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 Manufacturing GDP Analysis – January 2017 - CMC

Manufacturing GDP Analysis – January 2017


Manufacturing and energy drive the Canadian economy forward in January

The Canadian economy began 2017 on an impressive note, with GDP surging ahead by 0.61 per cent compared to December. Equivalent to an annualized increase of more than 7.3 per cent, January's strong performance continued the positive momentum that has been building in the Canadian economy since last summer - GDP has now risen in seven of the last eight months.

strong GDP growth chart

The one note of caution in the headline GDP numbers is the fact that Canadians have, unfortunately, become accustomed to rather tepid economic growth in recent years. Through most of 2015 and 2016, year-over-year economic growth rates were below 1.0 per cent. Since the population was increasing at about the same rate, that meant that on a per capita basis, GDP was effectively flat over that entire period. Economic activity has since accelerated significantly (reaching 2.3 per cent year-over-year in January), but remains well below what we would normally consider to be "strong" growth - in the range of 3-4 per cent.

momentum building chart

At the industry level, GDP gains were relatively widespread, with eleven of the fifteen major economic sectors posting increases. However, within those eleven there were three clear growth drivers in January; mining and energy extraction, manufacturing, and wholesale and retail trade all saw GDP growth in the range of 1.9 per cent compared to December.

GDP growth by sector

In the case of mining and energy, January's increase represents the ongoing recovery of a previously-struggling sector. GDP in those industries has risen dramatically - by 17.9 per cent since May - but remains below levels seen in the spring of 2014. Meanwhile, the spark in economic activity is fuelling new spending by both businesses and consumers. Wholesale trade GDP soared in January - rising by 2.4 per cent, while the numbers for retail trade came in slightly lower at 1.5 per cent.

The only significant negatives in January's GDP figures were in utilities, and agriculture and renewable resource production. A decline in electric power generation, transmission and distribution drove GDP in the utilities sector down by 1.3 per cent, while value-added activity in crop production, forestry and fishing was also lower.

The manufacturing sector has had several ups and downs over the past year or so - largely influenced by movements in petroleum refining and industries that feed into the energy sector. In January, however, GDP gains were not only strong, but remarkably widespread. Of the eleven largest manufacturing industries, ten were higher compared to December. On top of that, all ten posted very strong gains of more than 1.0 per cent.

Manufacturing GDP by Major Industry      
  Dec-16 Jan-17 Dec-Jan Jan 2016-Jan 2017
  ($billions) ($billions) % growth % growth
Total Manufacturing 176.6 180.0 1.9 2.5
  Durables 101.9 103.9 2.0 0.6
  Non-durables 74.9 76.2 1.8 4.7
Major Industries        
  Food 23.9 24.5 2.1 4.1
  Motor vehicles and parts 18.1 18.3 1.1 -5.4
  Chemicals 14.9 15.1 1.2 11.9
  Machinery 14.2 14.4 1.4 11.4
  Primary metals 13.9 14.3 2.6 2.7
  Fabricated metals 12.5 12.9 3.0 -2.2
  Wood products 10.3 10.7 3.4 1.0
  Plastics and rubber prods. 10.3 10.6 2.6 8.4
  Paper products 7.5 7.3 -1.8 -2.3
  Aerospace 6.5 6.7 1.7 -2.6
  Petroleum and coal prods. 6.2 6.3 1.5 -0.4

Leading the way in January were fabricated metals and wood products industries, where GDP was up by 3.4 per cent and 3.0 per cent, respectively. There were also solid gains in primary metals, plastics and rubber products, and in food production.

growth in mfg gdp chart

On the negative side, the only major manufacturing industry to see a drop in GDP was paper production, where value-added activity fell by 1.8 per cent. Even there, however, the decline is not especially concerning; GDP in the paper industry had spiked in December and January's drop represented a return to more normal value-added output levels. In fact, even with that decline, GDP in paper production is up by 3.3 per cent since last July.

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