Canadian economic accounts

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Real gross domestic product (GDP) grew by 0.5% in the second quarter, after increasing by 1.4% in the first quarter. Final domestic demand advanced 0.9%, led by business investment in machinery and equipment. Real GDP increased by 0.2% in June.

Consumer expenditures on goods and services, as well as business investment on residential structures, grew at a slower rate than in the first quarter.

Export and import volumes both rose, with growth in imports outpacing growth in exports for a second consecutive quarter.

Expressed at an annualized rate, real GDP grew 2.0% in the second quarter, after expanding by 5.8% in the first quarter. This compared with a 1.6% second quarter rate of increase in the US economy.

The output of the goods-producing industries rose 1.9%, while that of the services industries edged up 0.1%. This marks the third consecutive quarter in which the output of the goods-producing industries has significantly outpaced that of the services industries.

The second-quarter increase in GDP was led by mining, notably oil and gas extraction. Manufacturing also contributed to this gain as did the banking sector and the public sector (health, education, and public administration). Declines in the home resale market and in retail and wholesale trade contributed to the slower growth.

Consumer spending advances at a slower pace

Consumer spending on goods and services advanced 0.7% in the second quarter, slowing from the 1.0% gain recorded in the first quarter. Spending on both durable and semi-durable goods declined.

Expenditures on new and used motor vehicles fell 2.9%. Households spent less on electricity and natural gas for a second consecutive quarter.

Spending on furniture, furnishings, and household equipment and maintenance edged up 0.1%. Consumers had increased their expenditures on this category of goods and services by at least 1.0% in each of the three previous quarters.

Spending on services rose 1.2%, after advancing 0.7% in the first quarter. Growth in spending by Canadians travelling abroad, together with purchased transportation, contributed significantly to the increase in consumer spending on services.

Housing investment growth slows

Housing investment grew 0.3% in the second quarter, the slowest quarterly rate of increase since the first quarter of 2009. Renovation activity was down 0.8%, following four consecutive quarters of growth. Expenditure on ownership transfer costs related to housing resale activity declined for a second consecutive quarter, after recording large gains through most of 2009.

Investment in new housing construction (+6.9%) continued to advance, the third consecutive quarterly gain of over 6.0%.

Investment in plant and equipment picks up

Business investment in plant and equipment expanded 3.5%, the largest quarterly gain since 2005. The advance was due mainly to a 6.7% increase in spending on machinery and equipment. Investment in computers and other office equipment (+19.3%) and in industrial machinery (+12.6%) led the second-quarter gain.

Exports grow less than imports

Exports of goods and services grew 1.5%, the fourth consecutive quarterly gain. Increases in exports of automotive products (+12.8%) and exports of machinery and equipment (+6.2%) were the main contributors to growth in goods exports. Exports of services, notably commercial services, also continued to advance.

Imports of goods and services were up 3.9%, also the fourth consecutive quarterly increase. Machinery and equipment (+8.7%) and industrial goods and materials (+4.9%) contributed the most to the increase in imported goods, while travel services (+6.8%) led the growth in imported services.

Inventories rise again

Businesses accumulated $13 billion in inventories in the second quarter, following an accumulation of $6 billion in the first quarter. This was in contrast to the reduction of inventories recorded in each quarter of 2009.

Manufacturers' inventories increased for the first time since the fourth quarter of 2008. Inventories in both retail and wholesale trade also rose.

Agricultural inventories fell for a second consecutive quarter as exports of grains and cattle remained strong.

The economy-wide ratio of stock to sales remained unchanged from the previous quarter. Businesses held inventories equivalent to 65 days of sales.

Prices rise

The price of goods and services produced in Canada rose 0.2% in the second quarter. Price increases for coal and iron ore were largely offset by price declines for crude petroleum and motor fuels and lubricants.

Overall, the price of final domestic demand was up 0.1%. The price of government current expenditure on goods and services increased in the second quarter, as did the price of both residential and non-residential structures.

The price of consumer goods and services declined 0.1%. This was the first decline in the price of consumer goods and services since the fourth quarter of 2008. A decrease in the price of motor fuels and lubricants was a major contributor to the second quarter decline.

Purchasing power increases

Canada's real gross domestic income, a measure of purchasing power, grew 0.5% in the second quarter, the fourth consecutive quarter of growth. This gain mirrors the change in GDP, as Canada's terms of trade (a measure of export prices relative to import prices) were very similar to those of the previous quarter.

Incomes up again

Nominal GDP expanded 0.7% as a 1.2% gain in labour income was partly offset by a 1.0% decline in corporate profits. Wages and salaries increased 1.4% in the goods-producing industries and 1.2% in the services industries.

Corporate profits fell in the second quarter, following quarterly gains of over 8.0% in each of the previous three quarters. Both financial and non-financial companies recorded lower earnings in the quarter. Government business enterprise profits were up 1.4%, following an 11% increase in the first quarter.

Personal income increased 1.2%. Personal income tax paid declined 12% due, in part, to increased refunds for the 2009 tax year received in the second quarter.

