15-001-XIE
Gross Domestic Product by Industry
July 2001 |
Gross Domestic Product slipped 0.1% in July after a 0.2% decline in June. A slowdown in economic activity over the past 12 months left July GDP's at fourth quarter levels.
Weakness in the economy was concentrated in manufacturing, which has been on a downward path since August 2000. Reduced output of electronics and wood products led the way. Significant declines were also seen in the output of electric utilities, forestry, wholesaling services and agricultural crops. The economy got a slight boost, however, from mining and oil and gas extraction; the service sector remained unchanged.
Manufacturing continued its downward slide
Output in the manufacturing sector declined 0.5% in July, on the heels of a 0.8% drop in the previous month, as producers of electronic products continued to scale back production. The manufacturing of wood products was also significantly lower in July. The overall weakness was widespread as only 7 of the 21 major groups, accounting for 35.7% of manufacturing output, managed to advance. Declines in manufacturing were partly offset by makers of machinery and equipment, auto parts, fabricated metals, and petroleum refiners.
Output in the computer and electronics industries fell 1.9%, the eleventh consecutive monthly decline. Production declined 25.3% so far in 2001, reducing output to levels last seen in October 1999. Makers of communications equipment continued to suffer, with production sliding a further 3.0% in July. The output of telephone apparatus, the main component of this group, was reduced to 43% of the August 2000 level. A worldwide slump in this industry has taken its toll on producers of semi-conductors and electronic components, where output fell 3.6% - the ninth decline in the past twelve months. Lower demand for fiber optic cable brought the output of the communications and energy wire and cable industry 2.9% lower in July. There was a bit of a bright spot in the manufacturing of computers and peripheral equipment, where output edged up after four successive months of decline.
The forestry sector was affected when manufacturers of wood products reduced output by 2.7% in July after three months of gains. This decline curbed activity at sawmills and affected nearly all types of wood products. In response, forestry and logging operations were curtailed 3.9%. The lackluster growth in housing starts in the last 12 months, a weak U.S. economy, and uncertainty in the wake of the expiry of the Softwood Lumber Agreement did not bode well for the industry.
The slowdown in economic activity also lowered the demand for newsprint used in advertising, leading to a third consecutive monthly decline in pulp and paper production. The weak demand for newsprint sent world prices to near seven-year lows, as inventories continued to be a factor. The decline in manufacturing output also reduced the need for packaging materials.
Other notable declines in the manufacturing sector occurred in the chemical, food, furniture, and non-metallic groups and in iron and steel mills. Lower production of chemicals was concentrated in petrochemicals, agricultural chemicals and pharmaceuticals. A spike in the May production of petrochemicals preceded a large price hike in June. The reduced output of food processors was mainly centered in meat and seafood products and fruit and vegetables preservation. In agriculture, crop production was down 2.2%. Makers of office furniture curtailed output 6.7%. The flatness in residential and non-residential building lowered the demand for glass and concrete products, resulting in lower July production levels.
On the positive side, production of machinery and equipment grew 1.7%, the fourth consecutive monthly increase. Makers of industrial, commercial, metalworking and other general-purpose machinery were all busier in July. Output of transportation equipment grew 0.6%, even though the assembly of motor vehicles was down 0.9% in light of scheduled shutdowns and layoffs. Production of motor vehicle parts, which are mostly destined for export, was 1.4% higher. The manufacturing of fabricated metal products advanced 0.5% after a June drop of 1.3%. Performance in this manufacturing group was mixed as the number of industries that enjoyed higher production levels in July was largely offset by those who fared worse in the month. After five months of decline, petroleum refining increased 3.1%, restoring output to levels seen at the beginning of the year.
Wholesaling declined, retail flat
Wholesaling activity was down 0.7% in July. The weakness resulted mainly from reduced wholesale trade in automotive products and machinery. Retailing activity remained relatively unchanged. Sales at motor vehicle dealers were fairly flat despite aggressive incentives by manufacturers to clear their stocks of 2001 model year vehicles. Lower sales at service stations and general merchandise stores were offset by increased activity in department stores.
Mining, oil & gas higher
The mining and oil & gas sector expanded 1.8% in July after two months of decline. Oil and gas extraction was up 1.4% following unscheduled shutdowns at major oil refining facilities in June. Drilling and rigging activity was up modestly, after two months of decline that followed a weather-induced April peak. The 8.2% surge in metal mining resulted largely from increased activity at nickel mines where the industry was slow to recover from strikes earlier in the year. Iron mining rebounded after an unexpected mine shutdown in June. The output of non-metal mines was lower mainly due to a sharp reduction in diamond mining in the Northwest Territories.
Information and cultural services inch ahead
Information and cultural services were up 0.1% in July. The expansion of this sector of the economy in 2001 has been nowhere near the double-digit growth seen in 1999 and 2000. Telecommunications services, the largest component of this group, was down 0.5% in July. Growth has slowed considerably since the first quarter. Software publishers, however, have fared well since February and enjoyed a 1.9% gain in July.
Professional, scientific and technical services on hold
Professional, scientific and technical services declined slightly in July, after being relatively flat since the start of the year. Advertising services saw nine successive months of decline reflecting a weaker economy. Architectural and engineering services receded in each of the past six months. Computer services, which had expanded at double-digit annual rates up to 2001, saw a second month of decline.
Other industries
Electric power generation and transmission was down 2.1% in July, as exports of electricity fell for a second consecutive month. The total domestic supply was up modestly after four months of decline. Health care services increased largely due to the end of hospital strikes in the previous months. July strike activity in British Columbia and Nova Scotia dampened the rebound. Construction activity was up 0.3% with modest strength in engineering projects. New homebuilding edged up 0.2% after two months of decline; non-residential building was flat in July.
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