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Gross domestic product by income and by expenditureThird quarter 2006The pace of economic activity was largely unchanged in the third quarter, following a pronounced slowing in the second quarter. Real gross domestic product (GDP) grew by 0.4% in the third quarter after increasing 0.5% and 0.9% in the second and first quarters respectively. The third quarter included a recovery in exports, renewed non-residential investment and a slight acceleration in personal consumer spending. These combined increases were offset by a drop in investment in residential construction along with a significant slowdown in government current expenditures and in inventory accumulation. Investment in residential constructionTotal investment in residential construction fell 2.2% in the third quarter after sliding 1.2% in the second quarter. This decline reflects the drop in the value of new residential construction and a weaker resale market. Investment in housing weakens Housing starts fell again in the third quarter to 219.6 thousand units compared to 248.0 and 228.9 units in the first and second quarters respectively. This decline was the result of a drop in multiple-dwelling starts, which in September were at their lowest level since July 2004. Despite this slowdown, investment in residential construction for the first nine months of 2006 remains strong with housing starts up 1.4% over the same period last year. Property transfer costs were down sharply (-4.4%) following a drop in the second quarter (-2.4%). Spending on renovations rose 0.9% after advancing 0.1% in the second quarter. Personal expendituresPersonal expenditure on consumer goods and services rose by 1.0%, a slight acceleration from the previous quarter (+0.9%). This growth was due mainly to increased spending on services (+0.9%) and on durable goods (+2.2%). However, the impact of this increase on the total change in household spending was partially offset by a slowing in the growth of expenditure on non-durable and semi-durable goods such as food, beverages and tobacco as well as clothing and footwear. Growth in consumer spending edges up The rise in personal expenditure on durable goods was driven mainly by the 2.5% increase in purchases of new and used motor vehicles. The strength of the new vehicle market in July and August exceeded the drop posted in September. The increase was due to dealer incentives impacted by “employee price” sales programs, cash rebates and low interest rate financing. In unit terms, total sales of new motor vehicles climbed 3.7% in the third quarter after a slightly decrease of 0.7% in the previous quarter. In addition to motor vehicles, consumers also spent 1.2% more on furniture, household equipment and maintenance supplies in the third quarter than in the second. The increase in personal expenditure on services was dampened by spending on recreation services which continued to weaken for the third straight quarter. This weakness was due mainly to lower expenditure on games of chance. International tradeAfter two quarters of decline, exports climbed 0.9% in the third quarter while growth in imports slowed. Exports of goods rebounded (+1.2%) after two consecutive quarters of decline. Third quarter growth was due mainly to higher exports of industrial goods and materials (+4.8%) and machinery and equipment (+3.7%). A 21% increase in the exports of aircraft, engines and parts was recorded. The increases in exports was partially offset by a third consecutive decline in exports of automotive products (-6.7%), as some manufacturing plants in this sector experienced extended or irregular shutdowns. Exports of services were down 1.4% in the third quarter mainly as a result of lower exports of commercial services (-1.8%) and travel (-2.4%). The gain in imports came mainly from the purchase of goods (+1.5%), with growth in imports of automotive products (+4.4%) and machinery and equipment (+2.9%) accounting for most of the increase. Except for the first quarter of 2006, imports of machinery and equipment have risen steadily for the past three and a half years. Imports of crude oil remained strong in the third quarter (+9.0%). This growth was enough to offset the slide in imports of petroleum and coal products. Imports of services fell 1.4% in the third quarter mainly due to lower imports of commercial services (-3.7%). Investment in inventoryInvestment in non-farm inventory continued to rise in the third quarter but at a slower pace than in the second. Wholesale inventories of machinery and equipment and retail stocks experienced slower accumulation The buildup in inventories of durable manufacturing goods accelerated. This accumulation was especially pronounced for finished product inventories. Investment in inventories declines as retailers accumulate
less inventories Investment in plant and equipmentBusinesses continued to increase their investment in plant and equipment by 1.7% in the third quarter, after a rise of 1.3% in the second. The rate of growth of investment accelerated after slowing slightly in the second quarter. Business investment in machinery and equipment increased 2.2%. This growth was due mainly to the strength of investment in industrial machinery, trucks, software as well as computers and other office equipment. Engineering construction activity accelerated in the third quarter climbing 1.9%. This increase more than offset the 0.6% drop in construction of non-residential buildings. Labour income (in nominal terms)The growth in labour income in the third quarter was 1.1%, while growth in the first and second quarters was affected by a substantial first quarter special payment to reduce an actuarial deficit in a government sponsored employer pension plan. Wages and salaries rose by 1.1%, a slightly lower rate than the average of 1.5% for the previous six quarters. Sustained strength in the mining, oil and gas extraction and in the construction industries contributed to the 1.0% increase for all goods industries. Overall, services industries also advanced (+1.1%), with the professional and personal services industry leading the way. Corporate profits (in nominal terms)Growth in corporate profits was 2.7% during the third quarter building on an increase of 0.6% in the second quarter which followed a decline of 3.5% in the first. As a result, profits have almost reached the record level achieved in the fourth quarter of 2005. The increase in profits was especially pronounced in the petroleum and coal products manufacturing industries and air transportation industries as well as chartered banks. Growth in profits was partially offset by weakness in the motor vehicle and parts manufacturing industry and the accommodation and food services industry. Sector accounts (in nominal terms)The personal saving rate was 1.5%, up in the third quarter after a drop in the second quarter. Investment in capital acquisition by the personal sector continued to exceed savings. Consumer credit, including new vehicle financing, was up while mortgage borrowing slowed with the downturn in the housing market. Net lending by the corporate sector increased 8.5% with strong growth in undistributed corporate profits and a slower non-financial capital acquisition. The corporate sector was historically a borrower from other sectors but has generated a series of quarterly surpluses which now exceeds five years. The federal government became a net borrower in the third quarter for the first time in six quarters (on a seasonally adjusted and national accounting basis) as income from taxes on products fell substantially, reflecting the 1% reduction in the Goods and Services Tax (GST) rate effective July 1, 2006. Outlays of the federal government ballooned as well as a result of special transfers to the provinces and territories of $4.0 billion under Bill C-48 and the Early Learning and Child Care Initiative and $0.6 billion in new transfers to persons from the start-up of the Universal Child Care Benefit. All levels of government combined continued to be net lenders to other sectors of the economy. Government surplus continues Economy-wide pricesEconomy-wide prices, as measured by the price index for GDP, rose 0.2% in the third quarter following a drop of 0.1% in the second quarter. Export and import prices grew in the third quarter. Export prices rose with continued increases in the prices of industrial goods and materials. The 1% decrease in the GST rate dampened the growth in the chain price index for consumer expenditure. Statistical tables
Information on methods and data quality available in the Integrated Meta Data Base: 1901 and 2602. |
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