Canada Fourth Quarter Gross Domestic Product Report


The following is the text of the fourth quarter GDP report released by Statistics Canada today.

Real gross domestic product (GDP) edged up 0.2% in the fourth quarter, similar to the gain in the third quarter. On a monthly basis, real GDP by industry declined 0.2% in December.

Final domestic demand was up 0.6%, compared with a 0.2% gain the previous quarter. Household and government final consumption expenditures and business fixed capital investment all increased. Inventory investment slowed sharply from the third quarter. Imports were down, while exports increased slightly.

Mining and oil and gas extraction was the main source of industrial growth in the fourth quarter. Construction, the public sector, utilities and the finance and insurance sector also increased. Manufacturing recorded a significant decrease (- 2.2%), with both durable and non-durable goods production retreating. The arts and entertainment sector, transportation and warehousing as well as wholesale trade also declined.

Expressed at an annualized rate, real GDP expanded 0.6% in the fourth quarter. By comparison, real GDP in the Untited States grew 0.1%.

Household spending on goods and services advanced 0.7% in the fourth quarter, the same pace as in the third quarter. Consumer spending grew faster in the last two quarters of 2012 than in any quarter since the fourth quarter of 2010.

Spending on goods was up 0.7%, as outlays on durable goods increased 0.9%. Consumer spending on services was 0.7% higher.

Outlays on transport advanced 1.0%, the second consecutive quarterly increase, driven by purchases of vehicles (+1.8%).

Outlays on recreation and culture increased 0.3%, following a 0.4% advance in the third quarter. Spending on insurance and financial services increased 1.0%, after two quarters of decline.

Higher business investment in plant and equipment:

Business investment in non-residential structures advanced 1.6% in the fourth quarter, following a 0.5% decline in the third quarter. Outlays on both non-residential buildings and engineering structures were up.

Business investment in machinery and equipment grew 0.3%, the third consecutive quarter of weak growth. Industrial machinery and equipment outlays were down 1.5% in the quarter. Investment in medium and heavy trucks, buses and other motor vehicles (-1.7%) was also down, the third consecutive quarterly decline.

Investment in aircraft and other transportation equipment (+13.6%) was notably higher. Outlays on computers and peripheral equipment were up 3.7%, following three quarters of decline.

Investment in housing turns up:

Business investment in residential structures rose 0.2% in the fourth quarter, after declining 0.6% in the third quarter. Both renovation activity (+0.6%) and new home construction (+0.3%) were higher.

Ownership transfer costs decreased 0.8%, following sharper declines in the second and third quarters, on weaker housing resale activity.

Government spending advances:

Government final consumption expenditure increased 0.5% in the fourth quarter, following a decline of 0.1% in the third quarter.

Final consumption outlays of government had been weak over the previous four quarters.

Slowdown in business inventory accumulation:

Non-farm business inventory accumulation was sharply lower in the fourth quarter ($5.7 billion) compared with the third quarter ($13.5 billion).

Manufacturers’ inventories of durable goods (-$2.1 billion) were down. Wholesalers’ inventories of durable goods (-$2.3 billion) were also down, while retailers’ inventories of durable goods rose by $2.7 billion.

Farm inventories, notably of grains, were sold off in the fourth quarter.

Imports down:

Imports of goods and services fell 0.3% in the fourth quarter, the first decrease since the third quarter of 2011.

Industrial machinery, equipment and parts (-3.6%), basic and industrial chemical, plastic and rubber products (-3.3%) and motor vehicles and parts (-1.5%) imports were the main contributors to the decline.

Aircraft and other transportation equipment imports rebounded 13.1% in the fourth quarter, following an 8.1% decline in the third quarter.

Imports of services were down 0.7%, as all categories of services fell except travel services (+0.8%).

Exports edge up:

Exports edged up 0.3% in the fourth quarter, following a 1.9% decline in the third quarter.

Exports of goods were up 0.3%, with farm, fishing and intermediate food products (+17.2%) and energy products (+1.5%) contributing the most to the increase.

Exports of metal ores and non-metallic minerals (-8.3%) and metal and non-metallic mineral products (-2.8%) were notably lower. Electronic and electrical equipment and parts exports fell 4.6%, the fifth quarter of decline.

Exports of services increased 0.2%, led by a 2.4% increase in travel services.

Economy-wide income expands at slower pace:

Nominal GDP expanded 0.5% in the fourth quarter, slower than the 0.9% pace of the previous quarter.

Compensation of employees rose 0.6% following a 1.1% increase in the third quarter. Wages and salaries in service-producing industries grew 0.4%, one-third the pace of the previous quarter (+1.1%).

The net operating surplus of corporations fell 1.0%, following a 0.7% gain in the previous quarter and a weak first half of the year. Net operating surplus of non-financial corporations decreased 1.5%, while that of financial corporations increased 3.4%.

