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The Canadian economy started the fourth quarter of 2015 off on a tepid note, recording essentially flat growth for the month of October. National GDP grew by just 0.02 per cent compared to September – equivalent to an annual growth rate of 0.2 per cent. These weak figures are especially worrying given the poor showing in September, when GDP fell by 0.5 per cent – Canada’s worst monthly economic performance since March 2009.

GDP growth month chart image

The combination of a recession in the first half of the year, along with the current bout of weakness, points to a forgettable year for the Canadian economy. Through 10 months, Canada is on pace to record GDP growth of just 0.7 per cent in 2015 – the slowest rate of growth since the 2009 recession.

The widening gap between economic growth in Canada and the United States points to an interesting policy challenge for the Bank of Canada. While the US economy is far from firing on all cylinders, it is doing much better than the Canadian economy. Through the first three quarters of the year, US GDP is on pace to grow by 2.6 per cent and on a year-over-year basis, has outpaced Canadian economic growth for five consecutive quarters.

can vs us growth chart image

In response to reasonably healthy economic growth, the US Federal Reserve has begun to tighten monetary policy, implementing the first interest rate hike seen in the US in nearly a decade. Meanwhile, Canadian interest rates have been moving in the opposite direction in 2015 and with October’s weak GDP numbers, the outlook is for a potential further loosening of monetary policy in this country. If that happens, the divergence in Canada-US economic performance and interest rates could push the Canadian dollar even lower than the low-70-cent range where the loonie is trading at the present time.

Manufacturing GDP by Major Sector

  Sep-15 Oct-15 Sept-Oct Oct 2014 - Oct 2015
  ($billions) ($billions) % growth % growth
Total Manufacturing 174.9 173.9 -0.6 -0.9
  Durables 101.2 100.4 -0.8 -3.3
  Non-durables 73.9 73.5 -0.4 2.2
Major Industries        
  Food 23.6 23.4 -0.7 2.6
  Motor vehicles and parts 18.2 17.8 -2.2 -3.0
  Chemicals 14.4 14.2 -1.4 3.6
  Primary metals 13.5 13.4 -0.3 -5.8
  Machinery 13.1 13.2 0.4 -9.4
  Fabricated metals 12.7 12.5 -1.5 -5.9
  Wood products 9.7 9.7 -0.9 5.8
  Plastics and rubber prods. 9.6 9.4 -1.8 -0.6
  Paper products 7.3 7.2 -1.2 1.8
  Aerospace  7.0 6.9 -1.4 -5.1
  Petroleum and coal prods. 6.0 5.9 -1.6 -7.2


Turning back to October’s GDP numbers, economic growth was mixed across the fifteen major industrial categories. Nine of the fifteen recorded positive growth, led by agriculture, and mining and energy. GDP in agriculture grew by a healthy 0.8 per cent for the month, while mining and energy was not far behind, at 0.7 per cent. Growth elsewhere was relatively modest.

GDP sector growth oct 15 image

At the other end of the spectrum, the utilities sector had a poor month, with GDP there falling by 1.4 per cent. Other sectors to see value-added activity contract included transportation and warehousing (-0.4 per cent), manufacturing (-0.3 per cent), and wholesale and retail trade (-0.3 per cent).

mfg sector gdp chart image

Looking specifically at the manufacturing sector, the numbers were mixed, with six of the eleven largest industrial categories contracting and five growing. The steepest losses were in plastics and rubber industries, along with those in food production. Although not one of Canada’s largest manufacturing sectors, beverage and tobacco production also fell sharply in October. Offsetting those losses to some extent was an increase in GDP in wood products industries (1.1 per cent), as well as machinery (0.9 per cent) and chemicals (0.8 per cent).



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