Gross domestic product, income and expenditure, third quarter 2017
Growth in real gross domestic product (GDP) slowed to 0.4% in the third quarter of 2017, following a 1.0% increase in the second quarter. Increased household final consumption expenditure (+1.0%) was the main contributor, while weaker exports (-2.7%) moderated growth. Final domestic demand grew 0.9%, a rate similar to the previous two quarters.
Exports fell 2.7% while imports were flat in the quarter. Exports of goods decreased 3.4% following three quarters of growth. Lower exports of motor vehicles and parts (-9.0%) were the largest contributor to the decline, and were generally attributable to work stoppages and changes to certain models destined for the American market. Exports of metal and non-metallic mineral products (-4.5%), consumer goods (-3.1%) and energy products (-1.9%) also fell. Exports of services grew 0.7% on the strength of commercial services (+2.5%).
Businesses made additions to inventories totalling $17.2 billion in real terms, marking the third consecutive quarter of accumulation. The economy-wide stock-to-sales ratio increased to 0.76 following four consecutive quarterly declines.
Household final consumption expenditure grew 1.0% as households increased their outlays on both services (+1.3%) and goods (+0.6%). The main contributor was increased expenditure by Canadians abroad (+7.2%), in tandem with an appreciating Canadian dollar.
Business gross fixed capital investment slowed to 0.4% from 0.7% in the previous quarter. Investment in non-residential structures (+0.5%), machinery and equipment (+1.5%) and intellectual property products (+0.7%) all increased, albeit at slower rates than in the strong second quarter. Investment in residential structures (-0.4%) fell for a second consecutive quarter.
The compensation of employees rose 1.3% in nominal terms, the strongest growth since the third quarter of 2014, while the gross operating surplus of corporations fell 0.7%.
Expressed at an annualized rate, real GDP rose 1.7% in the third quarter. In comparison, real GDP in the United States grew 3.3%.
Exports fell 2.7% in the third quarter, the first decline since the second quarter of 2016. The decrease was led by goods (-3.4%), while exports of services increased 0.7%.
The decline in goods exports was mainly attributable to motor vehicles and parts (-9.0%), particularly passenger cars and light trucks (-11.7%). Metal and non-metallic mineral products (-4.5%), consumer goods (-3.1%) and energy products (-1.9%) also contributed to the decline.
The growth in exports of services was driven by greater exports of commercial services (+2.5%), while exports of other services declined.
Imports were virtually unchanged in the third quarter. Lower imports of goods (-0.4%) were offset by an increase in services (+1.3%).
Imports of goods were lower due to metal and non-metallic mineral products (-6.6%) and aircraft and other transportation equipment and parts (-13.8%). Increases in industrial machinery and parts (+5.0%) and metal ores and non-metallic minerals (+10.7%) tempered the decline.
Growth in imports of services was largely attributable to an increase in travel services (+2.9%).
Export prices fell 3.9% despite the appreciation in the Canadian dollar. Import prices were down 4.1%, and the terms of trade improved slightly.
Household spending increases
Household final consumption expenditure grew 1.0% following a 1.2% increase in the previous quarter.
Outlays on goods slowed to 0.6% after increasing 1.9% in the previous quarter. Growth decelerated in the durable (+1.0%), semi-durable (+0.5%) and non-durable (+0.4%) categories, while outlays on services rose 1.3%.
Expenditure by Canadians abroad (+7.2%) was the main contributor to the growth in household spending in the third quarter. Housing, water, electricity, gas and other fuels (+0.9%) and transport (+1.0%) also contributed.
Housing investment weakens
Investment in residential structures fell 0.4%, following a 0.9% decline in the second quarter. This was the first time since the first quarter of 2013 that housing investment fell for two consecutive quarters.
Ownership transfer costs, which reflect activity in the resale housing market, fell 4.7% following a 5.1% decline in the second quarter. Renovations edged down 0.2%, while investment in new construction rose 1.7%.
Business non-residential investment slows
Business gross fixed capital formation slowed to 0.4% growth in the third quarter, after increasing 0.7% in the previous quarter, with reduced investment in residential structures partly offsetting gains in all other areas. Business investment in machinery and equipment, non-residential structures, and intellectual property products all grew at a slower pace than in the previous quarter.
Increased investment in machinery and equipment (+1.5%) largely contributed to overall growth, as outlays on industrial machinery and equipment grew 5.5%.
Investment in non-residential structures (+0.5%) rose on increased investment in non-residential buildings (+3.1%). Engineering structures declined 0.4% after advancing 2.6% in the previous quarter.
