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Canadian Q3 GDP up 0.6%, growth driven by international demand

Staff writer ▼ | December 3, 2015
Canadian real gross domestic product (GDP) rose 0.6% in the third quarter, following two consecutive quarterly declines.
Canada
Statistics   Final domestic demand was flat
The quarterly growth was driven by increased international demand for Canadian goods and services as exports grew 2.3%.

Final domestic demand was flat after edging up 0.1% in the previous quarter. Household final consumption expenditure rose 0.4%, and residential investment increased 0.6% after a flat second quarter.

Exports of goods advanced 2.7% after increasing 0.5% in the second quarter. Exports of services edged up 0.1%. Imports of goods and services decreased 0.7%, in tandem with weak domestic demand.

Household final consumption expenditure on goods rose 0.8% in the third quarter, driven by outlays on durable goods (+2.3%). Expenditure on services edged up 0.1%.

Final consumption expenditure of the general governments sector decreased 0.4% in the third quarter, following a 0.4% increase in the second quarter. Declines occurred at all levels of government.

Business gross fixed capital formation fell 0.8%, the third consecutive quarterly decline. Investment in non-residential structures and machinery and equipment declined 1.5%.

Businesses reduced their inventory accumulation to $0.6 billion in the third quarter after adding $5.3 billion in the second quarter. Businesses added $3.9 billion to non-farm inventories, compared with $9.2 billion in the previous quarter. Farm inventories were drawn down by $2.1 billion, the seventh consecutive quarterly decrease, as grain holdings were sold off.

Expressed at an annualized rate, real GDP expanded 2.3% in the third quarter. By comparison, real GDP in the United States rose 2.1%.

Exports of goods and services increased 2.3%, following a 0.5% gain in the second quarter.

Exports of goods rose 2.7%, following a 0.5% increase in the second quarter. Exports of motor vehicles and parts grew 5.0%, led by passenger cars and light trucks (+6.0%). Exports of consumer goods (+8.7%) and crude oil and crude bitumen (+5.7%) also contributed to the overall gain.

Declines were recorded in metal and non-metallic mineral products (-1.8%) and basic and industrial chemical, plastic and rubber products (-2.4%).

Exports of services edged up 0.1%, following a 0.4% gain in the second quarter. Exports of commercial (+0.3%) and transportation (+0.3%) services contributed to the increase. These gains were mitigated by declines in travel services (-0.4%) and general governments services (-2.7%).

Imports of goods and services fell 0.7% in the third quarter, following a 0.5% decline in the previous quarter.

Imports of goods were down 0.7%, following a 0.5% decline in the second quarter. Lower imports of passenger cars and light trucks (-7.8%), food, beverage and tobacco products (-7.0%) and intermediate metal products (-7.4%) were the main contributors to the decrease.

These declines were offset by gains in imports of tires, motor vehicle engines and parts (+6.2%), communications and audio and video equipment (+11.9%) and basic chemicals and industrial chemical products (+8.3%).

Imports of services fell 1.0%, the largest decline since the second quarter of 2013. The decrease was driven by lower imports of travel services (-1.7%), transportation services (-1.1%) and commercial services (-0.5%). Imports of services by the general governments sector increased 0.4%.

Household final consumption expenditure increased 0.4% in the third quarter, following a 0.6% gain in the second quarter. Outlays on goods were up 0.8%, driven by durable goods (+2.3%). Semi-durable (+0.2%) and non-durable (+0.2%) goods also contributed to the increase. Outlays on services edged up 0.1%.

Expenditures on transport rose 2.2%, driven by purchases of vehicles (+3.5%) and operation of transport equipment (+1.2%). Recreation and culture (+1.1%) and food and beverage services (+0.4%) also contributed to the growth in household spending. Expenditures on clothing and footwear (-0.3%) were lower.

Business investment in residential structures grew 0.6% following a flat second quarter. The growth was driven by new construction (+3.2%), which offset declines in renovations (-1.6%) and ownership transfer costs (-0.7%).

Investment in non-residential structures decreased 1.7%, the fourth consecutive quarterly decline and the seventh in eight quarters. Engineering structures (-1.8%) and non-residential buildings (-1.0%) both decreased.

Investment in machinery and equipment fell 1.1%, a third consecutive quarterly decline. The decrease was led by industrial machinery and equipment (-3.3%). On the other hand, investment in communications and audio and video equipment grew 3.2%.

Investment in intellectual property products fell 2.1%, a third straight quarter of decline. Mineral exploration and evaluation (-9.3%) and software (-2.0%) were responsible for the decline. Investment in research and development increased 1.3%.

Businesses reduced non-farm inventory accumulation to $3.9 billion in the third quarter, down from $9.2 billion in the second quarter.

Manufacturing inventories were up by $1.8 billion, mainly in non-durable goods (+$1.5 billion). Retail inventories increased by $0.9 billion, also mainly in non-durable goods (+$0.8 billion).

Motor vehicle inventories fell by $0.4 billion, as vehicles were liquidated following a $2.6 billion accumulation in the second quarter. Wholesalers drew down $2.6 billion of inventory after three quarters of accumulation. Farm inventories were down by $2.1 billion, a seventh consecutive quarterly decline.

The stock-to-sales ratio edged down to 0.760 in the third quarter. This was the second highest stock-to-sales ratio since the second quarter of 2009.

The terms of trade fell for the fourth quarter in a row, as rising import prices outpaced increasing export prices. The Canadian dollar depreciated against its American counterpart in the third quarter. Real gross domestic income edged down 0.1%.

Export prices increased 0.9% while import prices rose 2.9%. The overall price level of goods and services produced in Canada edged up 0.1%, after increasing 0.4% in the second quarter.

The price of final domestic demand was up 0.8%, the largest gain since the second quarter of 2011.

Compensation of employees rose 0.2% in the third quarter following a 0.3% gain in the second quarter. Wages and salaries (+0.2%) and employers' social contributions (+0.3%) both increased. Wages and salaries in goods-producing industries declined by 1.2%, while wages and salaries in service-producing industries rose 0.7%.

The gross operating surplus of corporations increased 0.6% in the third quarter, following three straight quarterly declines. The gross operating surplus of non-financial corporations rose 0.4%, after three consecutive quarters of decline.

The growth in the gross operating surplus of financial corporations (+0.5%) slowed considerably from the 4.8% growth recorded in the second quarter.

Overall, nominal GDP rose 0.7% in the third quarter, following a 0.4% increase in the second quarter.

The household saving rate decreased from 4.9% in the second quarter to 4.2% in the third quarter, as growth in household expenditure outpaced the growth in disposable income. The household debt service ratio, defined as household mortgage and non-mortgage payments divided by disposable income, was 14.09%, up slightly from 14.08% in the second quarter.

The national saving rate moved down to 2.9% in the third quarter, as national net saving fell 11.1% from the previous quarter. National disposable income was up 0.5%, after a 0.6% increase in the second quarter.


 

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