The economic turnaround continued in April as GDP surged ahead a further 0.8%. This is the seventh consecutive monthly advance and the single largest monthly gain since early 2000.

A combination of factors led the widespread strength in GDP in April. Higher sales of cars and trucks and the temporary elimination of softwood lumber duties accelerated production of motor vehicles and parts and wood products. All sectors of manufacturing registered gains, with significant increases posted by makers of primary and fabricated metal products, plastic and rubber products, and food and beverages. These gains in manufacturing resulted in higher levels of demand for energy, transportation and wholesaling services.

Consumer demand for housing still strong

Continued gains in employment and historically low interest rates raised consumer demand for housing and household furnishings. Higher activity levels were reported for the real estate agents and brokerage industry, as sales of existing housing bounced back in April. Although residential construction dipped in April, output levels remain 16.2% higher than year-ago levels. This continued high level of residential construction led to increased output levels in the construction feeder industries in manufacturing. Manufacturers of asphalt products, paints, glass and glass products, concrete, gypsum products, architectural and structural metal products, boilers, ventilation (heating and air conditioning) and electric lighting equipment all raised production in response to increased activity levels in the home building industry.

Retailers of household furnishings and appliances saw increased consumer traffic as new homeowners attempted to fill these new living spaces. After two consecutive monthly declines, retail sales edged up 0.3% in April. Wholesalers of furniture also made gains in April, as sales rose a further 0.8%; sales have been on an upward trend since last October. Furniture and appliance manufacturers also boosted production in response to this increase in demand.

Increased consumer confidence also led to higher activity in the travel-related industries, including air transportation, passenger rail transportation, taxis, and the amusement and recreation industries. The hotel and restaurant industries also experienced increased output in April, after three consecutive monthly declines.

Removal of softwood lumber duties boosts wood output

The temporary elimination of softwood lumber duties (both countervailing and anti-dumping) from April 22nd to May 21st resulted in a significant increase in output in the forestry and wood products sector. The forestry and logging industry increased output 4.3%; the third consecutive monthly increase. However, output levels are still 9.4% below last year’s levels.

Wood product manufacturers pushed up production 8.7%, resulting in record output levels. Capacity utilization rates of the wood product manufacturers ran at 85.5% during the first quarter of this year. Sawmill producers provided the single largest push in April, as production surged 12.8%. This latest surge in production was concentrated in those provinces affected by the countervailing duties (British Columbia, Alberta, Ontario and Quebec). Lumber producers in Atlantic Canada are exempted from the countervailing duties and are required only to pay the anti-dumping duties. Manufacturers of veneer, plywood, and structural wood products and wood containers all raised output in April. Canadian wood manufacturers also benefited from the recent high levels of activity in the residential construction industry. Wholesalers of lumber products reported a 4.6% increase in sales of lumber products. Wood products manufacturers’ demand for transportation services to meet the tariff dateline requirements raised the activity levels of both the trucking and rail industries. Railcar shipments of lumber, plywood and other building materials all increased substantially in April.

Car and truck manufacturers expand production levels

Higher North American sales of cars and trucks reduced dealer inventories and accelerated production in the Canadian motor vehicle and parts industries. The motor vehicle assembly industry boosted production 15.4% in April, returning to output levels not seen since early 2000, in an attempt to replenish dealer inventories. The motor vehicle parts industry expanded output 3.3% to meet the needs of both Canadian and American assembly plants. Historically low interest rates and still generous financing incentives led to robust North American sales in recent months.

The recent strength in the motor vehicle assembly industry also raised the output levels for manufacturers of tires, plastic motor vehicle parts and primary and fabricated metal products. The Canadian steel industry benefited as well from the recent imposition of duties in the United States on steel imports from various countries excluding Canada. Wholesalers of automotive equipment saw sales activity levels escalate 3.8%.

Strike-affected industries

One of the few areas of weakness in April occurred in industries affected by labour disputes. The output of the public administration sector was negatively impacted by Ontario provincial employees who were on strike throughout the whole month of April. Labour strife in the aerospace and parts manufacturing industry reduced output 7.5% and offset some of the significant gains made in the rest of the manufacturing sector.