Gross domestic product by industry

September 2005

Note to readers

Growth in Gross Domestic Product was flat in September following a 0.5% increase in August. Weakness in the goods producing sector was concentrated in manufacturing (-1.0%) as output in mining, oil and gas extraction increased (+0.7%) and construction (+0.2%) edged up. The decrease in manufacturing output occurred after a strong showing in August. Retail trade hampered growth in the services sector, as new and used motor vehicle sales dropped. The wholesaling of motor vehicles and parts was however the main driver behind the strong growth in the wholesale sector (+1.2%).

Economic activity pauses in September

Industrial production (the output of Canada’s factories, mines and utilities) retreated by 0.5% in September on the weakness of manufacturing while the mining, oil and gas sector (+0.7%) and utilities (+0.9%) partially offset this setback. In the United States, the index of industrial production declined 1.5% in September, pulled back by weakness in all three sectors.

Main industrial sectors’ contribution to total growth - September 2005

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Manufacturing loses ground despite strong international demand

Manufacturing output dropped 1.0%, with only 5 of the 21 major groups, accounting for 24% of this sector’s output, recording growth. The largest declines were recorded by manufacturers of transportation equipment (-2.0%), machinery (-2.7%), chemicals (-2.2%) and food (-1.0%). The production of auto and light motor vehicles as well as that of heavy-duty trucks decreased, leading to a reduction of output in both motor vehicles (-4.0%) and parts (-0.3%). Among other manufacturing goods, fabricated metal (+1.0%), and plastic products (+2.7%) recorded significant gains.

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Oil and gas exploration continues to grow

Overall, the energy sector recorded a 0.6% increase in September. The growth in output was primarily driven by a 4.9% increase in oil and gas exploration, following two months of buoyant activities led by favourable weather and market conditions. Electricity generation (+1.3%) and pipeline transportation of natural gas (+0.9%) also contributed to sustain the energy sector.

Sustained growth of the energy sector

Oil and gas extraction, however, edged down 0.1%. The growth in output of natural gas was offset by a decline in crude petroleum. Despite the return to full capacity production in the tar sands area, the output of conventional oil lost some ground on the East Coast due to maintenance work.

Mining activity grew 0.4%. Base metal and coal extraction dropped 1.2% and 6.4%, respectively. Following the full resumption of activity in July, the output of iron ore retreated a further 1.0%. After three months consecutive monthly declines, the output of non-metallic minerals (which includes diamonds and potash) grew 2.6%.

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Transportation rebounds on the strength of international travel

The transportation and warehousing sector gained 0.4% on the strength of all types of transportation activities. Air transportation rebounded 1.9% reflecting a surge for the first time in five months in the number of international travellers, especially those from the United States. The accommodation and food and beverages industries edged up 1.1%, benefiting from the increased number of international tourists. Other types of transportation also grew, except the transportation of crude oil by pipeline (-2.5%).

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Weak retail results driven by declining auto sales

For a second month in a row, sales of new motor vehicles retracted sharply. The decline paralleled the end of special incentive programs by auto makers. The retail trade sector declined 1.5% largely on that weakness, as retailing activities excluding new motor vehicles grew 0.9% with the largest gains recorded by pharmacies, general merchandise stores, including department stores, and supermarkets.

Wholesale trade activity increased 1.2% in September mainly on the strength of motor vehicles for a second consecutive month. Excluding motor vehicle and parts, wholesale trade grew only 0.4% mostly from sales of building materials and food products. The largest decline was recorded by wholesalers of personal and household products.

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Construction activity rises on the strength of non-residential construction

Construction activity edged up 0.2% with much of the strength in non-residential building construction (+1.6%). Growth in commercial, as well as institutional and industrial buildings contributed to that strength. Engineering, repairs and other construction activities decreased 0.2%.

Residential construction remained flat following a 1.5% drop in August. Housing starts grew substantially in both single and multi-units residential buildings in all urban areas except in the Atlantic region. The value of housing permits increased 3.2% in September. Sales of existing homes, however, decreased significantly in most major metropolitan areas, reducing the output of real estate agents and brokers 0.9%, and contributing to the decline in activities of lawyers and accountants of 0.3%.

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Industry profile, third quarter 2005

Canadian economic activity increased during the third quarter of 2005. In September, economic output was unchanged, after increasing 0.5% in August and 0.3% in July. For the first time in four quarters, the growth in goods producing industries (+1.3%) surpassed that of the service sector (+0.9%). Much of the strength was attributable to energy-related industries and to the production of motor vehicles.

Industrial production (the output of mines, factories and utilities) increased 1.3%. The mining, oil and gas extraction sector increased 3.2%, manufacturing output rose by 0.8%, while utilities advanced 0.4%. In the United States, the index of industrial production increased 0.2% on the strength of manufacturing and utilities, but was pulled back by a drop in the mining sector.

The mining, oil and gas sector was pushed by intense oil and gas exploration (+21%) and to a lesser extent by oil and gas extraction (+0.6%). Output in the energy sector increased 2.5%. The output of iron ore mines regained the ground lost due to the end of a strike. This gain, however, was nearly offset by a 5.5% decrease in the output of non-metallic mineral mines (which include diamond and potash).

Output of the manufacturing sector increased 0.8% in the third quarter. Only 9 of the 21 major groups advanced, accounting for 51% of total manufacturing output. Much of gain was due to increased production of motor vehicles (+4.9%) and parts (+2.8%). The manufacturing of most chemical products (+2.3%) and of plastic products (+2.8%) also contributed to the sector’s growth. The main areas of weakness were in wood products excluding sawmills (-5.2%) and paper products (-0.9%).

Construction activity rose 1.2%. The bulk of the gain was due to increased engineering and repair activities (+2.1%), particularly in oil and gas-related construction projects. Non-residential building construction grew 1.5%, with all types of structures showing strength. Residential construction however edged down 0.2% mostly due to a decline in the erection of single detached dwellings. This marks the fourth consecutive quarterly decline in the construction of single houses.

Wholesale trade increased 1.3% mostly because of motor vehicles. In the third quarter, many car manufacturers moved their products on dealers’ lots as they offered special incentives to customers. Excluding motor vehicles, wholesale trade advanced 0.3%. Retail trade edged up 0.1% hampered by lower sales of new and used motor vehicles. Supermarkets and pharmacies contributed the most to the retail sector’s gain.

The financial sector increased by 1.1%. Credit intermediation, such as banking activities, grew 1.6%, while the higher volumes on the Canadian stock exchanges led to a 2.9% rise in the output of securities and commodities brokers. The continued strength in the home resale market led to a 3.5% increase in the activities of real estate agents and brokers.

The transportation and warehousing sector jumped 2.1% in the third quarter. Trucking (+2.7%), railroads (+3.1%) and support activities for transportation (+2.2%) benefited from the increased activities in energy-related industries and wholesaling. The pipeline transportation of natural gas jumped 7.1%.

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Statistical tables

• Real Gross domestic product by industry, at basic prices, monthly
• Real Gross domestic product by industry, at basic prices, quarterly and annually

Information on methods and data quality available in the Integrated Meta Data Base: 1301.