally adjusted quarterly National Income and Expenditure Accounts: Data Tables, second quarter, Vol. 1, no. 2 (13-019-XWE, free), Financial Flow Accounts: Data Tables, second quarter 2008, Vol. 1, no. 2 (13-020-XWE, free), and monthly Estimates of Labour Income: Data Tables, second quarter 2008, Vol. 1, no. 2 (13-021-XWE, free), are also now available from the Publications module of our website.

For more information, or to enquire about the concepts, methods or data quality of this release, consult the Guide to the Income and Expenditure Accounts (13-017-XWE, free) or contact the information officer (613-951-3640;, Income and Expenditure Accounts Division.

Tables. Table(s).