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September and third quarter GDP growth on strong manufacturing numbers

Published by Brad Fougere on November 28, 2014

Erasing the memory of an unexpected dip in August, the Canadian economy picked up steam in September, led by a turnaround in the manufacturing sector.

After falling by 0.1 per cent in August, Canadian GDP rebounded with a 0.4 per cent increase – its highest monthly growth rate since May. Manufacturing played a big role in this improved economic performance, posting a monthly GDP growth rate of 0.8 per cent in September.

The increase in manufacturing GDP helped to erase the memory of a bad showing in August when a widespread drop in economic activity across manufacturing sub-sectors sapped the momentum generated by three solid months of growth.

Even so, the manufacturing remains in a position to post one of its strongest years in recent memory. Manufacturing GDP in September was 3.7 per cent higher than it was the same month last year, compared to 2.8 per cent for the economy as a whole.

Although the manufacturing sector as a whole recorded solid gains in September, the performance was much more uneven across the various major industry groupings. Motor vehicles and parts producers continued their roller-coaster ride through 2014, with a 2.6 per cent increase in GDP in September. Machinery producers also made strong gains that month.

Offsetting those gains were sharp losses in petroleum refining. Scheduled maintenance shutdowns in September contributed to a 5.3 per cent decline in GDP in September. That drop alone was enough to knock 0.2 percentage points off manufacturing GDP growth that month.  Paper manufacturers (down 2.3 per cent) and fabricated metals producers (down 1.4 per cent) also saw lower GDP in September.

Third Quarter GDP

Third-quarter GDP data was also released this morning, showing the Canadian economy posted a 0.7 per cent gain over the summer, slightly lower than the 0.9 per cent increase in the second quarter of the year.

As in the second quarter, exports led the way, with GDP gains of 2.2 per cent. Household expenditures also continued to drive economic growth across Canada.

There was good news to be found for manufacturers in the underlying numbers as well. Business capital investment was up, led by purchases of machinery and equipment, while business outlays on intellectual property – including research and development, as well as software investment – were higher as well.

Finally, recent trends in inventory accumulation continue to generate positive signs for manufacturers. In general, businesses across Canada have been adding less and less to their inventories in recent quarters. Manufacturers, however, have seen significant declines in inventory levels. Inventories fell by nearly $300 million in the third quarter. While this represents a drag on current economic growth numbers, it also points to better times ahead. Declining inventories point to strong demand and to future production growth.

Found in: Stats Canada

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