Canada GDP improves 0.6%; manufacturing rebounds

Gross domestic product (GDP) in Canada was up 0.6 percent in January as the economy bounced back from the 0.7 percent decline registered in December 2007. This is according to a report released March 31 by Statistics Canada.

Growth was broadly based, with wholesale trade and manufacturing leading the way. Growth in manufacturing in January was widespread, with almost one-third of the gain attributable to the partial recovery in motor vehicle manufacturing. This partial recovery rippled to other industries, such as rail and truck transportation.

Increases were also recorded in the financial sector, retail trade, oil and gas extraction and exploration, accommodation and food services, and agriculture. Conversely, utilities, mining excluding oil and gas extraction, and forestry declined.

Nearly half of December decline in manufacturing is regained
After experiencing a significant 3.4 percent decline in December and falling to its lowest level since December 2001, manufacturing activity increased 1.7 percent in January. The 2.6 percent increase in durable goods manufacturing far outpaced the modest 0.4 percent increase in non-durable goods. Of the 21 major manufacturing groups, 16 increased, accounting for 71 percent of total manufacturing value added.

After tumbling 27 percent in December, motor vehicle manufacturing advanced 12 percent in January. Production of motor vehicle parts followed a somewhat similar pattern, regaining a portion of its December retreat.

Preliminary information for February 2008 indicates a continuation of the recovery in motor vehicle production, although at a much reduced pace than in January. Additional momentum for the manufacturing sector came from machinery, primary metal, and beverage and tobacco manufacturing. However, chemical product manufacturing slipped.

Wholesaling activities leap forward
After a lackluster December, wholesaling activities leaped forward 2.8 percent in January, surpassing its previous peak attained in November 2007. Although the gains were widespread, the primary source of growth was in the activities of miscellaneous wholesaler-distributors. This trade group consists primarily of wholesalers of agricultural chemicals and supplies, non-agricultural chemicals, and recyclable materials.

Significant increases were also recorded in the wholesaling of food products, building materials, machinery and electronic equipment, and motor vehicle parts and accessories. Conversely, alcohol and tobacco wholesaling activities fell.

Energy sector advances
The energy sector advanced 1.1 percent in January and returned to its October-November level. Petroleum and natural gas extraction moved forward 1.4 percent. The quantity of natural gas in storage decreased during the month in both Canada and the United States, driven by increased demand from the United States. Furthermore, natural gas distribution declined 1.1 percent in January. The production of electricity slipped 0.6 percent.

The output of the mining sector excluding oil and gas plunged 5.4 percent in January. Metal ore mines were down 2.9 percent, while non-metallic mineral mines (which include diamonds) tumbled 10.0 percent. Support activities for mining and oil and gas extraction posted a robust 5.6 percent gain, returning to their year-ago level. Both contract drilling and rigging were up considerably.

Industrial production (the output of mines, utilities and factories) increased 1.1 percent in January. The increases in manufacturing and mining were slightly tempered by the decline in utilities. In the United States, industrial production rose 0.1 percent in January, as utilities increased, while mining fell and manufacturing remained unchanged.

Retail trade activities rise
Value added in the retail trade sector rose 1.2 percent in January. Significant increases in activities by clothing stores, furniture, home furnishings and electronics stores, convenience and specialty food stores, and new car dealers, propelled the sector. These increases were dampened by a decline in the volume of sales of pharmacies and personal care stores.

Construction up slightly
The construction sector edged up 0.1 percent in January. Both residential (+0.1 percent) and non-residential (+0.2 percent) building construction advanced, while engineering and repair work essentially stood still.

In the non-residential sector, commercial building construction posted a gain, public building construction retreated and industrial construction was flat.

A strong increase in alterations and improvement work, combined with a rise in row house construction, outpaced the declines in the other types of residential construction (such as single homes). The real estate agents and brokers industry remained unchanged for the month, as the overall activity in the resale market for homes was almost flat.

Other industries

Activities in the finance and insurance sector grew 0.3 percent, on the strength of the record volume of transactions on the stock exchanges. However, mutual funds and most of the standard banking services contracted in January.