Monthly economic indicators[213]

February 2004 The "Monthly Economic Indicators" (MEI) provides a variety of economic analysis and data in a convenient format. The MEI does not interpret or evaluate government policies, and every attempt is made to present factual information in an informed and balanced manner consistent with generally accepted economic principles. It is available to all employees of Industry Canada in either hard or electronic copy, or can be accessed via the Internet at http://strategis.ic.gc.ca/epic/internet/ineas-aes.nsf/en/h_ra01898e.html MONTHLY ECONOMIC INDICATORS February 2004 HIGHLIGHTS Real Gross Domestic Product (GDP) remained flat in November, after rising 0.1% in October. Employment rose 15,000 in January and 220,000 in the last five months. The unemployment rate was unchanged from December at 7.4%. C a n a d a 's t r a d e s u r p l u s s o a r e d i n December by $1.0 billion. Exports rose more than imports despite the appreciation of the Canadian dollar. In the United States (U.S.), advance estimates showed that the economy grew 4.0% (annualized) in the fourth quarter after growing 8.2% in the third, but the recovery remains jobless so far. The Bank of Canada is widely expected to reduce interest rates further on March 2, in light of weaker-than-projected domestic demand and low inflation. Key Monthly Economic Indicators % Change since last last month year Real GDP ($97 B) Goods Services Composite Index Employment (000's) Full-time Part-time Unemployment* (%) Youth* Adult* 1,018.2 318.9 700.6 188.9 15,936 12,964 2,972 7.4 13.9 6.1 0.0 0.0 0.0 0.8 0.1 0.4 -1.1 7.4 14.0 6.1 2.0 -0.3 -10.9 4,445 3.6 0.7 1.1 1.5 1.0 1.7 5.1 1.9 2.1 1.0 7.5 13.7 6.3 Nov Nov Nov Dec Jan Jan Jan Jan Jan Jan CPI inflation* 1.2 Retail Sales ($M) 26,305 Housing Starts (000's)** 195.5 Trade Balance* ($M) Exports Imports M&E 5,424 33,431 28,007 8,050 4.5 Jan 1.9 Nov 4.2 Jan 3,926 -3.1 -8.4 -8.4 Dec Dec Dec Dec January February 18*** 2004 3-mth Corp. paper (%)* Long bond yield (%)* Canadian dollar (US¢)* 2.30 4.46 75.48 2.37 4.61 75.48 2003 2.91 5.02 65.72 *Data in levels only – % change not reported **Canada Mortgage and Housing Corporation ***Bank of Canada's Weekly Financial Statistics All other data from Statistics Canada The "Monthly Economic Indicators" (MEI) provides a variety of economic analysis and data in a convenient format. The MEI does not interpret or evaluate government policies, and every attempt is made to present factual information in an informed and balanced manner consistent with generally accepted economic principles. It is available to all employees of Industry Canada in either hard or electronic copy, or can be accessed via the Internet at http://strategis.ic.gc.ca/epic/internet/ineas-aes.nsf/en/h_ra01898e.html Industry Canada Industrie Canada Canada MONTHLY ECONOMIC INDICATORS February 2004 CONTENTS The Economy Real GDP by Industry Consumer Spending and Attitudes Business Investment in Plant and Equipment Housing Trade and Competitiveness Labour Market Trends Employment and Unemployment ......................................................................... 8 Industry Overview ................................................................................................. 9 Provincial Overview .............................................................................................. 10 Prices and Financial Markets Consumer and Commodity Prices ....................................................................... 11 Short-term and Long-term Interest Rates ............................................................. 12 Exchange Rates and Stock Prices ....................................................................... 13 ................................................................... 3 ................................................. 4 .................................. 5 .................................................... 