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GDP

Canadian economic accounts for fourth quarter 2014 and December 2014

Ottawa - Real gross domestic product (GDP) grew 0.6% in the fourth quarter, following a 0.8% gain in the third quarter. On a monthly basis, real GDP increased 0.3% in December.

Household final consumption expenditure rose 0.5%, contributing to economic growth in the fourth quarter, while business gross fixed capital formation edged down 0.1% after a strong third quarter. Final domestic demand rose 0.4%, following a 0.7% increase.

After two quarters of drawing down on inventories, businesses, mostly in retail and wholesale trade, added $8.0 billion to stocks.

Household spending on durable, semi-durable and non-durable goods all increased. Outlays on services were also higher.

Lower business gross fixed capital formation was driven by a decrease in investment in non-residential structures (-0.5%) and machinery and equipment (-0.8%).

Exports of goods and services fell 0.4% after increasing 2.2% in the previous quarter. Exports of goods were lower, while those of services were higher. Imports were up 0.4%.

Most major industrial sectors increased production in the fourth quarter. The value added of service industries rose 0.6%, while that of goods-producing industries increased 0.5%.

Oil and gas extraction and the finance and insurance sector were the main contributors to growth in the fourth quarter. The public sector posted a notable increase, led by educational services. There were also gains in utilities, construction, wholesale and retail trade, professional services, accommodation and food services as well as transportation and warehousing services.

Expressed at an annualized rate, real GDP expanded 2.4% in the fourth quarter. By comparison, real GDP in the United States grew 2.2%.

Household spending continues to increase

Household final consumption expenditure rose 0.5% in the fourth quarter, following a 0.6% gain in the third quarter. Outlays on goods were up 0.4%, with durable (+0.4%), semi-durable (+0.8%) and non-durable (+0.3%) goods all contributing to the increase. Outlays on services advanced 0.6%.

Expenditures on transport advanced 1.1%, as operation of transport equipment rose 2.6%, mainly as a result of increases in fuel and lubricants, spare parts and accessories for vehicles as well as maintenance and repair for vehicles. Purchase of vehicles declined 0.2% following two strong quarters of growth. Insurance and financial services increased 1.6%, while housing, water, electricity, gas and other fuels was up 0.4%.

Lower business investment in plant and equipment

Following two consecutive quarters of growth, business investment in non-residential structures fell 0.5% in the fourth quarter as a result of lower investment in both engineering structures (-0.5%) and non-residential buildings (-0.3%).

Business outlays on machinery and equipment (-0.8%) decreased after two consecutive quarters of growth. Lower investment in industrial machinery and equipment (-1.7%), communications and audio and video equipment (-3.8%) and other electrical and electronic machinery and equipment (-4.3%) contributed to the decline.

Outlays on intellectual property products by businesses increased 1.0% in the fourth quarter, after a 2.8% gain in the third quarter. Business investment in mineral exploration and evaluation rose 6.9%, a second consecutive quarterly increase. Purchases of software were down 0.9%.

Investment in housing decelerates

Following two strong quarters, business investment in residential structures rose 0.4% in the fourth quarter. Increased investment in new home construction (+1.6%) and renovations (+0.7%) were tempered by lower ownership transfer costs (-2.8%), reflecting weaker real estate activity.

Business inventories grow

Businesses added $10.5 billion to non-farm inventories in the fourth quarter, compared with $3.7 billion in the third quarter.

Retailers' inventories of durable goods rose mainly as a result of increased inventory accumulation of motor vehicles (+$3.2 billion). Wholesalers' inventories of durable goods rose $4.5 billion in the fourth quarter. Manufacturers' inventories of non-durable goods increased $3.7 billion and that of durable goods declined $1.9 billion.

Farm inventories, notably grains, were reduced for a third consecutive quarter. However, inventories of grain in commercial channels increased by $0.9 billion.

Exports down

Exports of goods and services were down 0.4% in the fourth quarter, following a 2.2% gain in the third quarter. Exports of goods decreased 0.6%, with farm, fishing and intermediate food products (-13.4%) contributing most to the decrease.

Exports of motor vehicles and parts (-3.5%) and energy products (-1.3%) were notably lower. Metal and non-metallic mineral products grew 5.4%.

Service exports increased 0.9%, following a 0.6% decline in the third quarter. The increase was driven by higher exports of commercial services (+0.9%).

Imports advance at a slower pace

Imports of goods and services grew 0.4% in the fourth quarter, after increasing 1.0% in the third quarter.

Imports of goods advanced 0.5%, led by energy products (+8.1%), metal and non-metallic mineral products (+3.0%) and motor vehicles and parts (+1.1%).

Imports of metal ores and non-metallic minerals (-8.8%), basic and industrial chemical, plastic and rubber products (-1.6%) and industrial machinery, equipment and parts (-1.3%) were among the main sources of weakness.

Imports of services edged down 0.1%, the second consecutive quarterly decline. Imports of commercial services (-0.6%) contributed most to the decrease.

Terms of trade weaken

The terms of trade, measured by export prices relative to import prices, weakened for the third consecutive quarter. As a result, real gross domestic income edged down 0.1%.

Export prices declined 1.6% in the fourth quarter, while import prices were 0.5% higher. The overall price of goods and services produced in Canada fell 0.6% after increasing 0.4% in the previous quarter, with the lower price of energy products contributing to the decline.

Economy-wide income unchanged

Nominal GDP was unchanged in the fourth quarter after advancing 1.1% in the previous quarter. This was the slowest growth since the second quarter of 2009.

Compensation of employees rose 0.5%, following a 1.0% gain in the previous quarter. Wages and salaries (+0.5%) and employers' social contributions (+0.6%) both contributed to the increase.

