Gross domestic product by industry

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March 2008

Economic activity edged down for a second consecutive month, declining 0.2% in March. Manufacturing accounted for virtually all of the decrease. The services-producing industries expanded by 0.2% during March.

The declines in manufacturing were widespread, but motor vehicle production was the hardest hit. Furthermore, wholesale trade and construction, retreated. Conversely, the finance sector, retail trade, and the energy sector, all increased.

Chart C.1
Economic activity declines

Manufacturers reduce production once again

Manufacturing value added fell 2.5 % in March, with both the durable and non-durable goods production decreasing. The drop in transportation equipment accounted for nearly half of the decline in manufacturing. Lower demand and a strike at a major parts supplier located in the U.S. had a ripple effect throughout motor vehicle manufacturing and its associated industries. As a result, motor vehicle production contracted 13.4%.

In March, production of wood, paper, and non-metallic minerals also fell as demand on foreign markets continued to soften. For some time, wood product manufacturers have faced lower foreign demand for their products, notably the United States, largely due to its cooling economy and a strong Canadian dollar.

Chart C.2
Widespread decreases in manufacturing

Wholesaling activity retreats

Wholesaling activity slipped for a second month in a row posting a 0.6% decline. Personal and household goods and food products were behind the decline. Conversely, wholesaling of building supplies and of motor vehicles improved.

Construction edges down

Construction activity decreased 0.2% in March. The declines in residential construction, and engineering and repair work, were only partially offset by an increase in non-residential building. Apartments and alterations and improvements work were the only type of residential construction activities that advanced for the month, while all types of non-residential building moved forward.

Real estate agents and brokers recorded a fourth consecutive monthly decline as the home resale market retreated slightly in March. Their activities were among those which were affected by the inclement weather. They are now well below their most recent peak reached in the summer of 2007.

Retailing activity up slightly

Value added in the retail trade sector was up 0.2% in March, recovering part of its February drop. The volume of activity of automotive product stores, particularly gasoline stations, and supermarkets increased, while clothing and accessories stores declined.

Chart C.3
Main industrial sectors' contribution to total growth

Energy sector moves ahead

The energy sector moved ahead 0.3% in March. Extraction of both oil and gas increased for the month. The price of oil continued its dramatic increase. The distribution of natural gas to residential and commercial clients rose in March. Furthermore, the quantity of natural gas in storage in Canada and the United States remained low. Support activities for mining and oil and gas extraction contracted 4.0%.

The output of the mining sector excluding oil and gas edged up 0.5% in March. The increase recorded by the non-metal mines was only partially offset by the decrease posted by the metal ore mines.

Other industries

Activities in the finance and insurance rose 0.8%, largely on the strength of very strong trading volumes on the stock exchanges. However, banking services were almost unchanged.

First quarter 2008

Canadian economic activity edged down 0.1% in the first quarter of 2008. The economy started to lose momentum during the second half of 2007. Production cutbacks in manufacturing were significant and widespread during the first quarter 2008, most notably in motor vehicles. If we exclude the production of motor vehicles and its estimated ripple effects on other sectors such as motor vehicle parts, wholesaling and transportation, gross domestic product (GDP) would have risen by 0.1%.

Chart C.4
Motor vehicle manufacturing hampered growth in the first quarter of 2008

The service industries continued to expand 0.5% in the first quarter, but it was not enough to offset the 1.5% decline in the goods industries. Continued strength in retail trade and in the finance and insurance sector, as well as a rebound in accommodation and food services propelled the services-producing industries. Lower activity in forestry and logging, mining and in utilities, combined with the decrease in manufacturing, was behind the drop in the goods-producing sector.

Manufacturing value added contracted 3.0% in the quarter, its third consecutive quarterly drop. The declines were widespread, with 20 of the 21 major industry groups declining. The most significant drops were in motor vehicle production and associated parts, wood products, non-metallic minerals, plastics and rubber products, and chemicals.

Motor vehicle production tumbled 13.4% during the first quarter of 2008, following a 5.4% decline in the fourth quarter of 2007. Extended holiday shutdowns related to inventory control measures and re-tooling substantially reduced December activity. Only a partial recovery was seen in January and February due to continued decreasing demand for new motor vehicles in the United States. The quarter closed with production largely hindered by a major labour strike in March at a parts supplier located in the U.S.

Wood product manufacturing lost ground again as Canadian exports suffered from continued weak new housing starts in the United States and slower construction activity in Canada, forcing more layoffs and closures, both temporary and permanent. The same factors impacted forestry and logging activities which declined in the first quarter of 2008, their third such quarterly decline in the last four. Output in machinery, computer and electronic products and electric equipment manufacturing have all experienced declines in the last three quarters.

Value added in the retail trade sector grew 1.1% in the first quarter with widespread increases. There were notable increases in the volume of activities at new and used cars dealers, partly related to the decrease in the goods and services tax (GST) that came into effect on January 1st. Wholesale trade activities remained essentially unchanged as strong advances in farm and other products were offset by reduced motor vehicle wholesaling as a result of diminished production.

The finance and insurance sector advanced 1.1% in the first quarter on the strength of banking. Real estate agents and brokers posted their third quarterly drop in a row (-4.6%) as transactions in the home resale market declined further.

Industrial production (the output of mines, utilities and factories) dropped 2.1% over the first quarter with all three components declining. Mining activities for both metal ore and non-metallic minerals decreased over the quarter. In the United States industrial production fell 0.1% for the quarter.

The energy sector declined for a second quarter in a row, down 0.4%, with the declines in utilities and pipeline transportation far outweighing a significant jump in coal mining and slight increases in refining activities and support activities for mining and oil and gas extraction.

Tourism-related industries once again fared well with air transportation climbing (+2.8%) for the quarter and food and accommodation services increasing 1.3%.

Data tables

• Table C.1 Real gross domestic product by industry, at basic prices, monthly
• Table C.2 Real gross domestic product by industry, at basic prices, quarterly and annually

Information on methods and data quality available in the Integrated Meta Data Base: 1301.