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Manufacturing GDP Analysis - November 2017 

Surge in manufacturing drives strong economic growth in November

After a period of slowing growth, the Canadian economy recovered smartly in November as a spike in manufacturing activity drove overall growth to its highest level since May. All told, GDP rose by 0.42 per cent in November, equivalent to an annualized increase of about 5.1 per cent. That 0.42 per cent growth rate snaps the Canadian economy out of a summertime rut and is almost three times higher than combined GDP growth from July to October.

With strong numbers for November, the Canadian economy is poised to end 2017 even better than originally thought. With eleven months in the books, GDP is on pace to expand by about 3.4 per cent in 2017 – the fastest annual growth in more than a decade. 

The increase in November was driven by a surge in manufacturing activity in Canada, specifically in the auto sector. Manufacturing GDP rose by 1.8 per cent compared to October. That alone was responsible for close to half of all economic growth nation-wide for the month. Not including the effect of manufacturing, overall GDP rose by 0.26 per cent in November – still a solid performance but nowhere near the strength of 0.42 per cent.

Although manufacturing was far the away the biggest story, there was positive growth nearly across the board in November. Of the fifteen major industrial categories, thirteen were higher and the declines in the remaining two – agriculture, forestry, fishing and hunting; and accommodation and food services – were negligible. There were strong increases in utilities (0.74 per cent), wholesale and retail trade (0.52 per cent), and mining and energy (0.46 per cent), as well as solid growth across a range of services sector industries.

As noted above, the spike in manufacturing GDP was concentrated in the auto sector. Motor vehicles production had been a drag on the manufacturing sector – and the economy generally – for most of the summer and into the fall, first because of longer-than-usual plant shutdowns to draw down on overbuilt inventories, and then later because of work stoppages. All told, from June to October, GDP in motor vehicles production had fallen by 13.6 per cent. With those issues now in the rearview mirror, the auto sector rebounded in November with a 10.7 per cent jump in value-added output, recovering most of the losses since June.

While the auto sector was the unambiguous growth driver in November, there were healthy gains in other manufacturing industries as well. Of the eleven major manufacturing industries in the country, nine were higher. Leading the way was the chemicals sector where GDP rose by 5.3 per cent. There was also strong GDP growth in plastics and rubber products, paper products and machinery production. The only weak spot in manufacturing was petroleum and coal refining, where GDP fell by 6.2 per cent, erasing two months’ worth of gains.

 

 

 

 

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