7 Page .......................................................................................... 6 The United States Economy U.S. Economic Trends Coming Up... Key Future Data Releases/Planned Events ........................................................... 15 This report uses data available as of February 20, 2004. It has been prepared by Jenness Cawthray, Éric Chalifoux, Anik Dufour, Kevin Koch, Joseph Macaluso, Arif Mahmud, Sue Moore, François Rimbaud, Patrick Taylor, and Marc Vachon of the Micro-Economic Analysis Directorate, under the direction of François Poitras and Hossein Rostami. Translation has been provided by Lucie Larocque and Sue Hopf is responsible for production support. Sources of information primarily include Statistics Canada, as well as the Bank of Canada, Canada Mortgage and Housing Corporation, Canadian Real Estate Association, Conference Board of Canada, U.S. Bureau of Economic Analysis, and U.S. Bureau of Labor Statistics. Unless cited otherwise, data contained in graphs and tables are derived from Statistics Canada. Please address comments to Hossein Rostami at 613-995-8452 or through the Internet at rostami.hossein@ic.gc.ca, or, alternatively, contact François Poitras at 613-957-3404 or through the Internet at poitras.francois@ic.gc.ca. ISSN 1495-4516 .................................................................... 14 THE ECONOMY Real GDP by Industry Economic activity remained subdued in November... Output was essentially unchanged in November, following a rise of 0.1% in October. Despite this weakness, real GDP (at basic prices) in October and November was up 2.6% (annually) from third-quarter levels, which had been depressed by the power blackout in August. This followed a rise of 1.5% in the third quarter. In the first 11 months of 2003, output was up 1.7% from its 2002 level. ...with growth stalling in both the goods and services sectors Output in the goods sector was unchanged in November following a decline of 0.1% in October. The appreciation of the Canadian dollar continued to take its toll on manufacturing, leaving output unchanged. Construction was up on increased activity in the residential sector. A sharp fall-back in diamond production lowered mining output, completely offsetting the rise in utilities induced by colder-than-normal temperatures. The latter factor also contributed to the largest rise in production in the energy sector - industries in oil & gas, utilities and transportation - (1.8%) since February 2001. Output in the services sector was unchanged in November after rising by 0.3% in October. The largest increases were in education and in transportation, as air travel increased. Lower motor vehicle sales caused retail output to fall while a reduction in long distance calls depressed information & cultural output. Finance, insurance & real estate also posted a decline as real estate brokers suffered from a drop in activity in the re-sale housing market. Real GDP at Basic Prices (1997 chained dollars) November 2003 Composite Leading Indicator Real GDP at Basic Prices 1.5 % change $ millions Total Economy Business Sector Goods-producing 1,018,168 862,150 318,924 monthly % Change since last month year change 175 -463 91 -24 -365 644 143 -59 81 -235 -280 436 -277 -112 19 69 404 114 -232 -12 5 125 0.0 -0.1 0.0 -0.1 -1.0 2.6 0.3 -0.0 0.0 -0.4 -0.5 0.9 -0.7 -0.1 0.0 0.3 0.9 0.2 -2.5 -0.1 0.0 0.2 1.5 1.5 1.0 6.6 4.5 -3.3 4.2 -1.0 1.7 4.4 2.1 -0.1 -1.2 1.8 2.3 2.5 0.1 3.2 2.3 -1.0 1.1 1.3 1.0 0.5 0.0 23,287 Agri., Forest, Fish, Hunt* Mining & Oil & Gas Extraction 36,908 Utilities Construction Manufacturing 1998 1999 2000 2001 2002 2003 -0.5 25,678 55,291 176,661 -1.0 1997 Real GDP by Major Sector 135 131 127 123 119 115 111 107 103 99 1997 1998 1999 2000 2001 2002 2003 January 1997 = 100 Goods Manufacturing Services Services-producing 700,649 Wholesale Trade 63,792 Retail Trade 