Economic Analysis: GDP – April  2017

Manufacturing weighs on an otherwise solid month for the Canadian economy

The Canadian economy continued its recent growth streak in April, posting its sixth consecutive monthly increase and tenth in the last 11 months. In spite of a steep drop in the manufacturing sector, overall GDP growth came in at 0.22 per cent in April, down from the (revised) 0.46 per cent pace set in March, but still equivalent to a reasonably strong annualized growth rate of about 2.7 per cent.

The recent string of positive GDP numbers has put Canada’s long period of economic stagnation to a decisive end. After averaging just 1.2 per cent over the last two years, economic growth has been picking up steam. April’s GDP numbers were 3.3 per cent higher than they were a year earlier and through the first four months of the year, the economy is running 2.8 per cent higher compared to the same period last year.

 

GDP gains in April were once again relatively widespread with 12 of the 15 major economic sectors recording positive growth. However, gains were heavily concentrated in the services sector, which expanded by 0.29 per cent compared to just 0.05 per cent on the goods side.

Some of the largest increases were in the arts, culture and tourism industries as Canada gears up for its 150th birthday. GDP in accommodation and food services industries was up by 1.1 per cent, and the much smaller arts and entertainment sector saw growth of about 2.8 per cent. There were also strong gains in transportation and warehousing (1.0 per cent), while professional, scientific and technical services industries, along with wholesale and retail trade, all posted growth in the range of 0.5 per cent.

 

On the goods side, there was strength in energy and mining in April but GDP was down in agriculture and renewable resource industries, and down steeply in manufacturing.

For its part, manufacturing GDP gave back most of the gains it made in March, contracting by about 0.9 per cent in April. Adding to the disappointment was a significant revision to what had initially been reported as an outstanding month for Canadian manufacturers in March. When March GDP numbers were first released, it was estimated that manufacturing GDP had expanded by a remarkable 1.6 per cent that month. However, with the release of April’s numbers, estimates for March were dialed back to just below 1.0 per cent.

In spite of the decline in April, value added activity in manufacturing has remained reasonably strong so far this year. Through the first four months of 2017, manufacturing GDP is 2.1 per cent higher than it was over the same period last year.

 

 

In April, however, the story was largely a negative one. Looking at specific industries, the largest declines in manufacturing GDP were in motor vehicles and parts (-3.0 per cent), along with machinery production (-2.9 per cent). Mitigating those losses to some degree was the fact that both came after large spikes in March.

 

The drop in manufacturing GDP was not limited to those two industries. Economic activity in the wood products, petroleum refining, and fabricated metals industries were all down as well.

On the positive side, Canada’s food products manufacturers continued their dominant performance in April, posting yet another solid month of growth and another all-time high in value-added output. From January through April, GDP in food products is more than 7.0 per cent higher compared to the same four-month period last year. GDP in aerospace was also up slightly, and there were gains in paper products and certain chemicals industries – pharmaceuticals and plastic polymers.

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