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Manufacturing GDP Analysis – August 2016

Energy and mining power GDP growth August; food and primary metals drive manufacturing gains

Energy and mining power GDP growth August; food and primary metals drive manufacturing gains August was a month of mixed results for the Canadian economy. At a glance, the numbers are relatively positive - GDP was up a reasonably solid 0.23 per cent, building off the (revised) 0.41 per cent growth rate in July. However, much of August's increase can be pinned on the mining and energy sector, where output was still returning to normal in the aftermath of the Ft. McMurray wildfires. While GDP in those industries grew by 1.4 per cent to reach their highest levels since February, the rest of the economy expanded by less than one tenth that rate.

GDP August

Eight months into 2016, it is becoming clear that this will be yet another year of modest economic growth. Year-to-date GDP growth is trending at around 1.3 per cent. While slightly better than the 0.9 per cent growth recorded in 2015, this pace remains well below recent trend levels.

Energy Sector

As in July, while overall growth was modest it was fairly well-distributed across the economic base. Of the fifteen major economic sectors, ten posted gains while five recorded losses. Although mining and energy captured the largest dollar-value gains, the fastest growth was in utilities, where GDP jumped by 2.4 per cent. Construction (0.5 per cent), transportation and warehousing (0.4 per cent), and accommodation and food services (0.4 per cent) were also higher. Meanwhile, GDP in agriculture, forestry and fishing was down 0.5 per cent, while there were small losses in professional and business services, as well as education.

GDP by sector

For its part, manufacturing had a relatively strong month in August, with GDP rising by 0.3 per cent. However, those gains were driven by only a few industries. Of the eleven major manufacturing sub-sectors, just four were higher in August, while the remaining seven saw value-added output decline.

On the positive side, Canada's food and primary metals producers continued to break new ground. GDP in food processing was up 1.7 per cent in August, while primary metals activity surged ahead by 3.0 per cent. Those two industries have posted consistent and strong gains since at least early 2015. GDP in machinery and motor vehicles and parts production was also higher. In the case of machinery, the 2.7 per cent increase is a welcome deviation from a steady downward trend that began in early 2015. Meanwhile, the 1.6 per cent increase in auto and parts production was not quite enough to offset a similar-sized loss in July.

GDP by Industry

On the negative side, GDP was down sharply in industries with direct ties to the energy sector. Although energy output itself was higher, petroleum refining was down sharply in August (-2.7 per cent). Similarly, Canada's fabricated metals industries continue to struggle. The 2.5 per cent decline in August marks the eighth time in the last nine months that GDP in that industry has fallen. There were also smaller declines in chemicals (-1.4 per cent) and aerospace (-0.9 per cent) production.

 

Gap primary and fab metals

 

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