15-001-XIE
Gross Domestic Product by Industry
May 2001 |
Gross domestic product advanced 0.3% in May, the strongest showing in seven months, buttressed by unusual events in the public sector.
May saw strike-related rebounds in education and provincial government services, as well as a burst of activity for the 2001 Census of population conducted by Statistics Canada. The economy was also bolstered by increased manufacturing activity due to the recent surge in auto production and an small rebound in the telecommunications equipment industry. A second month of improved performance in the stock markets translated into an increase in financial services output.
However, these gains were partly offset by a return to more normal levels of drilling and rigging in the mining sector after a weather-induced spurt in the previous month, and by the effects of a strike in the construction industry. Sales by retailers and wholesalers both slowed as demand for automobiles and computers was scaled back.
One-time factors boosted public sector
The return to work by 12,700 teaching support staff in Toronto and by 18,500 public servants in Newfoundland after April strikes led to a bounce-back in education and provincial government services in May. Elsewhere, federal government services rose significantly, as over 37,000 canvassers were hired to conduct the 2001 census of population. Most of the canvassing activity was completed by the end of May.
Strongest manufacturing gain in twelve months
Total factory output increased 0.9% in May as production of automobiles and electronic equipment rose. Manufacturing of food and wood products also increased. Overall, fourteen of twenty-two major industry groups, which accounted for 81.8% of the factory sector's output, increased production in May. The largest declines were reported by makers of furniture and beverages.
Production of electrical & electronic products rose 0.8% in May, only the second increase in seven months. The steep slide in the output of telecommunication equipment was arrested in May, as manufacturers increased production for the first time since August of last year. However, makers of fibre optic equipment, which have been on a similar downward trajectory, posted another decline. Production of computers and peripherals edged back after two solid months.
Favourable demand conditions in the United States continued to buoy the automotive products industry in May. Production of automobiles and parts rose in tandem, by 2.2% and 2.3%, respectively. It was the third consecutive increase for the automotive sector which, like that of its neighbour to the south, has been gradually recuperating the ground lost in the closing months of 2000, when consumer demand faltered and dealers' inventories peaked.
Food processing plants raised output 1.6% in May, as good catches kept fish processors busy in May, and producers of tea, coffee and confections also increased production. These increases were partly offset by a decline in vegetable oil milling, as production facilities were idled temporarily in response to slumping demand.
A 1.8% increase in the wood products industry was buttressed by a second consecutive increase at sawmills. Two months after the expiry of the Canada-US Softwood Lumber Agreement, a still-buoyant US homebuilding market was feeding demand for lumber, but May saw shipments to the United States fall as exporters were cautious about the possibility of countervailing duties that may be applied retroactively.
Production of furniture fell 3.1% in May, as manufacturers of office and other institutional furniture cut back production for the fourth time in as many months. The beverage-producing industries reported a 1.7% decline in output, as production of beer fell back to March levels.
Stock markets gave finance industries a boost
A resurgent stock market led to a 1.3% increase in financial services in May. The heightening of activity on stock markets, combined with a second consecutive monthly increase in sales of mutual funds after a steep decline in the first quarter, led to increased activity by banks and other financial service providers.
Return to more normal weather conditions weighed on oil patch
Mining sector output fell 1.9% in May because of a 16.5% drop in drilling and rigging activity, after unseasonably dry weather conditions had led this industry to an outsized gain in April. The rest of the mining sector fared better in May, with the end of a strike in the iron mining industry and a banner month for diamond miners.
Strike pulled down construction activity
Total construction activity fell 0.8% in May. A strike by 15,000 construction workers in Quebec led to a 0.7% decline in the repair and engineering construction industry. Work on residential building projects also fell, reflecting a nascent downtrend in housing starts that was most pronounced in single dwellings.
Slower computer sales continued to weaken wholesaling
Wholesaling activity continued to weaken in May, reflecting continuing slumping demand for computers. Imports of computers, previously on a steep upward track, have flattened out since the middle of 2000, and have fallen in two of the last three months. While business and institutional demand continued to grow, there was evidence that consumer demand (which accounted for about two-fifths of total sales in 2000) lost steam.
Grain dealers also had a poor month, but after two strong gains. These declines were partly offset by increased distribution of machinery and food.
Lower auto sales drove retailing down
Retailing activity fell 0.2% in May, as a setback in auto sales weighed on the industry. The drop in auto sales was a relatively modest one, after healthy gains in March and April. Even when auto dealerships were excluded, sales activity in the rest of the retailing sector fell slightly, as traffic at gas service stations dropped and clothing store sales generally declined. Department stores, where some key players have been struggling with over-expansion and stiff competition, saw little change in the month, extending the period of lacklustre growth since January.
Business services showed little change
The pace of activity in the business services industry continued to slacken off in May, the latest month's 0.1% decline being a far cry from the average monthly pace of 0.8% maintained during 2000. Much of the recent slowdown in activity could be traced to the computer consulting services industry. Furthermore, firms providing advertising, architectural, scientific and technical services have experienced an outright drop in business since the beginning of the year.
Other industries
Warmer weather and high natural gas prices caused demand at natural gas distribution and electrical utilities to fade 0.8% in May, a second consecutive decline. Activity by transportation companies rose 1.3% in May, mirroring increased manufacturing production, as well as larger shipments of primary commodities such as wheat and iron ore.
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