56,197 Transportation & Warehousing 46,626 Information & Cultural 41,240 FIRE** Professional*** Admin. & Waste Mgmt Education Health & Social Arts, Entertain. & Recreation Accommodation & Food Other Public Administration 205,080 44,902 22,452 45,639 61,286 9,159 23,065 24,305 57,805 *Agriculture, Forestry, Fishing & Hunting **Finance, Insurance & Real Estate ***Professional, Scientific & Technical services MEI February 2004 3 THE ECONOMY Consumer Spending and Attitudes Consumer spending eased in the fourth quarter... Although consumer spending recorded its eighth straight quarter of growth of 5.1% (annual rate) gain in the third quarter), available indicators point to weaker fourth quarter growth. Despite dealers' incentives, motor vehicle sales fell 9.5% in December, the fifth consecutive monthly decline and lowest level in five years. Fourth quarter vehicle sales were off 10.4% from their third quarter level. Moreover, following five consecutive quarters of growth, including a 3.3% (annual rate) gain in the third quarter, average real retail sales for October and November were 2.1% (annual rate) lower than their third quarter level. Total Retail and Motor Vehicle Sales 30.0 28.0 26.0 24.0 22.0 20.0 18.0 Total Sales (Left) $ Billions $ Billions 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 Motor Vehicle Sales (Right) 16.0 1996 1997 1998 1999 2000 2001 2002 2003 Retail Sales and Consumer Credit November 2003 % Change since last last $ millions month year -0.3 0.6 -0.7 1.2 1.9 -1.8 1.0 -0.2 0.6 0.9 1.9 4.4 4.9 2.7 8.2 -1.9 4.8 2.7 3.4 8.2 ...but early indications for the first quarter of 2004 look promising Although the 1.6 million vehicles sold in 2003 marked the first annual decline in five years, it followed a record year. Moreover, preliminary figures indicate a 1.5% rise in the number of new motor vehicles sold in January. Employment rose for the fifth straight month in January, though the unemployment rate remained at 7.4%. The consumer confidence index surged to 125.2 in January, representing a 4.8 point rebound from its December level. Total Retail Sales (S.A.) 26,305 Food Drug Stores Clothing Furniture Automotive General Merch. Stores All other Stores Total ex. motor vehicles Consumer Credit 5,930 1,377 1,391 1,678 10,135 2,969 2,826 19,699 244 Real Consumer Spending and Household Finances $ Millions, SAAR (unless otherwise noted) 2001 2002 Real Consumption (97$) % change Durable Goods % change Semi-Durable Goods % change Non-Durable Goods % change Services % change Disposable Income % change Saving Rate (%) Debt-to-Income Ratio (%) 581,590 2.6 85,958 4.2 52,310 3.8 133,791 1.2 309,887 2.7 667,376 4.4 4.5 95.9 601,198 3.4 93,294 8.5 54,341 3.9 136,534 2.1 317,885 2.6 698,479 4.7 4.2 97.3 2003 Q2 620,377 3.8 96,246 4.4 55,954 2.9 139,627 -0.2 329,518 5.7 716,984 1.6 2.2 100.1 2003 Q3 628,090 5.1 100,098 17.0 56,436 3.5 139,936 0.9 333,009 4.3 722,500 3.1 1.3 101.0 Real Consumer Spending and Attitudes 190 Index (1995 Q1=100) Total Spending (Left) 170 Durable Goods (Left) Consumer Attitudes* (Right) 140 1991=100 160 150 120 130 100 110 80 90 123412341234123412341234123412341234 95 96 97 98 99 00 01 02 03 60 *Conference Board of Canada MEI February 2004 4 THE ECONOMY Business Investment Business investment rose sharply in the third quarter... Bolstered by a non-financial corporate profits' recovery in the third quarter, real investment in plant & equipment rose at an annual rate of 13.2%, the fastest rate since the fourth quarter of 1999. This reflected a surge of 18.8% in machinery & equipment (M&E) and a rise of 4.4% in non-residential construction. Investment in Plant and Equipment 235 215 195 175 155 135 80 Index (1992Q1=100) Machinery & Equipment (Left) Non-Residential Construction (Left) Capacity Utilization (Right) 90 % 100 ...and rising business confidence bodes well for sustained investment growth The Business Confidence Index rose by a startling 19.2 points in the fourth quarter of 2003, reaching the highest level in three years at 146.3. An increasing number of respondents felt their firm's finances would improve over the next six months and respondents displayed the strongest increase in three years in their willingness to undertake investment. Imports of M&E rose 1.1% in December, the second occurrence of back-to-back gains in 2003. Manufacturing shipments of M&E increased 1.1% in the fourth quarter, but fell 3.1% in December, moderating the optimism. 