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Manufacturing GDP notes – September 2015

When June’s GDP numbers confirmed that the Canadian economy was in recession, they did so in the gentlest way possible; second-quarter growth was indeed negative, but figures for the month of June were exceptionally strong, pointing to better days ahead.

Q3 GDP growth chart

September’s GDP data tell the exact opposite story. They confirm that the recession ended over the summer, but did so in spectacularly weak fashion. For the third quarter of the year, industry-level GDP grew by 0.5 per cent – equivalent to an annualized rate of 1.9 per cent (This figure differs from expenditure-based GDP calculations which reported annualized growth of 2.3 per cent). However, September was the single worst month for the Canadian economy since March 2009. GDP tumbled by 0.5 per cent compared to August, equivalent to an annual growth rate of -5.7 per cent. 

GDP sept 15 chart

Prior to September’s contraction, the Canadian economy had been on a streak of three consecutive months of positive, albeit decelerating, growth. That changed swiftly in September as Canadians were reminded that our struggling economy is by no means out of the woods yet. With three quarters of the year in the books, industry-level GDP is up just 0.8 per cent over the same period in 2014 – below the national population growth rate. When the population grows faster than the economy, Canadians are becoming worse off.

GDP growth by major sector chart

Nine of the fifteen major industrial categories posted losses in September, but far and away the steepest decline came in the energy sector. After holding out for as long as possible, oil and gas companies began to dial back activity and lay off staff in September. As a result, GDP in oil and gas extraction fell by 5.5 per cent in just one month. The decline was especially severe in the oil sands where GDP was 9.4 per cent lower compared to August.

Manufacturing GDP by Major Sector      
  Aug-15 Sep-15 Aug-Sept Sept 2014 - Sept 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

 

While oil and gas extraction were certainly the main drivers behind September’s poor showing, they were by no means the only weak spots. Even excluding the energy sector, the Canadian economy contracted by an annualized rate of 1.3 per cent. Manufacturing, accommodation and food services, and transportation and warehousing were among the weakest performers. At the other end of the spectrum, agriculture, utilities and health care all saw positive gains for the month.

Monthly GDP growth by mfg sector chart

Looking specifically at the manufacturing sector, the numbers were almost all negative in September. Of the country’s eleven largest manufacturing sub-sectors, only one recorded positive growth; primary metals industries posted a healthy 0.4 per cent gain for the month, buoyed by aluminum and non-ferrous metal production. Aside from that, there was almost no good news at all for manufacturers. Among Canada’s most important sub-sectors, losses ranged from 0.3 per cent in machinery production to 2.2 per cent in motor vehicles.

 

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