Intellectual property products increased 0.7%, with software (+1.7%) and research and development (+0.5%) contributing to the growth. Business investment in mineral exploration and evaluation fell 3.2% following strong growth in the previous two quarters.
Inventories build up
Businesses added $17.2 billion to inventories in the third quarter, the largest accumulation since the first quarter of 2014. The quarterly stock-to-sales ratio increased to 0.76 following four consecutive quarterly declines.
Wholesalers' inventories rose $6.4 billion, mainly in durable goods. Retailers added $5.4 billion to stocks, with more than half of the build-up ($2.9 billion) in motor vehicles, in tandem with the sharp decline in exports of passenger cars and light trucks. Manufacturers' inventories rose $4.3 billion on larger inventories of non-durable goods.
Farm inventories were reduced by $412 million, the fourth consecutive quarterly draw-down.
Labour compensation increases
The compensation of employees increased 1.3% in nominal terms in the third quarter, a quicker pace than in the previous 11 quarters. Wages and salaries rose 1.9% in goods-producing industries and 1.1% in services-producing industries. Regionally, Ontario and Quebec continued to fuel wage growth in the third quarter. In addition, employees of the federal core public administration continued to receive retroactive salary payments in the third quarter related to new collective agreements.
Nominal growth in household final consumption expenditure (+1.0%) outpaced that of household disposable income (+0.8%), which was tempered by lower dividends received (-4.6%) and higher interest paid on consumer credit (+5.9%). The household saving rate consequently fell from 2.8% in the second quarter to 2.6% in the third quarter.
Obligated principal and interest payments on consumer debt rose at a faster rate (+1.3%) than disposable income in the third quarter, and the household debt service ratio increased for the third consecutive quarter to 13.88.
Corporate earnings weaken
The gross operating surplus of corporations fell 0.7% in the third quarter, compared to a flat second quarter, as weakening international sales resulted in inventory accumulation. The gross operating surplus of non-financial corporations declined 0.8%. Similarly, financial corporations' gross operating surplus was down 0.3%.
In celebration of the country's 150th birthday, Statistics Canada is presenting snapshots from our rich statistical history.
Today we look more closely at the evolution of trends in the audio-visual, photographic and information processing equipment component of household final consumption expenditure from 1981 to 2016. This component includes spending on items like televisions, stereo systems, cameras and accessories, personal computers, and software packages.
While household final consumption expenditure as a share of GDP remained relatively stable from 1981 to 2016, growth in household spending on televisions, stereo systems, computers and other electronics has been substantial, increasing nearly 200% from 1996 to 2006.
Factors influencing these trends include the emergence and strong sales of the first mass-produced microcomputers in the early 1980s as well as increased availability of operating systems. In the early 1990s, competition increased and more powerful processors and companion software emerged. Sales increased strongly in 1993 and 1994 after a period of slower growth. Growth picked up again in 2000 with the era of portable media players and the eventual entry of multi-purpose pocket computers into the world market.
Coinciding with increases in spending from 1996 to 2006 were sharp price declines for digital computing equipment and devices, after adjusting for changes in quality. Advances in micro-electronic technology since the 1980s moved quickly, reducing costs and increasing performance. In a short time, these products have become mainstream in the context of household spending, even as new products continue to emerge.
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
Sustainable Development Goals
On January 1, 2016, the world officially began implementation of the 2030 Agenda for Sustainable Development—the United Nations' transformative plan of action that addresses urgent global challenges over the next 15 years. The plan is based on 17 specific sustainable development goals.
Gross domestic product, income and expenditure is an example of how Statistics Canada supports the reporting on the Global Goals for Sustainable Development. This release will be used in helping to measure the following goals:
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 of 2017 to the third quarter of 2017.
- 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 third quarter of 2017 were released along with revised data from the first quarter of 2014 through the second quarter of 2017. These data incorporate new and revised data, as well as updated data on seasonal trends.
An article describing the impact of the revisions implemented in this year's annual revision cycle can be found in, "The 2014 to 2016 revisions of the Income and Expenditure Accounts". It covers impacts of revisions to both the quarterly Income and Expenditure Accounts released today, and the annual Provincial and Territorial Economic Accounts, released on November 8, 2017.
Real-time CANSIM tables
Data on GDP by income and expenditure for the fourth quarter of 2017 will be released on March 2, 2018.
The document, "The 2014 to 2016 revisions of the Income and Expenditure Accounts", which is part of Latest Developments in the Canadian Economic Accounts (13-605-X), is now available.
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.
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).
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