115 95 70 75 60 1992 1994 1996 1998 2000 2002 1993 1995 1997 1999 2001 2003 Corporate Profits & Business Confidence 200 175 150 125 100 75 1992 1994 1996 1998 2000 2002 1993 1995 1997 1999 2001 2003 *Conference Board of Canada Index, 1991=100 Corporate Profits as % of GDP (Right) Business Confidence* (Left) % of GDP 14 12 10 8 6 4 Business Investment and Corporate Finances $ Millions, SAAR (unless otherwise noted) 2001 BUSINESS INVESTMENT Machinery & Equipment (1997$) % change Non-residential Construction (1997$) % change Capacity Utilization (%, Non-farm goods) Capacity Utilization (Mfg. sector) CORPORATE FINANCES & ATTITUDES Corporate Operating Profits % change Profits - Non-financial industries % change Profits - Financial industries % change Business Credit % change 138,563 -16.1 102,845 -19.0 35,718 -6.3 856,063 5.4 146,312 5.6 113,379 10.2 32,934 -7.8 887,383 3.7 155,212 15.8 120,892 10.2 34,320 38.4 894,184 1.7 175,472 63.4 137,392 66.8 38,080 51.6 898,210 1.8 160,560 -29.9 119,728 -42.3 40,832 32.2 900,033 0.8 166,508 15.7 124,820 18.1 41,684 8.6 903,189 1.4 86,494 0.3 48,047 2.2 82.3 81.9 83,720 -3.2 43,044 -10.4 82.5 83.6 83,453 -4.1 41,920 -6.5 82.7 84.1 84,655 5.9 42,451 5.2 82.7 83.9 85,145 2.3 42,441 -0.1 81.3 82.5 88,892 18.8 42,905 4.4 81.2 82.2 2002 2002 Q4 2003 Q1 2003 Q2 2003 Q3 MEI February 2004 5 THE ECONOMY Housing Housing activity is still going strong... Residential construction rose 1.0% in November following 0.9% growth in October. Assuming no growth in December, residential construction is on track to post 3.1% growth in the fourth quarter. Housing starts stood at 195,500 in January. This figure represents a 10.9% drop from its December level and follows a 4.9% drop in the fourth quarter. Reflecting continued optimism, residential building permits posted a 1.5% increase in the fourth quarter. This comes on the heels of a 11.4% increase in the third. Overall, 2003 was a good year. The value of building permits issued was 8.7% higher than in 2002. Housing starts increased 7.0% and residential construction increased 7.2% on a year-to-date basis. Housing Activity 25 23 20 18 16 14 11 Housing Starts* (Right) $ Billions Units (000s) 275 250 225 200 175 150 125 Residential Construction (Left) 9 100 1996 1997 1998 1999 2000 2001 2002 2003 2004 *Canada Mortgage and Housing Corporation Monthly Housing Indicators Levels Residential Construction (1)* ($97M, basic prices) Change since Last Last month year 1.0% 6.6% -978 7.7% 16.8% -1,407 7,900 1,300 300 1,000 -1,300 -1,000 -4,100 -300 -500 1,300 11,100 20,447 2,953 24,046 Building Permits, $M (2)* Sales of Existing Homes (3)** (# of units) ...but could decelerate in 2004 House prices have kept their momentum and rose 6.3% (year-over-year) in January. This is higher than their average increase for the past three years (5.0%) and five years (3.9%). Low interest rates continue to make home ownership attractive. Moreover, the good performance of the labour market in recent months bodes well for personal income growth. However, increases in prices as well as a reduction in pent-up demand for new units could slow housing activity. Housing Starts, (3)*** (# of units, SAAR) Newfoundland & Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia 195,500 -23,900 2,600 0 1,100 200 4,400 -2,300 2,600 -1,900 47,200 -8,200 65,800 -16,000 3,500 -500 3,200 700 34,300 100 