July 10, 2012
Canada’s industry-based GDP rose a surprisingly sprightly 0.3% in April
Alex Carrick
Chief Economist, CanaData
Industry-based gross domestic product (GDP) in April provided a boost to the prevailing sentiment about the economy by advancing 0.3% month to month, according to Statistics Canada.
That was the strongest monthly reading so far this year. January’s slight increase (+0.1%) was followed by a decline in February (-0.2%), then another marginal gain in March (+0.1%).
December of 2011 (+0.5%) was the last time the GDP growth rate was higher than this April’s figure (+0.3%) from one month to the next.
An individual month doesn’t make a year, however, and that’s why analysts look at “smoothed” data.
The three-month moving average of GDP growth in April was +0.1%. Since the recession, that number has been as high as +0.5% on several occasions and even rose close to +0.6% in January 2010.
On the flip side, it fell to -0.8% 12 months earlier in January 2009 when the recession was doing the most damage.
Year-over-year industry-based GDP in April was +2.0%. That’s in keeping with most expectations for Canada’s growth rate in 2012 as a whole relative to 2011.
The industry-based GDP figures are in “constant’ or inflation-adjusted dollars.
In April, goods-producing industries (+0.8%) charged ahead more forcefully than services (+0.1%).
Mining and oil and gas extraction (+2.7%) had a particularly good month, followed by the category “agriculture, forestry, fishing and hunting” (+1.5%).
Several firms in crude petroleum production experienced recoveries from earlier shutdowns for maintenance and repairs. In mining, there were output increases at copper, nickel, lead, zinc and potash operations.
Among services, wholesale trade (+1.2%) and transportation and warehousing (+0.7%) made significant marks. Retail trade (-0.8%) faltered, as did accommodation and food services (-0.6%).
But results for those two sub-categories were relatively cheery next to the uncharacteristically gloomy performance of the arts, entertainment and recreation grouping (-1.0%)
On the same day that Statistics Canada released its industry-based GDP numbers for April, the Bureau of Economic Analysis (BEA) reported on U.S. personal income and outlays for May.
In current dollars, the personal income of Americans rose 0.2% in May month over month, the same as in April, but down from March, February and January, each at +0.4%.
Personal consumption expenditures (PCE) in the latest month were flat (0.0%) in current dollars, although +0.1% in constant dollars.
PCE in constant dollars in April was also +0.1% after declining 0.2% in March. By way of contrast, February’s figure was +0.6%.
Most notable in the U.S. numbers were reduced spending on motor vehicles and gasoline. The latter is in large measure due to a recent decline in price. May’s Consumer Price Index (CPI) report shows the charge at the pump falling 6.8% month to month and 4.0% year over year.
The conclusion to be drawn from the latest national accounts data is that the American economy is still moving forward, but somewhat sluggishly.
Similar to Canada, the U.S. is on a path to realize real GDP growth of about 2.0% this year. For both countries, full capacity output growth is realized when GDP rises 3.5% to 4.0% annually.
In other words, the current pace of growth is only about half what it should be.
For the pace of expansion in the U.S. to pick up, there must be a return to better month-to-month employment numbers.
The strong jobs growth in the back half of last year has given way to only so-so readings over the past several months.
Nor are the latest initials jobs claims numbers encouraging. First-time out-of-work employment seekers in the latest week (ending June 16) hovered too close to 400,000.
At 387,000, they were only slightly better than in two of the three preceding weeks, when a disappointingly high figure of 389,000 was reached on both occasions.
The number needs to be down around 350,000 to make much of an impact on the jobless rate.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.
(based on seasonally adjusted constant dollars)
