Canadian economic accounts, second quarter 2014 and June 2014
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Real gross domestic product (GDP) rose 0.8% in the second quarter, following a 0.2% increase in the first quarter. This was the largest quarterly gain since the third quarter of 2011. On a monthly basis, real GDP by industry increased 0.3% in June.
The quarterly growth was a result of increased economic activity in all sectors of the economy except non-profit institutions serving households. Final domestic demand was up 0.7% after a flat first quarter. The increase was mainly due to higher household final consumption expenditure.
Household final consumption expenditure was up 0.9%, as a result of increased outlays on goods (+1.2%) and services (+0.7%).
Business gross fixed capital formation increased 0.8% following two consecutive quarterly declines. Investment in residential structures (+2.9%) contributed the most to the overall gain. Ownership transfer costs were up 9.0% after declining in the previous two quarters.
Businesses accumulated $7.0 billion in inventories, down from $14.5 billion in the first quarter. Retail trade reduced its inventories of non-durable goods by $2.8 billion.
Exports of goods and services increased 4.2% following a 0.2% decline in the previous quarter. Exports of goods rose 4.4%. Imports of goods and services increased 2.7%.
The output of service industries grew 0.8% in the second quarter. There were notable increases in both wholesale and retail trade. Increases were also recorded in transportation and warehousing services, at offices of real estate agents and brokers, in professional services, accommodation and food services as well as in finance and insurance services.
The output of goods-producing industries rose 0.6% in the second quarter. There were notable increases in mining and oil and gas extraction, manufacturing and construction. Declines were recorded in utilities and the agriculture and forestry sector.
Expressed at an annualized rate, real GDP expanded 3.1% in the second quarter. By comparison, real GDP in the United States rose 4.2%.
Household spending continues to increase
Household final consumption expenditure rose 0.9% in the second quarter, the strongest quarterly gain since the second quarter of 2013. Consumers increased spending on goods by 1.2%, led by gains in durable goods (+3.5%), while spending on services was 0.7% higher.
Transport purchases of goods and services (+2.0%), which contributed about one-third of the growth in household final consumption, were boosted by an increase in purchases of vehicles (+4.2%).
Outlays on furnishings, household equipment and other goods and services (+3.1%), food, beverage and accommodation services (+1.9%) as well as clothing and footwear (+2.9%) also contributed to the growth in household spending.
Housing demand up
Business investment in residential structures increased 2.9%, as ownership transfer costs, an indicator of resale activity, rose 9.0%. Both had recorded declines in the previous two quarters.
Outlays on renovations (+2.3%) and new housing construction (+0.8%) were also higher.
Increased business investment in plant and equipment
Business investment in non-residential structures as well as machinery and equipment combined grew 0.2% in the second quarter, following a 0.8% decline in the first quarter.
Business investment in non-residential structures (+0.1%) edged up, after declining in the previous two quarters.
Investment in machinery and equipment grew 0.4%, as outlays on medium and heavy trucks, buses and other motor vehicles increased 5.4%. Conversely, investment in industrial machinery and equipment was down 2.4%.
Investment in intellectual property products down
Business outlays on intellectual property products fell 2.8% in the second quarter, following a similar decline in the previous quarter.
Investment in mineral exploration and evaluation decreased 11.3% after falling 14.5% in the previous quarter. Investment in research and development (-0.7%) and software (-0.3%) was also down.
Deceleration in business inventory accumulation
Businesses added $7.0 billion in inventories in the second quarter, compared with $14.5 billion in the first quarter.
Retail trade reduced inventories by $784 million, following an accumulation of $2.5 billion in the previous quarter. Retail inventories of non-durable goods were $2.8 billion lower.
Wholesalers accumulated $7.4 billion in inventories, following a $9.8 billion accumulation in the previous quarter. Manufacturers reduced their inventories by $709 million, after adding $2.5 billion to their stocks in the first quarter. Farm inventory accumulation (+$210 million) was slightly less than in the previous quarter and significantly lower than in 2013.