Household savings down:

Household disposable income (in current dollars) increased 0.3% in the fourth quarter as primary incomes increased 0.5%, and transfers paid to other sectors outpaced transfers received. Household final consumption expenditure was up 0.7% in the quarter, and the household saving rate decreased to 3.8% in the fourth quarter from 4.2% in the third quarter.

The household debt service ratio, defined as household mortgage and non-mortgage interest paid divided by household disposable income, was 7.4% in the fourth quarter. This ratio is similar to that of the previous three quarters but less than the average rate of 7.6% recorded in 2011.

The national saving rate was 4.4%, compared with 5.2% in the third quarter. The decrease resulted from lower household, corporate and government savings. National disposable income edged down 0.1%, after 0.5% growth in the third quarter.

Improved terms of trade:

Canada’s terms of trade, which measure export prices relative to import prices, advanced 1.2% in the fourth quarter. Real gross domestic income increased 0.5%.

The price of goods and services produced in Canada rose 0.4%, after advancing 0.6% in the third quarter. Export prices increased 1.0%, following three quarters of decline. Import prices (-0.1%) were slightly lower following a 2.2% decline in the third quarter.

The price of final domestic demand rose 0.1% after increasing 0.4% in the third quarter.

Annual, 2012:

Real GDP expanded 1.8% in 2012 after growing 2.6% in 2011. Final domestic demand was up 1.9%, following a 2.7% increase in 2011.

All major industrial sectors rose in 2012 with the exception of arts and entertainment, and public administration. Goods production increased 1.9% while the output of services grew 1.8%.

Construction, notably residential building, and manufacturing, led by transportation equipment, were the main contributors to growth in goods production. Health care and social services, finance and insurance, professional services as well as wholesale and retail trade contributed to the increase in service producing industries. A labour dispute in professional hockey contributed to the decline in the arts and entertainment sector in 2012.

Household consumption spending rose 1.9%, driven by outlays on durable goods (+2.8%) and services (+2.2%). By comparison, consumer spending was up 2.4% in 2011.

Government final consumption expenditure increased 0.4% in 2012. The pace of growth in government spending has slowed in every year since 2008, when it increased by 4.6%.

Business investment in residential structures advanced 5.8% in 2012, three times the pace (+1.9%) set one year earlier. New home construction was up 12.8%. On the other hand, business investment in plant and equipment (+6.2%) grew at a slower pace compared with one year earlier (+10.4%).

Trade volumes slowed considerably in 2012. Exports rose 1.6%, one-third their pace in 2011 (+4.6%). Imports grew 2.9%, half their pace in 2011 (+5.8%).

Household disposable income (in current dollars) advanced 3.4% in 2012. The household saving rate edged up to 4.0% from 3.8% one year earlier.

The household debt service ratio was 7.4% in 2012. This ratio has been declining since 2007, indicating that debt servicing requires a smaller portion of household disposable income.

Real gross domestic income grew 1.5% in 2012, less than half the pace set in 2011 (+3.6%). Canada’s terms of trade fell 1.2% after gaining 3.6% in 2011.

The price of goods and services produced in Canada increased 1.3%, compared with an increase of 3.1% in 2011. The price of final domestic demand was up 1.6%, following a 2.3% increase in 2011.

Gross domestic product by industry, December 2012:

Real GDP declined 0.2% in December, following a 0.3% increase in November. Manufacturing and, to a lesser extent, retail trade and utilities were the main sources of the December decline. Wholesale trade, transportation and warehousing, as well as the arts and entertainment sector also decreased. Increases were recorded in finance and insurance, mining and oil and gas extraction, accommodation and food services, the public sector (education, health and public administration combined) and construction.

Manufacturing production declined 1.8% in December, after a 0.9% increase in November. Declines were widespread, as manufacturing of both durable and non-durable goods retreated. Motor vehicle manufacturing fell 9.9%, partially as a result of longer than usual holiday shutdowns. There were also decreases in fabricated metal products, food, furniture and related products, and motor vehicle parts manufacturing.

Retail trade declined 1.6% in December, following three consecutive monthly increases. Reduced output of motor vehicle and parts dealers was the main contributor to the December decline. Retailing at electronics and appliance stores fell 10.1% in December, following strong activity in November. Wholesale trade (-0.6%) also declined in December, primarily because of a decrease in the wholesaling of machinery and equipment.

Utilities fell 1.9% in December, after three consecutive monthly increases. Both electricity production and natural gas distribution receded.

Gains in the finance and insurance sector were widespread in December. Banking and other depository credit intermediation increased 0.9%. Increased mutual fund activity and strength in new corporate bond issues led to gains in financial investment services.

Mining and oil and gas extraction grew 0.3%. The increases in coal and metal ore mining outweighed the declines in non-metallic mineral mining (in particular potash). Oil and gas extraction edged up 0.1%.

Construction output was up 0.2%, as increases in engineering, repair and non-residential building construction more than offset a slight decline in residential building construction. The output of real estate agents and brokers fell for a third consecutive month.

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