Gross domestic product by industry

Note to readers

September 2006

The Canadian economy fell back 0.3% in September, after growing 0.3% in August and 0.2% in July. Except for the drop in economic activity registered in August 2003, which was mainly attributable to a power blackout in Ontario, there has not been a monthly decrease of this magnitude since March 2002 (-0.4%). Special events hindered growth in September, such as a strike in the mining sector in Labrador and the winding down of the collection activities of the 2006 Census.

Goods production, which has shown signs of weakness since the start of the year, declined 1.0% in September, while service industries held steady. Decreases in manufacturing, wholesale trade and the energy sector were only partially offset by the strength of the finance, accommodation and food services sectors.

Economic activity turns down

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Steep decline in manufacturing

Manufacturing output fell 1.4% in September. This is the eighth monthly decline since the start of the year. This sector’s activity level was 3.6% below its peak of December 2005. Of the 21 major groups, 16 accounting for 82% of total manufacturing output, cut back their production. The production of both durable goods (-1.3%) and non-durables (-1.6%) was down. The largest decreases were in the manufacturing of motor vehicles, chemical and metal products, machinery, as well as in printing activities. Only a few subsectors, including the manufacture of wood products and computer and electronic products, advanced in September.

Automakers apply the brakes

Industrial production (the output of mines, utilities and factories) fell 1.4% with declines in all three sectors. Industrial production in the United States also decreased (-0.6%) in September, with mining being the only sector to advance.

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Activity down in wholesale trade

After two months of strong growth, wholesale trade fell 2.1%. Declines were widespread, with wholesalers of automotive products and of machinery and electronic equipment registering the steepest decreases. Only two subsectors posted increased sales: building supplies, and farm products which continued its recent advance. Retail trade grew by only 0.2% in September, held back by a steep drop in new motor vehicle sales. Excluding new vehicle dealers, retail sales advanced 1.0%.

Contribution of main industrial sectors to total growth – September 2006

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Output of energy sector declines

The energy sector declined 1.0% in September, in contrast to the gains registered in July and August. This drop is mainly attributable to lower natural gas production. Weaker prices and high natural gas inventories were largely responsible for the decline. Pipeline transportation of natural gas fell 3.3%, while that of oil advanced 1.7%. Lastly, natural gas distribution grew 0.3%, buoyed by industrial and wholesale demand, while residential and commercial distribution posted steep declines.

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Construction up marginally

Construction activities grew only marginally (+0.1%), with gains in engineering and repair activities offsetting losses in residential and non-residential construction.

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Brokerage and banking activities increase

The finance and insurance sector grew 0.8% in September on the strength of banking and lending activities (+1.0%) and a rebound in brokerage activity. Meanwhile, real estate brokers registered a fifth consecutive monthly decline, reflecting the downturn in the home resale market observed since last March.

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Third quarter 2006

The pace of economic activity was largely unchanged in the third quarter, following a pronounced slowing in the second quarter. The rise in the production of services (+0.5%) more than offset the decline (-0.1%) observed in goods-producing industries. The growth came mainly from the energy sector, retail and wholesale trade and the financial sector. Manufacturing and forestry were the main brakes on economic growth.

In contrast with two consecutive quarters of declines, the growth of the energy sector in the third quarter was largely due to a rebound in oil extraction and oil and natural gas exploration activities.

Wholesale trade continued to grow strongly in the third quarter (+1.3%). Wholesalers of food products, computers and professional and office equipment as well as wholesalers of other products, such as chemicals, contributed the most to this performance. However, in contrast with the vibrant growth observed in the past few quarters, wholesalers of household and personal products registered no gain in this quarter. Retail trade advanced 0.9%, well below the growth in the previous two quarters. New motor vehicles sales were the main engine of growth in this sector. Excluding new motor vehicle dealers, retail trade grew by only 0.4%.

The financial sector advanced 0.9% in the third quarter on the strength of banking, brokerage and insurance activities. For a fourth straight quarter, the activities of real estate agents and brokers declined (-3.0%), reflecting the state of the home resale market during the same period.

Construction activities grew 0.2% in the third quarter. All the strength laid in engineering and repair works, while residential and non-residential construction registered declines.

Manufacturing output (-0.5 %) fell for a third straight quarter. Of the 21 major groups, 15 were down, accounting for 68% of total manufacturing output. The production of both non-durable goods (-0.5%) and durables (-0.6%) declined. The high value of the Canadian dollar in relation to its American counterpart and high gasoline prices were the main factors that caused manufacturers to adjust their production level, especially in automotive products.

After two quarters of significant declines, industrial production (the output of utilities, mines and factories) edged up 0.1%, with the manufacturing sector once again dampening growth. The strong performance of the mining and oil and gas extraction sector and the stability of utilities could not offset the drop in the manufacturing sector. Industrial production in the United States grew 1.0%, with all three sectors posting gains.

In the third quarter, the output of the federal government excluding defence services was down, primarily because of the end of the main collection activities relating to the 2006 Census. Also, forestry activities in British Columbia declined owing to an increase in forest fires compared to the previous year as well as higher stumpage fees and an expected change in U.S. tariffs.

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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.