Exports of goods and services were up 4.2% in the second quarter, after edging down 0.2% in the first quarter. This was the largest increase since the third quarter of 2011.
Exports of goods rose 4.4%, with passenger cars and light trucks (+13.0%), farm and fishing products (+13.9%) as well as forestry products and building and packaging materials (+8.7%) contributing the most to the increase.
Imports of goods and services increased 2.7% in the second quarter, following a 1.4% decrease in the first quarter. This was the largest increase since the second quarter of 2010.
Imports of goods advanced 2.8%. Motor vehicles and parts (+8.4%), consumer goods (+3.8%) as well as basic and industrial chemical, plastic and rubber products (+7.9%) contributed the most to the increase.
Imports of energy products were down 7.4% while imports of metal ores and concentrates fell 12.5%.
Imports of services grew by 2.1% after falling by 1.1% in the first quarter.
Economy-wide income grows at a slower pace
Nominal GDP grew 1.0% in the second quarter, after increasing 1.6% in the first quarter.
Compensation of employees, which includes wages and salaries as well as the employers' social contributions, rose 0.7%, following a 1.2% increase in the first quarter. Wages and salaries were up 1.2% in goods-producing industries and 0.9% higher in service-producing industries.
The net operating surplus of corporations rose 1.5%, following a 5.9% gain during the first quarter. Non-financial corporations' net operating surplus rose 2.3%, the fourth consecutive quarterly increase. However, the net operating surplus of financial corporations fell 4.9%.
Household saving rate lower
The household saving rate decreased from 5.0% in the first quarter to 3.9% in the second quarter, as household final consumption expenditures (in current dollars) increased at a faster pace than household disposable income.
The household debt service ratio, defined as household mortgage and non-mortgage interest paid divided by disposable income, was 6.94%, down from 6.97% in the first quarter and below the average rate of 7.11% recorded in 2013.
The national saving rate in the second quarter was 4.6%, down from 4.7% in the first quarter. Higher corporate savings were mainly offset by lower savings of households.
Terms of trade weaken
A weakening in Canada's terms of trade, resulting from lower prices for exports relative to imports, tempered the growth in real gross domestic income to 0.3% in the second quarter.
Export prices declined 1.2% while import prices were 0.3% higher. The overall price of goods and services produced in Canada rose 0.2%, after advancing 1.4% in the first quarter.
The price of final domestic demand rose 0.5%, after increasing 1.0% in the first quarter.
Gross domestic product by industry, June 2014
Real gross domestic product grew 0.3% in June, a sixth consecutive monthly increase.
The output of goods-producing industries increased 0.5% in June, mainly as a result of increases in mining and oil and gas extraction as well as construction. Utilities also advanced. In contrast, the agriculture and forestry sector and manufacturing declined.
The output of service industries rose 0.3% in June. Notable increases were recorded in wholesale and retail trade, the finance and insurance sector, and transportation and warehousing services. There were declines in accommodation and food services and, to a lesser extent, the arts and entertainment sector. The public sector (education, health and public administration combined) was unchanged in June.
Mining, quarrying and oil and gas extraction expanded 1.8% in June, after rising 0.5% in May. Mining and quarrying (excluding oil and gas extraction) rose 4.7%, mainly as a result of an increase in copper, nickel, lead and zinc mining following maintenance activities in May. Potash mining and, to a lesser extent, iron ore mining, were also up. Oil and gas extraction advanced 1.3% as a result of higher oil production. Support activities for mining and oil and gas extraction declined 0.2% in June.
Wholesale trade grew 1.0% in June, a third consecutive monthly increase. Notable gains were recorded in the wholesaling of building materials and supplies as well as machinery, equipment and supplies. Miscellaneous wholesaling (which includes the wholesaling of agricultural supplies) also advanced.
