Gross domestic product, income and expenditure, fourth quarter 2016
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Real gross domestic product (GDP) rose 0.6% in the fourth quarter, following a 0.9% increase in the third quarter. Final domestic demand continued to decelerate (+0.1%), with ongoing weakness in business investment.
Household final consumption expenditure grew 0.6%, a slightly slower pace than the previous quarter (+0.7%). Growth was driven by higher outlays on durable goods (+2.0%) and financial services such as mutual funds and stock and bond commissions (+1.6%). Investment in housing increased 1.2%.
Exports rose 0.3%, following a 2.3% gain in the third quarter. Exports of both goods (+0.3%) and services (+0.5%) increased. Imports of goods fell 4.1%, leading to a 3.5% drop in overall imports. Some of this decline was attributable to the one-time import of a large module destined for the Hebron offshore oil project in the third quarter.
Business gross fixed capital formation decreased 2.1%, following a 0.5% decline in the third quarter. Business investment in non-residential structures fell 5.9% following the strong growth in the third quarter (+3.5%), partly due to a large one-time investment in the Hebron offshore oil project. Investment in machinery and equipment (-2.7%) and intellectual property products (-1.9%) was also down.
Businesses reduced their inventories by $5.0 billion in the fourth quarter, after accumulating $7.4 billion in the third quarter. Manufacturing inventories were drawn down by $6.9 billion. Retail inventories of motor vehicles were reduced by $1.9 billion, as household purchases of vehicles increased 1.5% and imports of passenger cars and light trucks fell 6.0%.
Expressed at an annualized rate, real GDP rose 2.6% in the fourth quarter. In comparison, real GDP in the United States grew 1.9%.
Household spending increases
Household final consumption expenditures rose 0.6%, a slightly slower pace than in the third quarter (+0.7%), but still the largest contributor to GDP growth. Outlays on goods were up 0.9% following a 0.3% increase in the previous quarter. Outlays on services rose 0.4%, after increasing 1.0% in the third quarter, as spending on financial services such as mutual funds and stock and bond commissions grew 1.6%.
Outlays on durable goods grew 2.0% following declines in the previous two quarters, with purchases of vehicles (+1.5%) finishing the year strongly. Consumption of semi-durable (+1.5%) and non-durable (+0.2%) goods also rose.
Housing market rebounds
Business investment in residential structures rebounded 1.2% following two weak quarters. New construction investment (+1.9%) was the main driver in the fourth quarter, while renovation activity (+1.7%) also showed strength. Ownership transfer costs declined 1.0%, in contrast to the strength in the resale market evidenced earlier in the year.
Export growth slows, while imports fall
Exports of goods and services rose 0.3% in the fourth quarter, after increasing 2.3% in the third quarter.
Exports of goods increased 0.3%, following a 2.3% gain in the previous quarter. The growth was led by the exports of crude oil and crude bitumen (+7.9%) and metal and non-metallic mineral products (+4.0%). Lower exports of passenger cars and light trucks (-6.4%) partially offset the overall increase.
Exports of services rose 0.5%, following a 2.0% increase in the third quarter.
Imports of goods and services fell 3.5% in the fourth quarter, following a 1.2% gain in the previous quarter.
Imports of goods decreased 4.1% following a 1.2% increase in the third quarter. Imports of industrial machinery, equipment and parts fell 18.4%, erasing the 19.8% gain in the third quarter due to the import of a large module destined for the Hebron project. Lower imports of crude oil and crude bitumen (-28.8%) also contributed to the decline. Conversely, increased imports of metal and non-metallic mineral products (+3.3%), and electronic and electrical equipment and parts (+1.6%) moderated the overall decrease.
Imports of services fell 1.1%, preceded by a 1.2% increase in the third quarter. The decline was driven by lower imports of commercial (-1.8%) and transportation (-1.5%) services.
Business investment continues to decline
Business gross fixed capital formation decreased 2.1% in the fourth quarter, the ninth consecutive quarterly decline. As a result, final domestic demand (+0.1%) decelerated for a second consecutive quarter.
Business investment in non-residential structures fell 5.9%, following a 3.5% gain in the previous quarter. Investment in engineering structures (-7.3%) reversed the strong growth in the third quarter (+5.3%), which was partially due to the delivery of the Hebron oil platform.
Businesses reduced investment in intellectual property products (-1.9%), following a 4.5% drop in the third quarter. Mineral exploration and evaluation (-21.0%) fell at a similar rate to the third quarter, mainly due to lower exploration activity in the oil and gas sector. Investment in software increased 0.4%, while research and development was flat.
Investment in machinery and equipment decreased 2.7%, driven by a decline in industrial machinery and equipment (-7.4%). Investment in aircraft and other transportation equipment grew 14.0%.
Inventories drawn down
Businesses drew down their inventories by $5.0 billion in the fourth quarter, after accumulating $7.4 billion in the third quarter.