Gross operating surplus of non-financial corporations decreased 1.0%, after five consecutive quarters of growth. That of financial corporations fell 2.9% after posting an 8.6% increase in the previous quarter. Overall, the gross operating surplus of corporations decreased 0.9%, the weakest showing since the second quarter of 2012.

Household saving rate edges down

The household saving rate decreased for the third consecutive quarter and, at 3.6%, was the lowest since the first quarter of 2010.

The household debt service ratio, defined as household mortgage and non-mortgage interest paid divided by disposable income, was 6.88%, virtually unchanged from the previous quarter.

The national saving rate went from 6.0% in the third quarter to 5.3% in the fourth quarter, as national net saving fell 12.3%. National disposable income was down 0.2%, following five consecutive quarterly increases.

Annual 2014

Real GDP rose 2.5% in 2014 after increasing 2.0% in 2013. Final domestic demand advanced 1.6% following a similar increase the previous year.

Household final consumption expenditure rose 2.8%, as outlays on goods (+3.4%) and services (+2.2%) both advanced. Spending on durable (+5.3%), semi-durable (+3.6%) and non-durable (+2.4%) goods all increased. In 2013, household spending increased 2.5%.

Business gross fixed capital formation rose 0.9% in 2014 after increasing 0.8% in 2013. This follows an average annual increase of 8.9% in the previous three years. Business investment in residential structures increased 2.8%, after declining 0.4% in 2013. Outlays on renovations and new home construction were up 3.9% and 0.5% respectively. Business investment in plant and equipment edged up 0.1%, its growth decelerating for the fourth consecutive year.

Governments' gross fixed capital formation (-2.3%) decreased for the fourth consecutive year.

Exports of goods rose 6.0%, while those of services were 2.3% higher. Overall, exports advanced 5.4% after increasing 2.0% in 2013. Imports of goods increased 2.4% and were partially offset by a 1.3% decline in imports of services. Overall, imports grew 1.7%, following a 1.3% increase the previous year.

Value added of all major industrial sectors rose in 2014 with the exception of the agriculture and forestry sector.

Mining and oil and gas extraction as well as manufacturing were the main contributors to overall growth in goods production (+2.4%). Construction and utilities also advanced. The gains were partly offset by a decrease in the agriculture and forestry sector, pulled down by falling crop production following strong growth in 2013. Wholesale and retail trade, finance and insurance, the public sector (education, health and public administration combined), transportation and warehousing services, professional services as well as accommodation and food services contributed to the increase in service-producing industries (+2.4%).

Household disposable income (in current dollars) grew 3.4%, the slowest pace in five years. As a result, the household saving rate declined from 5.2% in 2013 to 4.0% in 2014.

Real gross domestic income grew 2.1%, following a 2.0% increase in 2013. Canada's terms of trade declined 1.3%, after edging up in 2013.

The price of goods and services produced in Canada increased 1.8% in 2014, compared with a 1.4% gain in 2013. The price of final domestic demand grew 2.2% following a 1.7% gain in the previous year.

Gross domestic product by industry, December 2014

Real GDP advanced 0.3% in December after declining 0.2% in November, led mainly by growth in manufacturing.

Goods production increased 0.6% in December. Notable gains were registered in manufacturing and, to a much lesser extent, in construction. In contrast, mining, quarrying, and oil and gas extraction as well as utilities declined.

The output of service industries advanced 0.2% in December. Notable gains in wholesale trade and the finance and insurance sector were partially offset by declines in retail trade and the public sector (education, health and public administration combined).

Manufacturing output advances

Manufacturing output increased 2.5% in December after declining 1.6% in November.

Durable-goods manufacturing advanced 2.3% in December, as most industrial subgroups recorded increases. There were notable increases in the manufacturing of machinery, transportation equipment and fabricated metal products.

Non-durable goods manufacturing increased 2.9% in December, mostly as a result of notable increases in chemical, food, and, to a lesser extent, plastic and rubber products manufacturing.

Mining, quarrying, and oil and gas extraction declines

Mining, quarrying, and oil and gas extraction decreased 0.8% in December, following a 1.1% decline in November.

Oil and gas extraction was down 1.4% in December following a 0.9% decrease in November. Conventional oil and gas as well as non-conventional oil extraction declined.

Support activities for mining and oil and gas extraction decreased 1.6% as rigging services declined.

In contrast, mining and quarrying (excluding oil and gas extraction) rose 1.4% in December. Increases in non-metallic mineral, iron ore and coal mining were partially offset by a decrease in copper, nickel, lead and zinc mining.

Wholesale trade increases while retail trade declines

Wholesale trade advanced 1.6% in December, reversing the declines in October and November. The wholesaling of building materials and supplies, miscellaneous products and supplies (which include agricultural supplies), motor vehicle and parts as well as personal and household goods were up.

Retail trade was down 1.4% in December following a 0.7% increase in November. All industrial subgroups of retail trade were down with the exception of retailing activity at food and beverage stores, as well as health and personal care stores. Decreases were notable in clothing and clothing accessories stores, general merchandise stores (which include department stores), and electronics and appliance stores.

The finance and insurance sector increases

The finance and insurance sector was up 1.3% in December. There were notable gains in banking and financial investment services, and, to a lesser extent, in insurance services.

Construction rises

Construction rose 0.3% in December. Increases in residential building, repair and engineering construction were partially offset by a decline in non-residential building construction.

The output of real estate agents and brokers declined 3.1% in December, a fourth consecutive monthly decline.

Other industries

Utilities decreased 1.1% in December, after increasing 2.7% in November. The demand for both electricity and natural gas declined in December, partly as a result of unseasonably warm weather in some parts of the country.

The agriculture and forestry sector grew 0.4% in December, mainly the result of higher crop production.

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