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Manufacturing GDP Analysis – January 2016

Manufacturing leads the Canadian economy to its best monthly performance in over 13 years
 
The Canadian economy roared out of the gate to begin 2016, posting its strongest month-over-month gains since October 2002. GDP grew by 0.63 per cent in January - equivalent to an annualized growth rate of more than 7.5 per cent. The surge in January builds on solid gains in November and December, creating some hope that Canada may finally be turning a corner after years of sluggish growth.

Manufacturing GDP by Major Sector    
  Dec-15 Jan-16 Dec-Jan Jan 2015 - Jan 2016
  ($billions) ($billions) % growth % growth
Total Manufacturing 175.8 179.1 1.9 2.6
  Durables 102.0 104.6 2.6 2.3
  Non-durables 74.0 74.8 1.1 2.9
         
Major Industries        
  Food 23.0 23.8 3.6 5.1
  Motor vehicles and parts 18.5 19.5 5.5 12.6
  Chemicals 14.2 14.1 -0.7 -1.2
  Primary metals 13.5 13.4 -0.5 1.0
  Machinery 13.3 13.0 -2.2 -13.3
  Fabricated metals 12.4 12.9 3.8 -2.3
  Wood products 10.0 10.2 1.5 11.1
  Plastics and rubber prods. 9.7 9.8 1.3 5.3
  Paper products 7.9 7.9 0.1 10.0
  Aerospace  6.9 6.9 -0.2 -6.7
  Petroleum and coal prods. 6.4 6.5 2.0 4.6

Indeed, the economy is starting the year off on a much different note compared to 2015. Last year, rapidly-declining oil prices began to hit home in January, producing the first of five consecutive months of falling GDP. It took some time to dig out of that hole; GDP in January 2016 is only 1.5 per cent higher than it was 12 months earlier. However, that annualized growth rate is almost certain to rise considerably in the coming months.

As in December, the manufacturing sector was the biggest contributor to Canada's economic strength. Last month, manufacturing GDP expanded by a very healthy 1.1 per cent. The pace only accelerated in January as manufacturing GDP jumped by nearly 1.9 per cent - equivalent to an annualized growth rate of more than 22 per cent. In total, manufacturing accounted for close to one third of Canada's overall economic growth in January.

Canadian Economy Jan 16 Chart Image

Although manufacturing led the way, there were positive growth numbers nearly across the board. Growth was especially strong in the transportation, mining and energy, utilities and financial services industries. Public administration (-0.3 per cent), arts and entertainment (-1.2 per cent), and management and administrative services (-0.2 per cent) were among the few industries where GDP fell in January.

Manufacturing drives GDP growth Jan 16

Within the manufacturing sector itself, growth was relatively widespread with seven of the 11 largest manufacturing industries posting gains. Leading the way were Canada's two most important manufacturing sub-sectors: food processing; and motor vehicles and parts production. After dropping in December, GDP in food processing snapped back in January, expanding by 3.6 per cent and reaching a new all-time, inflation-adjusted high of $23.8 billion. For its part, the auto sector boom continued on in January, with GDP rising by 5.5 per cent compared to the previous month. Auto sector GDP is now 12.6 per cent higher than it was at the same time last year.

Auto Sector Jan 2016

While there were modest declines in chemicals, aerospace and primary metals manufacturing, the only major manufacturing subsector to see a significant decrease in value-added activity in January was machinery production. Commercial and service industry machinery, as well as agriculture, construction and mining machinery, were the largest contributors to the 2.2 per cent drop in machinery GDP in January.

GDP Growth Jan 2016

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