VIEWS: 3 PAGES: 3 CATEGORY: Government POSTED ON: 11/16/2011
Despite a very challenging external environment,
Canada’s economy has outperformed its G7 peers
in many respects. It weathered the financial and
economic crisis better than most industrialized
countries and it staged an impressive turnaround.
Real GDP grew 4.9 per cent (annualized) in the
final quarter of 2009 and a resounding 5.6 per
cent in the first quarter of 2010, fueled by a strong
rebound in consumer spending, residential investment
and government expenditures.
Despite a very challenging external environment, Canada’s economy has outperformed its G7 peers in many respects. It weathered the financial and economic crisis better than most industrialized countries and it staged an impressive turnaround. Real GDP grew 4.9 per cent (annualized) in the final quarter of 2009 and a resounding 5.6 per cent in the first quarter of 2010, fueled by a strong rebound in consumer spending, residential investment and government expenditures.
CURRENT TRENDS UPDATE — CANADA Overview and highlights Update - November 10, 2011 August GDP rises Latest available: August Real GDP % change, month-over-month Release date: October 31, 2011 0.8 GDP output in August rose 0.3% following an upwardly revised 0.4% rise in 0.6 0.4 July, originally reported as up 0.3%. All of the strength in the month was in 0.2 the goods-producing side of the economy where activity rose 0.9% following a 0.0 -0.2 revised 0.7% gain in July (was 0.4%). These increases along with a 0.6% rise -0.4 in June have more than offset the 1.7% drop in goods-production that occurred -0.6 -0.8 in May where various factors including wildfires in Northern Alberta weighed -1.0 on the mining sector. Service-producing industries were unchanged in August -1.2 though this followed an upwardly revised 0.3% gain in July (0.2% previously). -1.4 2006 2007 2008 2009 2010 2011 The strength in goods-producing industries largely reflected a 3.3% jump in Source: Statistics Canada mining output. This in part reflected a 2.6% jump in oil and gas extraction though the mining support component soared 16.5% in the month reflecting increased drilling activity. Manufacturing fell 0.4% in the month despite motor vehicle production rising a robust 3.9%. The offset was mainly in various non- durables components declining in the month including: non-metallic mineral ▲ The gain in August GDP provides further evi- products, wood products, chemicals and paper products. The latter three com- ponents all showed sizeable gains in July. In terms of the other major goods- dence of the transitory nature of the economic producing industries, utilities fell 0.8% after a 1.4% jump in July while con- weakness in the second quarter of 2011 where struction was up a modest 0.1%. Within-service-producing industries, finan- activity dropped to an annualized 0.4%. cial services managed to rise 0.6%. However, this was offset by sizeable de- ▲ Despite a drop in employment in October, the clines in wholesale trade (1.4%) and the arts and entertainment component economy has still generated a solid increase in (1.4%). The former followed a 1.8% jump in July. employment this year. ▲ Retail sales in August rose 0.5% which offset an equal-sized decline in July. Economy at a glance % change from ▲ The pace of housing starts in Canada has Previous Lastest month month Year ago picked up substantially during the course of 2011, increasing by 8.3% and 6.3% in second and third Real GDP Aug. 0.3 2.4 quarters, respectively. Industrial production Aug. 1.2 3.1 ▲ September’s trade surplus improvement was Employment Oct. -0.3 1.4 due to exports rising $1.6 billion (4.2%) with only Unemployment rate* Oct. 7.3 7.8 Manufacturing a small decline in imports of $0.1 billion. Production Aug. -0.4 0.8 ▲ The overall inflation rate averaged 3.0% in Employment Oct. -2.8 -2.7 the third quarter of 2011, slightly higher than the Shipments Aug. 1.4 6.7 Bank of Canada's July forecast of 2.8%. New orders Aug. 0.8 6.5 Inventories Aug. 0.3 7.0 Retail sales Aug. 0.5 3.9 Car sales Aug. -0.4 1.1 Housing starts (000s)* Oct. 207.6 172.1 Exports Sept. 4.2 20.3 Imports Sept. -0.3 8.9 Trade balance ($billlions)* Sept. 1.2 -2.3 Consumer prices Sept. 0.2 3.2 * Levels are shown for the latest period and the same period a year earlier. Employment tumbled in October Employment Latest available: October Change in thousands, month-over-month 100 Release date: November 4, 2011 Canadian employment fell by 54,000 in October. The labour force contracted by 50 13,800 in October and the unemployment rate rose to 7.3% from 7.1% in Sep- 0 tember. The October report showed a decline in employment in the goods pro- ducing industries where the number of employed fell by 51,900. Construction -50 (-20,100) and manufacturing (-48,400) jobs were cut in the month. In the ser- vices side of the economy, employment dipped by 2,000. All jobs lost were full- -100 time with 71,700 positions cut. Part-time employment rose by 17,700. On net, -150 full-time employment is still up by 198,200 in 2011. The public sector shed 2005 2006 2007 2008 2009 2010 2011 3,800 positions. Private sector employment reported 32,000 jobs cuts. Still, the Source: Statistics Canada declines over the three month period only reversed 71% of July's 94,500 surge. The number of self-employed individuals was down by 18,100 following the Unemployment rate 38,900 increase in September. The year-over-year gain in average hourly wages % of labour force for permanent workers slipped to 1.3%, a tad slower than September's 1.6% pace 9.0 and still well below the average 2.3% in the first half of the year. 8.5 8.0 Retail sales rise in August 7.5 Latest available: August 7.0 Release date: October 25, 2011 6.5 Canadian nominal retail sales rose 0.5% in August. The increase managed to 6.0 offset the 0.5% drop recorded in July that had originally been reported as down 5.5 0.6%. Most of the retail sales strength reflected the 