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Manufacturing GDP Analysis – October 2016

Manufacturing and energy drive GDP down in October

Two days before Christmas, Statistics Canada left a lump of coal in our stockings with the release of October’s GDP numbers. After September’s release  suggested that the Canadian economy might be finally picking up speed, October’s performance abruptly put that notion to rest. GDP fell by 0.27 per cent (equivalent to an annualized rate of -3.2 per cent) compared to September, ending a streak of four consecutive months of growth.  Aside from May, when the impact of the Ft. McMurray wildfires drove the economy down by 0.63 per cent, October’s GDP performance was the worst in over a year.

GDP Growth Chart

As a result, Canada remains pace to record a second consecutive year of sub-one-per cent growth. Through 10 months, GDP is on pace to rise by 0.96 per cent for 2016 after growing by 0.81 per cent in 2015. Except for the 2008-2009 recession, one would have to go back all the way to 1990-1991 to find a worse two-year economic performance in Canada.


GDP 2 year chart

The decline in GDP in October was spread across a wide range of industries. Of the 15 major economic sectors in Canada, 10 were down compared to September. However, those declines were heavily concentrated in the goods sector and in energy and manufacturing in particular. GDP in the energy sector fell by 1.9 per cent, while manufacturing GDP was 2.0 per cent lower. On the energy side, the decline comes after four consecutive months of strong growth, while in manufacturing there was no significant trend in any direction prior to October’s decline.


GDP down in October

Any positive news in October came in the services sector. GDP in wholesale and retail trade was up 0.6 per cent, while professional, scientific and technical industries saw value-added output rise by 0.4 per cent. Beyond those two industries, however, there was little about which to be happy. 




Turning to the manufacturing sector itself, there were virtually cross-the-board declines in October. Of the eleven largest manufacturing industries in Canada, nine posted lower GDP numbers compared to September and only paper producers realized any significant gains (0.9 per cent growth). Making matters worse, most of those declines were not small. Only aerospace was able to escape the month with less than a 1.0 per cent drop in GDP.

 

Manufacturing GDP by Major Industry


  Sep-16 Oct-16 Sept-Oct Oct 2015 - Oct 2016
  ($billions) ($billions) % growth % growth
Total Manufacturing 175.5 171.9 -2.0 -0.2
  Durables 100.3 98.2 -2.1 -2.4
  Non-durables 75.2 73.7 -2.0 2.5
         
Major Industries        
  Food 24.6 24.1 -1.9 7.4
  Motor vehicles and parts 17.8 17.6 -1.3 -2.5
  Chemicals 14.7 14.7 0.2 7.4
  Primary metals 13.8 13.4 -2.9 -0.2
  Machinery 13.6 13.0 -4.7 -4.5
  Fabricated metals 12.5 12.1 -3.4 -9.8
  Wood products 10.3 10.2 -1.3 4.3
  Plastics and rubber prods. 10.1 9.7 -3.8 2.5
  Paper products 7.2 7.2 0.9 -2.3
  Aerospace 6.6 6.5 -0.7 -3.1
  Petroleum and coal prods. 6.3 5.8 -6.5 -6.9

 

At the other end of the spectrum, the largest drop was in petroleum and coal refining, where scheduled maintenance work slowed output and drove GDP down by 6.5 per cent. There were major declines in other industries as well. On the durable goods side, machinery (-4.7 per cent), primary metals (-2.9 per cent), and fabricated metals industries (-3.4 per cent) all saw value-added output fall dramatically in October. For non-durables, GDP in plastics and rubber products fell by 3.8 per cent, while food processing was down 1.9 per cent. 

 

 

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