15-001-XIE
Gross Domestic Product by Industry
June 2001 |
Economic activity receded 0.2% in June, largely erasing a 0.3% gain in May. It was the economy's largest monthly decline in over a year.
A decline in goods production brought output in this sector down to levels last reached in February 2000. Another sharp drop in electronic product manufacturing, a lowering in mining exploration activity and a decline in public sector output accounted for the lion's share of the economy's reversal in June. Output in the finance industries fell as stock market performance flagged. Wholesaling activity also receded, as demand for computers continued to falter, while retailing was essentially flat.
The economy's best showing in June came from communications service providers, which continued to experience steady growth.
Decline in manufacturing output more than offset May gain
Total factory output fell 1.0% in June, after a 0.7% increase in May, on deeper cuts to production by manufacturers of electronic products. Producers of paper and allied products and lumber also reduced output significantly, while automotive production fell back slightly. There was widespread weakness as fourteen of twenty-two major industry groups, which accounted for 52.3% of total manufacturing production, declined in June. These decreases were partly offset by gains in aircraft, chemicals and plastics manufacturing.
Output of electronic products fell 5.8% in June as a pattern of steep declines, which was interrupted in May, resumed. Manufacturers of telecommunications equipment showed the largest decline (-14.3%), bringing levels down 50% since November 2000. Makers of computers and peripherals, which had been holding their own in recent months, had their second sharpest drop in almost three years. Production of fibre optic equipment and electronic parts and components also fell substantially. Inventories of electrical and electronic products continued to accumulate in producers' warehouses, indicating that further cuts to production may be in store. Relative to sales, these manufacturers' finished product inventories were at their highest level in a decade.
Production of paper and allied products slipped 2.9% in June, the seventh downward movement in ten months. Slumping demand for pulp and newsprint from the slowing United States economy was largely to blame. Exports of these commodities have fallen 13.3% since the beginning of the year, despite aggressive price cutting.
Production of sawn lumber fell 3.4% in June, the first decline in three months. Uncertainty surrounding the outcome of the softwood lumber dispute with the United States led many Canadian sawmills to halt or slow production of lumber in June. The threat of the retroactive imposition of countervailing duties on U.S. importers had many buyers taking a wait-and-see attitude, depressing demand for Canadian lumber.
After three months of recovery, output of automotive products edged back 0.4% in June. Production at auto assembly plants receded by 1.0% in June. Auto parts production was essentially flat, as output of engines and wiring assemblies fell back after gains in the previous two months. These declines were offset by gains in the manufacturing of motor vehicle fabric parts and accessories, due to the opening of new plants and the expansion of existing facilities. A resurgence in auto sales in the first half of the year in the United States after a dismal fourth quarter was largely responsible for higher demand for Canadian-made vehicles in the preceding months.
Output in the aircraft industry continued to expand, as producers filled orders for commuter aircraft. Production of chemicals rose 0.8% after two months of decline, as an increase in output of plastics, resins and pharmaceutical products more than offset declines in industrial organic and agricultural chemical products. Makers of other plastic products also increased production in June.
Mining sector output lower
Output in the mining sector tumbled 2.6% in June following a 2.3% decline in May. A second substantial decline in drilling and rigging activity accounted for the bulk of the drop, as production in this industry fell back to more normal levels from a weather-induced spike in April. Despite the two successive declines, the unusually strong April performance still generated substantial growth in the second quarter. Production of crude petroleum declined for the third time in as many months, the latest decline being mostly attributable to unscheduled shutdowns at major facilities. A shutdown caused output in the iron mining industry to give up some of May's strike-related rebound as well.
Strikes, Census, caused public sector output to recede
Output of public sector services fell back 0.3% in June. The factors that had combined to spur public sector activity higher in May - the return to work of striking workers and the massive hiring of temporary staff to accommodate a surge in canvassing work for the 2001 Census - had the reverse effect in June.
June saw a new wave of strike activity as 12,000 nurses, hospital workers and other support staff walked off the job in Saskatchewan, while about 14,000 hospital staff staged rotating walkouts in British Columbia and Nova Scotia. Federal government services activity returned to April levels in June as the work of canvassing work of 37,000 temporary hires was completed by the end of May.
Financial sector pulled down by weaker stock markets
Activity in the financial services industries fell 0.4% in June, the first decline after three months of advance. A drop in stock market volumes and values weighed on mutual fund companies and securities dealers. The latter were also adversely affected by a sharp slowdown in new issues of stocks, although a resurgence of new bond offerings provided a partial offset.
Wholesaling weakened, retailing was little changed
The ongoing decline in the wholesaling of computer and software goods and services extended into June, leading to a 0.3% overall decrease in wholesaling activity in that month. After an almost uninterrupted ascent during the last decade, the growth in imports of computers and peripherals has stalled in recent months, reflecting a slowdown in consumer demand for personal computers. The rest of wholesaling fared better, as the distribution of automobiles and food products buttressed the industry.
Retailing activity was little changed for a second consecutive month in June. Auto sales stayed at May levels, as did department store sales, although furniture store sales edged up after a pause in May.
Communications industry buoyed by telephone companies
Output in the communications industries rose 1.0% in June, extending the strong upward momentum that has seen this industry maintain double-digit levels of annual growth during the past two years. Telephone carriers continued to be this industry group's main source of growth, as consumer demand for long distance and cellular telephone services continued to grow.
