After five months of stagnation, gross domestic product jumped 0.6% in July, with significant gains registered across the economy. This was the largest monthly gain in GDP since April 2002.

Manufacturers led the pace, with the strongest gain in twelve months, followed by the mining and real estate sectors. A surge in manufacturing, mining and utilities output helped industrial production regain some strength after five consecutive monthly declines. US industrial production also moved ahead in July, increasing 0.7% compared to a stronger 1.2% advance in Canadian industrial production.

A confident consumer and low interest rates boded well for retailers of big ticket items, especially those involved in the distribution of new motor vehicles and furniture. Continuing demand for new and existing housing propelled the residential construction industry, its feeder industries in manufacturing and the real estate agents industry. The World Health Organization removed Toronto from its list of SARS-affected areas in early July, thereby creating a positive impact on travel-related industries. The finance sector benefited from a recovering stock market. Increased activity levels were also registered by the health, education and public administration sectors.

Manufacturers ramp up production levels

Although both the durable and non-durable goods components of the manufacturing sector advanced in July, durable goods manufacturers were responsible for the bulk of the gain. The transportation equipment sector was the largest contributor, thanks to the bounce-back in the production of cars and trucks after a weak June. North American motor vehicle sales were quite strong in July and bode well for future production. The growth of the transportation sector was mitigated by a sharp decline in the aerospace industry, where production dropped to April 2000 levels.

Increased prices for lumber and continuing strong demand for construction materials in North America led sawmills to boost their output. However, the level of activity in this industry was still far below its March peak. A sharp decline in the chemical sector, due to a global industrial downturn and higher feedstock costs, limited the growth of the non-durable goods manufacturing sector.

Mining sector shines

Increased oil and gas production was responsible for almost half of the growth in the mining sector. Crude oil extraction continued its upward trend, while natural gas extraction rose after five months of weakness. The re-opening of a mine after an unexpected closure in April also helped to boost metal ore mining as well as the non-ferrous metal smelting and refining industry. Non-metallic mineral mines got a boost from increased diamond production.

Consumers continue to purchase big ticket items

Consumer demand for new and existing housing continued unabated in July as existing home sales set a monthly record, propelling the activity levels of real estate agents and brokerages by 5.7%. Lower mortgage rates fuelled demand but a shortage of sellers in the resale market led to a surge in prices. The average resale housing price in July was 11.9% higher than a year ago. Residential construction was buoyed by an 8.5% increase in housing starts, reflecting an increase in both single and multiple units. The strong housing market also translated into higher sales for retailers, wholesalers and manufacturers of furniture. Manufacturers of wood, asphalt, glass products, heating and ventilation systems also benefited from the strong housing market in July.

Higher sales at motor vehicle dealers boosted the retail trade sector by 0.6%. However, the strength in the retail trade sector was so concentrated in new cars sales that output excluding motor vehicle dealers fell 0.6%. About half of this decline came from a 1.3% drop in sales by food stores. Increased sales incentives by motor vehicle manufacturers helped propel the number of vehicles sold by 13% following a decline of 10% in June. Wholesaling activity advanced 0.6%, the first significant increase in four months.

Travel-related industries get a boost

Industries in the travel-related sector benefited from the end of the WHO’s travel advisory to Toronto. Domestic tourism increased, although the number of US and overseas tourists to Canada continued to decline in July, falling 1.0% over June. The airline transportation industry registered its second consecutive monthly gain as a number of airlines reported increased passenger load factors – the proportion of occupied to available seats. The travel agent industry recorded a gain of 3.1%, while the hotel and restaurant industries both posted an increase of 0.7%. The occupancy rates for Toronto hotels continued to improve over the lows reached in April; however, these rates are still well below last year's levels.

Other industries

After slowing production for five consecutive months, utilities increased their output 1.9% in July, thanks to the electric power generation industry, which rebounded after a weak June. The only sluggish area in July was the primary goods sector. Animal production dropped a further 2.4% after six consecutive monthly declines, due to continued export restrictions. The forestry and logging industry also continued to suffer from trade difficulties and an infestation of the mountain pine beetle.