15-001-XIE
Gross Domestic Product by Industry
August 2001 |
Gross Domestic Product remained largely flat for the fourth straight month. The economy increased a marginal 0.1% in August, just prior to the terrorist attacks in the United States. It was only the fifth time in the past twelve months that the economy as a whole showed any improvement.
There were pockets of strength in new homebuilding, wholesale trade, activity in the oilpatch and the information and cultural service industries. The manufacturing sector, which has been in decline since October 2000, edged up slightly in August, as growth in chemicals and paper helped offset the continuing deterioration of the electronic products industries. Otherwise, there was widespread weakness in services as well as agriculture and forestry.
Manufacturing slide halted in August
The output of manufacturing industries was up marginally (0.1%) in August, after experiencing eight monthly declines over the past year. The level of GDP in this sector has fallen 4.6% since August 2000. Producers of electronic equipment continued to struggle as output dropped for the twelfth consecutive month. This weakness was largely offset by higher output of chemical and paper products. Of the 21 major manufacturing groups, the month was evenly split between winners and losers in August. The ten industry groups that advanced represented 36.5% of total manufacturing output.
Chemical products were up 2.0% in August with strong growth in pharmaceuticals and cleaning compounds. Producers of pharmaceuticals and medical supplies raised output by 5.6%. Since January, mergers and restructuring in this industry has led to increased capacity, resulting in a 15% rise in production. The launch of new products propelled the soap and cleaning compounds industry to new levels. Output rose 5.1% in August and has increased 36% since December. The output of petrochemicals was down sharply as falling prices reduced margins and producers geared down for current and upcoming maintenance shutdowns.
Output of the paper industry was up 1.2% in August, led by newsprint. Production of newsprint had been in steady decline since last September as weak demand resulted in high inventories and a 7-year low in prices. The halt in this slide in August came largely from increased foreign demand. The output of wood products was 0.9% higher in August, largely in response to the surge in new homebuilding. Exports of lumber to the U.S. fell sharply in August, as the U.S. Commerce Department announced a countervailing duty in August that applies to all softwood lumber exported since May 20th. Since producers are having problems covering production costs given low prices, these added costs do not bode well for the industry.
The output of computers and electronic equipment fell 3.2% in August as makers of computers, telephone apparatus, semiconductors and electronic components continued to scale back output. The production of telephone equipment was 59% lower than the same month a year earlier. Producers of communications and energy wire and cable also lowered output, as sluggish international demand continued to plague the industry.
The assembly of motor vehicles was down 1.5% in August, the eighth decline over the past year. The production of auto parts, however, fared somewhat better. This industry has not seen a monthly decline since February, although growth did ease up slightly in August. The manufacturing of heavy trucks fell sharply (17.6%), as the industry continues to suffer from a slump in demand that began in late 1999.
Elsewhere in manufacturing, the output of petroleum refineries showed strong growth for a second consecutive month, up 3.6% in August. This is attributed to stockpiling, as a major refinery announced a maintenance shutdown to begin towards the end of September. Output of primary metals was down 1.2% due to sharp declines in the fabrication of non-ferrous metal products. Smelter output was negatively affected by unscheduled maintenance shutdowns as well as the power situation in Ontario. All other products (iron, steel and aluminium) in this industry group saw healthy increases.
Surge in homebuilding pushed construction activity higher
Residential construction was up 2.1% in August, posting its strongest gain since July 2000, as mortgage rates continued to decline. Much of this growth occurred in Ontario in the construction of single homes and multiple dwelling homes. Non-residential building construction was virtually flat, as was activity in engineering projects.
Oil production helped offset weak metal mining
The mining and oil and gas sector rose for the second consecutive month in August, increasing 0.4%. Oil and gas extraction was up 0.6% as synthetic oil production continued to expand. Activity increased for the drilling and rigging industry although it is still significantly below its April peak as prices for oil and gas products are down substantially from previous highs. Metal mine output fell substantially in August as almost all components reported declines. The output of non-metal mines was up sharply this month as improvements to the diamond recovery process increased diamond output.
Wholesaling strengthened, retail inched ahead
Wholesaling activity jumped 1.1% after a modest decline in July. Strength was concentrated in automotive products. The wholesaling of machinery also had a healthy gain after 4 months of decline, and food and beverages were up modestly. These gains were partly offset by lower wholesaling activity for electrical products and lumber, due to lower international demand. Retail trade has been sluggish since April, with August posting a lacklustre 0.2% gain. Sales at department stores were down significantly and were slightly lower at motor vehicle dealers. On the positive side, there was noticeably higher activity in grocery stores, pharmacies, clothing stores, service stations and automotive parts stores.
Other industries
The output of information and cultural industries was up 0.7% in August resulting from increased sales of telecommunications services, television and radio broadcasting, software publishing and motion pictures. Transportation services were down 0.7% as trucks, trains and ships all carried less freight and cargo during the month. The output of professional scientific and technical service providers was down slightly, pulled down by lower computer, advertising and scientific services. Business at restaurants and bars fell significantly in August. Labour unrest in the federal government resulted in a slight decline in this industry.
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