1.0% jump in auto sales that 5.0 occurred despite indications of unit auto sales falling 0.4%. Excluding motor 2005 2006 2007 2008 2009 2010 2011 Source: Statistics Canada vehicles, sales rose 0.4% following an upwardly revised 0.1% gain in July (previously reported as unchanged). On a volumes basis, overall retail sales man- aged to rise 0.3% which represented a more moderate change compared to the Retail sales 0.9% decline in July and 1.7% surge in June. Excluding both motor vehicles and % change, month-over-month 4.0 gasoline stations, sales were up a disappointing 0.1% though the monthly gain in 3.0 July was revised up to 0.2% from the previously-estimated 0.1%. Though the 2.0 report indicated solid sales gains at furniture (1.6%) and sporting goods stores 1.0 (1.5%), it was almost fully offset by declines in electronic and appliance (1.1%) 0.0 and clothing stores (0.7%). -1.0 -2.0 Housing starts decline slightly in October -3.0 -4.0 Latest available: October -5.0 Release date: November 8, 2011 2006 2007 2008 2009 2010 2011 Canadian housing starts remained essentially steady in October, falling 0.6% to Source: Statistics Canada 207,600 annualized units from September’s 208,800 (earlier reported as 207,600). October’s slight decline in the pace of housing starts was entirely due to a 9.0% drop in the urban singles component, to 60,900 from 66,900 in Sep- Housing starts Thousands tember. The volatile urban multiples component continued to climb in October, 300 with a 1.7% increase to 123,600. Rural starts also rose, from 20,400 annualized 280 260 units to 23,100. On a regional basis, big declines in urban starts were seen in 240 Quebec (-28.8%) and the Atlantic provinces (-43.5%), following strength in 220 these areas last month. These declines were the result of a slower pace of con- 200 struction in both the singles and multiples components. Ontario, the Prairies and 180 160 British Columbia all saw gains, of 11.7%, 28.2% and 1.5%, respectively. These 140 gains were entirely driven by multiples starts, with singles declining in all areas. 120 Growth in multiples was particularly pronounced in the Prairies, with the multi- 100 ples component increasing by over 93%. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Statistics Canada ECONOMICS | RESEARCH 2 September trade balance returns to a surplus Latest available: September Release date: November 10, 2011 Canada’s September merchandise trade returned to a surplus position of $1.2 billion with the deficit in August lowered to $0.5 billion from a previously esti- mated $0.6 billion. The improvement in the balance was due to exports rising $1.6 billion (4.2%) with a decline in imports contributing the additional $0.1 billion (-0.3%) to the overall improvement in the trade balance. A lion’s share of the increase in exports reflected a $1.0 billion (11.3%) jump in energy exports. Most major export categories rose in the month with automotive products in- creasing $0.2 billion (5.6%), industrial goods up $0.3 billion (3.4%), and the agriculture component up $0.3 billion (9.4%).The main offset was a $0.4 billion (4.9%) drop in machinery and equipment. The drop in imports reflected declines Merchandise trade C$ billions, annualized in automotive products of $0.3 billion (5.5%), and in machinery and equipment 550 Exports of $0.3 billion (3.3%). The main offsets were in $0.2 billion gains in energy 500 products (5.7%) and industrial goods (2.6%). The volume (constant 2002 dollar chained) of exports rose 1.2% while the volume of imports dropped 1.9%. This 450 resulted in the real net export deficit narrowing to $7.5 billion from $8.7 billion 400 in August. Imports 350 Annual headline and core inflation rates up in September Latest available: September 300 Release date: October 21, 2011 2006 2007 2008 2009 2010 2011 Source: Statistics Canada The September consumer price report showed the headline index rose 0.2% in the month however, the core rate ran much hotter, rising 0.5%. The year-over- year headline inflation rate edged up to 3.2% in September from August's 3.1% pace. The annual core rate was 2.2%, above the 1.9% recorded in August. Women's clothing prices spurted by 10.5% in September, which, supplemented Consumer price index % change, year-over-year by rising tuition fees (4.2%), car prices, and air transportation costs, boosted the 5 inflation rates. Financial services costs also rose 4.8% in September. Moderating 4 these increases were declines in electricity costs (which partially reversed in- creases in July and August) and insurance costs. The rise in the headline rate was 3 also dampened by declining prices for fresh fruit and vegetables, and gasoline, 2 three items that are not included in the core measure. The rise in vehicle prices 1 and larger than seasonal increase in clothing prices accounted for about 0.2% of 0 the monthly increase. Compared to September 2010, prices for gasoline were up 22.7%, fuel oil prices rose 27.4%, vehicle insurance premiums rose 5.6%, and -1 food from restaurants and meat prices were also higher. At the same time, mort- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Statistics Canada gage interest costs, furniture prices, computer equipment, and natural gas prices declined. On balance, the annual inflation rates, both headline and core, moved higher in the month. The material contained in this report is the property of Royal Bank of Canada and may not be reproduced in any way, in whole or in part, without express authorization of the copyright holder in writing. The statements and statistics contained herein have been prepared by RBC Economics Research based on information from sources con- sidered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This publication is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities. ECONOMICS | RESEARCH ®Registered trademark of Royal Bank of Canada. ©Royal Bank of Canada. 3
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