Other industries
The construction industry edged up 0.2% in June, as an increase in engineering and repair work was mostly offset by declines in residential and non-residential building activity. The weaker economy had an effect on transportation services, where output fell 0.1%. Business services growth was constrained by a decline in the demand for computer services.
Second Quarter, 2001
Economic activity advanced a 0.3% in the second quarter, besting the previous quarter's 0.1% performance, but falling well short of the average gain of 0.9% observed during 2000.
A partial rebound in automotive manufacturing and an outstanding quarter in mining exploration activity propelled the economy forward. Retailers and real estate agencies were buoyed by strong auto and home sales. An upsurge in stock market activity lifted the financial services industry, while demand for communication services continued to grow.
However, slumping electronic goods production led a third consecutive decline in total manufacturing output. Lower construction activity and a pronounced deceleration in the service-producing side of the economy also restrained growth. Wholesaling, which contracted during the quarter, has been undermined by a steady weakening of sales of computers and related services since the beginning of the year. The business service sector continued to see its momentum flag, reporting the smallest quarterly gain in three years. Public sector strikes in education and government services also detracted from growth in the economy in the April-to-June period.
Collapsing electronic goods production offset gain in auto industry
Total factory output declined for a third consecutive time in the second quarter, falling 0.2%. Declining output of electrical & electronic products was largely to blame, although output of machinery, furniture and paper and allied products also fell. Overall, fourteen of twenty-two major industry groups, accounting for 53.3% of total manufacturing output, posted declines in the April-to-June period. However, it was the smallest of the three declines, as manufacturing was buttressed by a partial rebound in auto production. Makers of food and plastic products also increased production in the quarter.
Output of electronic products was scaled back 8.5% in the second quarter of 2001, a significant though smaller decline than the previous quarter's 12.7% drop. While makers of telecommunications equipment reported the largest output drop, manufacturers of fibre optic equipment and electronic parts and components were also hit hard by the slump in demand for high tech equipment. Even producers of computers and peripherals, which had been largely holding their own, reported a second consecutive decline. The industry as a whole has not yet seen the much-needed inventory correction that drastic production cutbacks have sought to achieve: the value of goods sitting in producers' warehouses has actually risen in the last two quarters, indicating that more production cutbacks may be in the offing.
Manufacturing of autos and parts partially offset this decline, as auto assembly plants cranked out more cars to feed resilient export demand from the United States. Unit sales south of the border rose substantially in the year's first half, and consumer buying intentions there remained high, translating into higher demand for popular Canadian-build models. The resulting 6.7% increase the production of cars and trucks largely fed into a 6.5% increase in exports.
Mining sector buoyed by increased exploration activity
Mining sector output rose 1.6% in the second quarter, largely on account of favourable weather conditions. The onset of unseasonably dry weather in April, usually a wet season that sees much mining equipment get bogged down, was a boon to drill and rig operators, as their production soared 16.2% in the quarter.
The rest of the mining sector did not see similar gains, as production at both metal and non-metal mines fell, the former being affected by strike action.
Increased auto sales buoyed retailing
Retailing activity rose 1.1% in the latest three-month period, essentially maintaining the solid pace of growth set in the first quarter. The bulk of the current quarter's increase was accounted for by increased auto sales, as dealerships maintained incentive programs that provided consumers with generous discounts on new vehicles. Imports of automobiles, from which most Canadian dealers are supplied, rocketed up 17.5% in the second quarter.
Excluding auto dealerships, growth in the rest of retailing was essentially flat. Furniture sales fell back slightly after a spectacular first quarter, as did sales at grocery stores and gas service stations. Higher sales at clothing stores and stores that specialise in selling auto parts partially offset this.
Finance industries lifted by stock, bond markets
Output of financial services rebounded 0.9% after a 0.5% decline in the previous quarter, thanks to a pick-up in stock market activity. An increase in both volumes and values traded was good news for mutual fund companies and brokerages. While a dearth of new stock issues continued to depress securities dealers, a second strong quarter of new bond offerings partially made up for this.
Sagging computer sales took wind out of wholesaling
Wholesaling activity fell back 0.6% in the second quarter, the largest quarterly decline in more than three years. Declining sales of computers and related services proved to be the largest factor in the decline, more than offsetting gains by food distributors and grain dealers.
Business services continued to lose momentum
The trend of business services growth continued to flatten in the second quarter, as GDP in these industries advanced by a comparatively small 0.6%, the smallest advance in three years. Most of the slowdown could be attributed to firms providing computer consulting services and temporary help agencies, which so far in 2001 have maintained a pace of growth less than half that achieved in 2000. Firms providing advertising services have shown an outright decline in activity. The only bright spot was in firms providing legal and accounting services which, on account of a strong housing market, were actually surpassing their previous year's growth performance.
Public sector affected by strikes, Census
Output of public sector services grew 0.3% in the second quarter, but the increase fell short of gains made in the four previous quarters. Strikes by health care workers in Saskatchewan, British Columbia and Nova Scotia, school support staff in Ontario and government workers in Newfoundland all had a constraining effect on growth during this period. However, the 2001 Census of population had a partially offsetting effect, as massive temporary hiring to conduct door-to-door canvassing boosted federal government services.
Other industries
A drop in residential building activity and in engineering and repair construction translated into a 0.4% decline in construction industry output. The decline in homebuilding was the first since a strike-induced slump in the second quarter of last year. Companies providing communications services posted another solid quarter, on account of continued gains in long distance and cellular telephone services.
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