An overview of recent macroeconomic developments in Canada

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Release date: [October 29, 2014]

Organization

Objective — Highlight recent macroeconomic developments, focusing on:

  • Trends in the post-recession period (2010 to current)
  • Key developments through the first half of 2014

Major themes

  1. Economic growth and labour market conditions
  2. Financial conditions in the household sector
  3. International dimensions of Canada's economy

Developments in the Canadian economy, post-recession

  1. Pace and composition of GDP growth (2010-11 vs. 2012-13)
    • Consumer-led growth and household sector leverage
    • Business investment spending (2010-11 vs. 2012-14)
    • Rebalancing of growth from domestic demand to trade
  2. Pace of employment creation (2010-12 vs. 2013-14)
  3. Lower inflation (2013) and stable borrowing costs; impact on household sector and real estate market
  4. Exchange rate movements (2013-14)

Key developments through the second quarter of 2014

  1. Changes in the pace and composition of economic growth
    • Real GDP accelerates (3.1% annualized) on broad-based gains in Q2
    • Drivers: exports, household spending, residential investment
    • Contributions to growth widespread across major industrial sectors
    • Steady gains through the spring across many of the major output indicators (merchandise trade, manufacturing sales, wholesale and retail sales, building permits, housing starts)
  2. Employment growth remains subdued during the first half of 2014
    • Little growth in the private sector; two-thirds of total employment growth in the six months to June (+53,000) in self-employed
    • Decline in employment rates during the first half of 2014
  3. Consumer prices accelerate through the second quarter but remain in Bank of Canada's target range
    • Drivers: food, shelter and transportation
    • Annual inflation moderates during the summer months
  4. Exchange rate movements
    • Canadian dollar depreciates during Q1, rebounds through Q2 but remains significantly weaker than pre/post recession
    • Non-energy exports advance steadily during the first half of 2014
    • Auto exports advance on higher volumes, led export growth in Q2

Topics

Topic 1 — Economic growth and labour market conditions

Canada's economic growth in a comparative context

Question: How does economic growth in Canada compare with growth in other major economies?

Chart 1 Real gross domestic product (GDP)

Description for Chart 1

Real GDP, annual growth rate

Question: How rapidly has the economy expanded in the post-2000 period, and subsequent to the 2008-09 recession?

Chart 2 GDP, average annual growth

Description for Chart 2

Real GDP, expenditure components

Question: What types of final expenditures have supported economic growth in Canada? And how have the pace and composition of growth changed more recently?

Chart 3 GDP, selected aggregates

Description for Chart 3

Real GDP, by industry

Question: How have different industrial sectors fared during the recession and the recovery? And how broad based were gains during the spring of 2014?

Chart 4 GDP, selected aggregates

Description for Chart 4

Real GDP growth, by province

Question: How has the economy expanded in different regions of the country?

Chart 5 Average annual growth of real GDP by province, 2010 to 2013

Description for Chart 5

Real GDP and employment

Question: How does employment growth compare with economic growth in the post-recession period?

Chart 6 Output and employment

Description for Chart 6

Net employment growth

Question: How does the composition of employment growth in recent years compare with employment gains in the early to mid 2000s?

Chart 7 Net employment growth

Description for Chart 7

Question: How does employment growth in goods industries compare to service industries?

Chart 8 Employment in goods and services

Description for Chart 8

Question: To what extent has the pace of private sector job creation slowed during 2014?

Chart 9 Employment growth, class of worker

Description for Chart 9

Question: To what extent has employment growth slowed among core-age workers?

Chart 10 Employment growth, age of worker

Description for Chart 10

Labour market conditions

Question: How have Canada's employment rate and unemployment rate adjusted in the post-recession period?

Chart 11 Unemployment rate by province, August 2008

Description for Chart 11

Unemployment rate by province

Question: How does unemployment vary across Canada?

Chart 12 Unemployment rate by province

Description for Chart 12

Topic 2 — Financial conditions in the household sector

Inflation in the Canadian economy

Question:  How has the consumer price index evolved?

Chart 13 Consumer price index

Description for Chart 13

Lending and borrowing in the Canadian economy

Question: How have the net lending and borrowing positions of different sectors of the economy changed in the post-recession period?

Chart 14 Net lending by sector

Description for Chart 14

Household sector leverage and debt service costs

Question: How much debt are consumers carrying as a proportion of their disposable income? How has the pace of leveraging changed in the post-recession period?

Chart 15 Household leverage and debt service costs

Description for Chart 15

Household sector assets and liabilities

Question: How has the net worth of households changed subsequent to the 2008-09 recession?

Chart 16 Household assets and liabilities, market value

Description for Chart 16

Household sector worth

Question: How have financial and non-financial assets contributed to the increase in net worth after the recession?

Chart 17 Household sector net worth changes, by component

Description for Chart 17

Topic 3 — International dimensions of Canada's economy

Canada's exchange rate

Question: How has Canada's exchange rate changed in recent years?

Chart 18 Exchange rate

Description for Chart 18

Canada's merchandise trade

Question: How have exports, imports, and the balance of trade changed in the post-recession period?

Chart 19 Merchandise trade

Description for Chart 19

Commodity trade balances, major sectors

Question: What accounts for the decline in Canada's trade surplus?

Chart 20 Merchandise trade balances

Description for Chart 20

Canada's current account

Question: How have recent changes in the merchandise trade balance affected Canada's current account balance?

Chart 21 Current account

Description for Chart 21

Key developments

  1. More broad-based economic growth during recent months reflecting increases in:
    • Household spending, residential investment and non-energy trade
    • Steady gains across many goods and services industries
  2. The gap between economic and employment growth has widened
    • Little job creation among core-age and private sector workers
    • Declining employment rate during the first half of 2014
  3. Household net worth continued to expand on strength in equities and real estate markets, as leverage rates remain stable and borrowing conditions remain favourable
  4. Higher annual inflation during the spring moderates through the summer
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