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Manufacturing once again helps drive the Canadian economy forward in August

Published by Brad Fougere on October 30, 2015

Manufacturing GDP notes – August 2015

It appears that Canada’s 2015 recession will not extend beyond the first half of the year. The economy grew for the third straight month in August, albeit at a relatively modest 0.1 per cent. Equivalent to an annual growth rate of about 1.7 per cent, that increase adds to much stronger performances in June and July and virtually assures that third quarter GDP numbers will be positive.


Even so, Canada’s economic performance for the year to date remains poor, weighed down by five consecutive months of losses to begin the year. Through August, Canada is on pace for growth of just 1.2 per cent compared to the first eight months of last year – only slightly above the annual population growth rate of 0.9 per cent.

As was the case in each of the two previous months, August’s gains were driven by the goods sector. GDP in goods production rose by 0.3 per cent (an annualized rate of 3.9 per cent). All major sub-sectors posted strong gains, with the exception of construction where activity was flat.

Manufacturing GDP by Major Sector      
  Jul-15 Aug-15 July-Aug Aug 2014 - Aug 2015
  ($billions) ($billions) % growth % growth
Total Manufacturing 174.1 174.8 0.4 0.5
  Durables 101.0 101.3 0.3 -0.8
  Non-durables 73.3 73.7 0.6 2.3
         
Major Industries        
  Food 23.4 23.3 -0.3 2.5
  Motor vehicles and parts 18.7 18.7 -0.1 5.4
  Chemicals 13.7 14.1 3.4 4.1
  Primary metals 13.6 13.8 1.6 -4.2
  Machinery 13.1 13.2 0.6 -3.7
  Fabricated metals 12.8 12.6 -1.9 -7.5
  Wood products 9.5 9.8 3.4 6.1
  Plastics and rubber prods. 9.4 9.3 -1.0 4.8
  Paper products 7.4 7.5 1.2 4.4
  Aerospace  6.7 6.6 -1.9 -9.4
  Petroleum and coal prods. 6.2 6.2 1.1 -5.0

 

For its part, Canada’s struggling energy sector also enjoyed a strong month, advancing by 0.4 per cent (5.4 per cent annualized). The services sector grew as well, albeit at a more modest pace of 0.1 per cent (0.7 per cent annualized), while economic activity in the public sector was essentially unchanged.


While 10 of the 15 major business groupings advanced in August, it was manufacturing that contributed the most to overall economic growth. Manufacturing GDP rose by 0.4 per cent in August ($690 million annualized) and accounted for two thirds of the overall monthly increase in GDP. In fact, the manufacturing sector – which struggled considerably earlier in the year – has been one of Canada’s most important engines of economic growth since May, significantly outpacing overall GDP growth for three consecutive months.

Within the manufacturing sector, however, performance was mixed. Continuing the trend of past months, non-durable goods producers outperformed their counterparts in durable goods industries. GDP in non-durable manufacturing rose by 0.6 per cent, while increasing by 0.3 per cent in durable goods manufacturing. However, production levels are beginning to pick up in the durable goods sector, buoyed by a resurgent automotive sector.

Four industries drove manufacturing GDP forward in August, while most others saw flat or negative growth. Chemicals ($465 million), wood products ($322 million), computers and electronics ($258 million), and primary metals producers ($215 million) all saw significant advances. The increase in primary metals output is good news for an industry that has struggled mightily so far this year. Through eight months, GDP in primary metals production is down 5.1 per cent compared to the same period last year.

The gains in August noted above were partially offset by losses in two important manufacturing industries: transportation equipment and fabricated metals. GDP in transportation equipment manufacturing fell by nearly $400 million in August – a decline of 1.4 per cent for the month. Most of that loss is difficult to pinpoint, as it was concentrated in the other transportation equipment manufacturing sub-category, which excludes motor vehicles, aerospace, rail and shipbuilding. Finally, fabricated metals producers continued their struggles in 2015, with GDP in that industry falling by an annualized $242 million (1.9 per cent) in August.   


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