The combination of higher income and lower personal income tax paid contributed to a 3.6% increase in personal disposable income. The personal saving rate rose to 5.9% in the second quarter.

The national saving rate was unchanged at 5.5%. Saving increased in the household and corporate sectors, while saving in the government sector declined. The decline in government sector saving was due mainly to lower income tax revenues.

Financial flows: Financing activity increases

Total funds raised by domestic non-financial sectors reached $273 billion in the second quarter, up from $222 billion in the first quarter.

The increase in financing was concentrated in the government sector. Borrowing by all levels of government increased in the second quarter. This was led by bond issuances by federal and provincial governments.

Funds raised by non-financial private corporations advanced to $64 billion. Borrowing through loans increased by $21 billion, the first increase in loans since the fourth quarter of 2008, while bond issuances declined.

Household borrowing eased from $102 billion in the first quarter to $91 billion in the second quarter, in contrast to the upward trend in borrowing seen in previous quarters. Lower consumer credit and mortgage borrowing accounted for most of the decline in the second quarter.

The non-resident sector continued to be a net lender to the domestic economy in the second quarter. This lending reflects Canada's quarterly current account deficit, which has continued since the fourth quarter of 2008. Most of these funds were provided to the Canadian economy in the form of purchases of government securities and acquisitions of corporate shares.

Gross domestic product by industry, June 2010

Real gross domestic product advanced 0.2% in June, mainly on the strength of manufacturing. Retail trade, utilities and forestry also contributed to the overall growth. Conversely, reductions in mining and oil and gas extraction, and lower activity by real estate agents and brokers, partially offset these increases. Wholesale trade remained unchanged.

Manufacturing rose 1.3% in June, continuing its upward trend that started in the third quarter of 2009. Manufacturers of durable goods increased their production by 1.9%, notably machinery, fabricated metal and computer and electronic products. Non-durable goods manufacturing advanced 0.5%, led by pharmaceutical products. In contrast, 9 of the 21 major groups declined in June, notably food products.

Retail trade grew 0.7%, led by significant increases at new car dealers as well as at furniture, home furnishings and electronics stores. Wholesale trade was unchanged in June. Increased activity by wholesalers of automotive products was offset by declines in other major groups such as petroleum products and machinery and equipment.

Mining and oil and gas extraction retreated 0.8%. Oil and gas extraction decreased 0.2% due to lower production of natural gas. Copper, nickel, lead and zinc mines also lowered their output. Production at potash mines contracted but remained at a high level. Support activities for mining and oil and gas extraction were also down.

Sales of existing homes continued to fall in several parts of the country, resulting in a 7.1% decrease in the output of real estate agents and brokers. On the other hand, construction activity was up slightly in June, with residential construction increasing 0.2%.

Forestry and logging increased 10.5% in June, in parallel with a significant increase in exports of lumber products. Conversely, the finance and insurance sector decreased 0.3%, largely as a result of the decline in the volume of transactions on the stock exchanges.

Products, services and contact information

Detailed analysis and tables

The National economic accounts module, accessible from the Key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.

Additional tables and links to other releases from the national accounts can be found in the second quarter 2010 issue of Canadian Economic Accounts Quarterly Review, Vol. 9, no. 2 (13-010-X, free). This publication is now available from the Key resource module of our website under Publications. This publication will be updated on September 14, at the time of the release of the labour productivity, hourly compensation and unit labour cost. Revised estimates of the Income and Expenditure Accounts for the first quarter of 2010 have been released, along with those for the second quarter of 2010. These estimates incorporate new and revised source data and updated estimates of seasonal patterns.

Gross domestic product by industry

Available on CANSIM: table 379-0027.

Definitions, data sources and methods: survey numbers, including related survey, 1301.

The June 2010 issue of Gross Domestic Product by Industry, Vol. 24, no. 6 (15-001-X, free), is now available from the Key resource module of our website under Publications.

Data on gross domestic product by industry for July will be released on September 30.

For more information, or to order data, contact the dissemination agent (toll-free 1-800-887-4623; 613-951-4623; 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.

Income and expenditure accounts

Available on CANSIM: tables 026-0009, 380-0001 to 380-0017, 380-0019 to 380-0035, 380-0056, 380-0059 to 380-0062 and 382-0006.

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

The second quarter 2010 issues of National Income and Expenditure Accounts: Data Tables, Vol. 3, no. 2 (13-019-X, free), and Estimates of Labour Income: Data Tables, Vol. 3, no. 2 (13-021-X, free), are also now available from the Key resource module of of our website under Publications.

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-X, free) or contact the information officer (613-951-3640, iead-info-dcrd@statcan.gc.ca), Income and Expenditure Accounts Division.

Financial flow accounts

Available on CANSIM: tables 378-0015 to 378-0048.

Definitions, data sources and methods: survey number 1804.

The second quarter 2010 issue of Financial Flow Accounts: Data Tables, Vol. 3, no. 2 (13-020-X, free), is also now available from the Key resource module of our website under Publications.

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.