Non-farm inventories were reduced by $4.8 billion. Manufacturing inventories were drawn down by $6.9 billion, with stocks of durable goods decreasing by $7.0 billion, while non-durable goods rose by $151 million. Retail inventories were drawn down $1.4 billion, mainly by a $1.9 billion reduction in motor vehicle stocks. Wholesalers added $3.2 billion to the stock of durable goods and $1.0 billion to non-durable goods.
Farm inventories were down $259 million in the fourth quarter, following large accumulations in the second (+$1.1 billion) and third (+$1.2 billion) quarters.
The economy-wide stock-to-sales ratio edged down from 0.748 in the third quarter to 0.745 in the fourth quarter.
Household disposable income grows
Household disposable income rose 1.5%, following a 1.7% increase in the third quarter (nominal terms), outpacing household final consumption expenditure (+1.0%). The household saving rate increased to 5.8% from 5.5%.
The household debt service ratio (defined as household mortgage and non-mortgage payments divided by disposable income) fell from 14.05% in the third quarter to 13.95% in the fourth quarter, as disposable income grew more quickly than interest payments.
Compensation of employees rose 1.4%, leading the growth in disposable income. Wages and salaries were up 1.4%, with increases in both services (+1.5%) and goods-producing (+1.1%) industries.
Gross operating surplus increases, boosted by higher export prices
The gross operating surplus of non-financial corporations expanded 3.5%, following a similar increase in the third quarter. Gross operating surplus of financial corporations increased 3.9%.
Higher export prices and an inventory draw down contributed to higher non-financial corporate earnings. Export prices of energy products, metal ores and non-metallic minerals increased in the fourth quarter.
The terms of trade (+1.9%), measured as export prices relative to import prices, improved for the third consecutive quarter, while real gross national income rose 1.3%.
Real GDP rose 1.4% in 2016, following more modest growth in 2015 (+0.9%). Final domestic demand grew 0.9%, following a 0.3% increase the previous year. Driven by household consumption expenditure, much of this growth occurred in the first two quarters with a deceleration towards the end of the year. Household consumption expenditure grew 2.2% following a 1.9% gain in 2015. Outlays on both goods (+2.7%) and services (+1.9%) rose.
Also contributing to the annual gain was a 2.0% increase in government final consumption expenditure, an acceleration from the 1.5% growth in 2015.
Annual growth in 2016 was pulled down by lower business investment in non-residential structures, which posted a double-digit decline (-10.7%) for a second consecutive year, mainly due to weakness in the energy sector.
In contrast, housing investment increased 2.9% for the year. Ownership transfer costs (+7.6%) and investment in new construction (+2.3%) and renovations (+0.7%) all contributed to the increase.
Exports of goods and services increased 1.1% in 2016, despite some fluctuations throughout the year. Exports of services grew 4.0%, while goods rose 0.5%. Imports declined 1.0% in 2016, driven by lower imports of goods (-1.3%). Imports of services (+0.2%) rose slightly.
Real gross domestic income rose 0.7% in 2016, following a 1.4% decrease in 2015. Following a 6.9% drop in 2015, the terms of trade declined 2.1% as import prices rose 1.3% while export prices fell 0.9%. The implicit price of GDP grew 0.6% after falling 0.8% in 2015.
Household disposable income grew 3.8%, led by a 2.5% increase in compensation of employees. This outpaced the growth in household final consumption expenditure (+3.2% in nominal terms), bumping up the household saving rate slightly, from 5.0% in 2015 to 5.3% in 2016.
In celebration of the country's 150th birthday, Statistics Canada is presenting snapshots from our rich statistical history.
Today, we look back at the evolution of household final consumption expenditure since 1947.
Outlays on services accounted for the majority (56.3%) of all consumer spending in 2016, almost doubling its share since 1947 (30.7%). This large shift towards services was partly due to housing costs, as the share of spending on rents grew from 9.2% in 1947 to 20.6% in 2016. However, the proportion of spending on most other services categories also increased over the period, including outlays on restaurant and accommodation, financial and communications services.
In contrast, the proportion of spending on most types of goods has fallen since 1947. Food and non-alcoholic beverages, for example, accounted for 9.1% of consumer spending in 2016, compared with 23.1% in 1947. This may be partly attributable to shifts to market production of food preparation due to the higher labour force participation of women. Vehicles were one of the goods categories whose share of spending grew, from 2.7% in 1947 to 6.6% in 2016.
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
Real gross domestic product by expenditure account, year-over-year change – Seasonally adjusted at annual rates, chained (2007) dollars
Note to readers
For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.
Percentage changes for expenditure-based statistics (such as personal expenditures, investment, exports and imports) 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 two ways of expressing growth rates for gross domestic product (GDP) and other time series found in this release:
- Unless otherwise stated, the growth rates in this release represent the percentage change in the series from one quarter to the next, such as from the second quarter to the third quarter of 2016.
- 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.
Data on GDP for the fourth quarter of 2016 were released along with revised data from the first quarter of 2016 to the third quarter of 2016. These data incorporate new and revised data, as well as updated data on seasonal trends.
Real-time CANSIM tables
Data on GDP by income and expenditure for the first quarter will be released on May 31.
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.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is also available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available.
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