Retail trade rose 0.5%, mainly as a result of increased activity at food and beverage stores and, to a lesser extent, at general merchandise stores (which include department stores).
Construction increased 0.9%, largely as a result of gains in residential building and repair construction. The output of real estate agents and brokers edged down 0.1% in June, following a 7.2% increase in May.
The finance and insurance sector increased 0.6% in June, after edging down 0.1% in May. Growth in banking and in financial investment services more than offset a decline in insurance services.
Transportation and warehousing services grew 0.9% as a result of increases in rail and truck transportation.
Manufacturing output declined 0.3% in June. Durable-goods manufacturing decreased 1.1% as a result of declines in transportation equipment and, to a lesser extent, furniture and related products as well as machinery manufacturing. Non-durable goods manufacturing was up 0.8%, mainly because of a gain in chemical manufacturing.
The agriculture and forestry sector fell 2.2%, largely as a result of lower crop production.
Utilities rose 0.3% in June. Increased electric power generation, transmission and distribution more than offset a decline in natural gas distribution.
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Detailed analysis and tables
The System of macroeconomic accounts module, accessible from the Browse by key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.
Links to other releases from the national accounts can be found in the second quarter 2014 issue of Canadian Economic Accounts Quarterly Review, Vol. 13, no. 2 (Catalogue number13-010-X). This publication is now available from the Browse by key resource module of our website under Publications. This publication will be updated on September 12, at the time of the release of the national balance sheet and financial flow accounts.
Real gross domestic product by expenditure account, quarterly change – Seasonally adjusted at annual rates, chained (2007) dollars
Real gross domestic product by expenditure account, annualized change – Seasonally adjusted at annual rates, chained (2007) dollars
Monthly gross domestic product by industry at basic prices in chained (2007) dollars – Seasonally adjusted
Quarterly gross domestic product by industry at basic prices in chained (2007) dollars – Seasonally adjusted
Note to readers
The Canadian System of macroeconomic accounts is implementing a new revision policy. Annual revisions, which affect the three most recent calendar years, will take place in November rather than May, as was previously the practice. For more information see Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X).
For more information on seasonal adjustment, see Seasonally adjusted data — Frequently asked questions.
Percentage changes for expenditure-based and industry-based statistics (such as personal expenditures, investment, exports, imports and output) are calculated from volume measures that are adjusted for price variations. Percentage changes for income-based and flow-of-funds statistics (such as labour income, corporate profits, mortgage borrowing and total funds raised) are calculated from nominal values; that is, they are not adjusted for price variations.
There are four ways of expressing growth rates for gross domestic product (GDP) and other time series found in this release.
1. Unless otherwise stated, the growth rates of all quarterly data in this release represent the percentage change in the series from one quarter to the next, such as from the first quarter of 2014 to the second quarter of 2014.
2. Quarterly growth can be expressed at an annual rate by using a compound growth formula, similar to the way in which a monthly interest rate can be expressed at an annual rate. Expressing growth at an annual rate facilitates comparisons with official GDP statistics from the United States. Both the quarterly growth rate and the annualized quarterly growth rate should be interpreted as an indication of the latest trend in GDP.
3. The year-over-year growth rate is the percentage change in GDP from a given quarter in one year to the same quarter one year later, such as from the second quarter of 2013 to the second quarter of 2014.
4. The growth rates of all monthly data in this article represent the percentage change in the series from one month to the next, such as from May to June 2014.
Data on gross domestic product by industry for July will be released on September 30.
Data on gross domestic product for the second quarter have been released along with revised data for the first quarter. These data incorporate new and revised source data and updated data on seasonal patterns.
Data on gross domestic product by income and by expenditure for the third quarter will be released on November 28. For more information, consult the Guide to the Income and Expenditure Accounts (Catalogue number13-017-X).
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To enquire about the concepts, methods or data quality of this release, contact Allan Tomas (613-951-9277), Industry Accounts Division.
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