The Canadian economy slipped in the final month of the first quarter. GDP declined 0.1% in March after advancing by 0.2% in both February and January. Economic activity was restrained in large part by a reduction in output of motor vehicles as manufacturers tailored their production to changing demand.

Industrial production (the output of factories, mines and utilities) decreased by 0.6% as output of the manufacturing sector dropped by 0.9% and the mining, oil and gas sector receded by 0.9%. Output of utilities increased by 1.3% as both the generation of electricity (+1.1%) and the distribution of natural gas (+3.1%) bounced back from previous months' decreases. In the United States, the Index of industrial production advanced by 0.1% with increases in utilities and mining being partially offset by a decrease in manufacturing.

Motor vehicle manufacturers tailor their production

Manufacturing output decreased by 0.9% in March, dragged down by the automotive sector—motor vehicles (-5.1%) and parts (-3.8%), as manufacturers tailored their production to changing demand. Unit sales of cars in Canada and the United States were nonetheless robust in February and March. The production of heavy-duty trucks also retreated in March after two large consecutive monthly increases.

Weakness in the manufacturing sector was widespread as 15 of the 21 major groups decreased, accounting for 71% of the sector's value added. Output of manufactured wood products declined 4.4% with decreases in every category. Activity in sawmills was reduced by 6.5% partly because of shutdowns. Newsprint mills (+2.9%) recovered some of the ground lost in January and February.

The production of beverages grew by 3.6% driven by breweries and wineries. Furniture and related product manufacturing advanced 2.2% with greater output of office furniture. Primary production of aluminum (+4.8%) continued with its resumption of activity following a labour dispute in the third quarter of 2004.

Oil extraction and exploration retreat

Activity in the mining and oil and gas extraction sector fell by 0.9% in March pulled down by reductions in oil and gas extraction (-0.6%), and in support activities (-7.3%). Oil producers in the tar sands were busy re-establishing output levels following a series of problems that plagued the industry since January. The reduced production of oil was also behind the 0.7% decrease in pipeline transportation of crude oil. Oil exploration was hampered by unfavourable weather despite a 14% jump in the average price of heavy crude oil on international markets. Natural gas distributors increased their output by 3.1%.

Activity in metal mines decreased by 4.1% despite a 5.3% increase in gold and silver mines' output, as copper, nickel, lead and zinc mines dropped by 10% due in part to mine closures. The output of non-metallic mineral mines increased by 6.7%, more than offsetting the decrease in metal mines.

Construction activity declines for a third consecutive month

Construction activity decreased 0.3% in March. Residential construction reported its third and steepest consecutive monthly decline (-1.4%), almost returning to the average level of 2004. In March, an increase in the construction of apartment units failed to offset the decreases in single-detached and semi-detached units. Housing starts in urban areas increased in British Columbia and the Prairies, but decreased in Ontario, Quebec, and the Atlantic regions.

Non-residential building construction edged up 0.1% in March. An increase in commercial buildings barely offset decreases in institutional and industrial buildings. Engineering, repair and other construction activity softened the general decline in this sector, increasing by 0.5%.

Wholesaling activity continues to rise

Wholesaling activity increased by 0.8% in March. The largest gains were reported by wholesalers of machinery and electronic equipment and of personal and household products. Declines were recorded by wholesalers of motor vehicle parts and accessories, of farm products and of other products.

Retailing activity decreased 0.2% in March following strong growth in January and February. Food and beverage stores reported the largest gains while automotive stores and clothing and accessories stores recorded the largest decreases.

Other industries

The economic weakness in March led to reduced activity in rail (-0.8%) and truck (-1.8%) transportation. Walkouts by students in Quebec were largely responsible for the decline in the output of educational services.

First quarter, 2005

Economic activity increased by 0.5% in the first quarter of 2005, with growth concentrated in January and February. Much of the growth occurred in service producing industries (+0.9%) while goods producing industries declined by 0.1%.

Wholesale trade rose by 2.1% pushed by the strong demand for personal and household products and for machinery and electronic equipment. The wholesaling of motor vehicle parts and accessories decreased however.

Retailing activity increased 2.0% with gains reported by almost all store types. The end of a strike at liquor stores in Quebec as well as the increasing popularity of gift cards helped this sector in the first quarter. The largest gainers were food and beverage stores, furniture, home furnishings and electronic stores, and general merchandise stores, including department stores.

The finance, insurance, real estate, rental and leasing sector advanced by 1.0%. Banks and other depositary credit intermediation rose by 1.2%. Higher volumes on the Canadian stock exchanges helped raise the output of securities brokers by 3.5%. A rebound in sales of existing homes in the first quarter of 2005 raised the activity of real estate agents and brokers (+2.9%).

Industrial production (the output of factories, mines and utilities) decreased by 0.2%. Output of the manufacturing sector as well as that of utilities increased by 0.3%, but these increases were more than offset by a 2.1% drop in the mining, oil and gas sector. In the United States, the Index of industrial production increased by 0.9%, with manufacturing and mining up, but utilities decreasing.

Output of the manufacturing sector increased by 0.3% with 12 of the 21 major groups accounting for 53% of this sector's value added advancing. The most important gains were recorded by manufacturers of machinery (+3.2%), of computer and electronic products (+5.0%) and of fabricated metal products (+1.8%). The manufacturing of information and communication technology equipment advanced 3.7%. The largest declines were recorded in wood product (-3.3%), paper (-2.3%), motor vehicle (-2.2%) and motor vehicle parts (-1.4%) manufacturing.

The mining, oil and gas sector decreased by 2.1%. Much of this setback was attributable to production difficulties in the tar sands, which led to a 1.7% decline in oil and gas extraction. Support activities for mining, oil and gas (mostly drilling and rigging) also declined in the first quarter of 2005 (-8.3%) as oil and gas exploration reached high levels in 2004. Output of the energy sector decreased by 1.3%.

Construction activity rose by 0.6% in the first quarter of 2005. Residential construction declined by 0.7%, while non-residential building construction advanced 1.2%. The setback in residential construction was the first quarterly decline since the second quarter of 2000. Engineering, repairs and other construction activities also advanced (+1.4%) in the first quarter of 2005.