30,700 3,900 1 - November data; 2 - December data; 3 - January 2004 data Sources: *Statistics Canada; **Canadian Real Estate Association; ***Canada Mortgage and Housing Corporation Real Investment in Residential Structures $97 Millions, SAAR (unless otherwise noted) Residential Construction % change New Housing % change Alterations & Improvements % change Ownership & Transfer Costs % change 2001 50,705 10.3 23,374 5.7 19,629 16.1 7,748 11.2 2002 57,854 14.1 28,782 23.1 20,605 5.0 8,484 9.5 2003 Q2 60,877 5.5 29,880 -2.2 22,480 16.0 8,628 10.0 2003 Q3 63,501 18.4 30,946 15.1 22,852 6.8 9,684 58.7 Growth in Real Residential Construction % change, SAAR 18.4 14.1 10.3 8.2 5.2 3.6 1.3 5.5 15.4 10.4 -3.6 97 98 99 00 01 02 -3.0 2 3 02 4 1 2 03 3 MEI February 2004 6 THE ECONOMY Trade and Competitiveness Exports increased more than imports in December... The value of exports rose 3.6% in December, after declining 0.5% in the previous month. Automotive products and industrial goods & materials posted the strongest gains. Exports rose in every major trading region except the European Union. Export volumes increased 2.9% while export prices edged up 0.7%. In 2003, merchandise exports declined 3.2% compared to the previous year. Imports increased 0.7%, following a 1.6% rise in November. Energy product imports soared 7.0%. Excluding the European Union, imports from all major trading partners posted gains. The volume of imports rose 0.6% and im port prices were up 0.1%. Overall, imports fell 4.2% in 2003. Merchandise Trade Flows and Balance 40.0 35.0 7.5 30.0 25.0 20.0 15.0 Trade Balance (Right) 10.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 0.0 Imports (Left) 2.5 5.0 $ Billions Exports (Left) $ Billions 10.0 Unit Labour Cost Comparison ($US) 110 Ratio: Canada/U.S.; 1992=100 $US per $CAN A falling line represents an increase in Canadian competitiveness 90 Business Sector (Left) Exchange Rate (Right) 0.8 ...resulting in a higher trade surplus The merchandise trade surplus soared $1.0 billion to $5.4 billion in December. The surplus with the U.S. increased $0.5 billion, while the non-U.S. trade deficit declined $0.5 billion. In 2003, Canada's trade surplus rose by $2.0 billion to $59.8 billion. Although the Canadian dollar appreciated strongly vis-à-vis the U.S. currency, the merchandise trade surplus with the U.S. was virtually unchanged in 2003. Merchandise Trade December 2003 Levels ($ millions) November 2003 Exports to United States 32,257 26,490 27,812 19,391 4,445 7,099 2,521 4,687 2,962 5,613 7,001 6,945 1,407 1,729 1,596 244 5,270 7,964 6,156 3,903 0.9 70 50 3 4 1 2 3 02 03 Source: Statistics Canada & U.S. Bureau of Labor Statistics 92 93 94 95 96 97 98 99 00 01 02 0.6 Year-to-date ($ millions) Jan.-Dec. 2002 414,305 346,992 356,458 254,929 57,847 92,063 30,917 49,542 37,198 70,232 97,302 97,030 17,670 21,783 16,527 3,137 68,874 105,866 81,450 46,420 Change ($M) % Change December 2003 33,431 27,058 28,007 19,504 5,424 7,554 2,526 4,742 2,893 5,997 7,213 7,503 1,426 1,752 1,708 240 5,368 8,050 6,217 3,764 Jan.-Dec. 2003 401,187 331,064 341,382 239,200 59,805 91,864 29,321 61,271 34,503 66,588 89,240 87,942 17,124 21,521 19,554 3,021 65,116 98,196 76,356 46,198 Nov. to Dec. Nov. to Dec. Jan.-Dec. 2002 to 2003 2003 Jan.-Dec. 2003 1,174 568 195 113 979 455 5 55 -69 384 212 558 19 23 112 -4 98 86 61 -139 3.6 2.1 0.7 0.6 -3.2 -4.6 -4.2 -6.2 Imports from United States Trade Balance with United States Exports by Commodity Agriculture/Fishing Products Energy Products Forestry Products Industrial Goods & Materials Machinery & Equipment Automotive Products Other Consumer Goods 0.2 1.2 -2.3 6.8 3.0 8.0 1.4 1.3 7.0 -1.6 1.9 1.1 1.0 -3.6 -5.2 23.7 -7.2 -5.2 -8.3 -9.4 -3.1 -1.2 18.3 -3.7 -5.5 -7.2 -6.3 -0.5 Imports by Commodity Agriculture/Fishing Products Energy Products Forestry Products Industrial Goods & Materials Machinery & Equipment Automotive Products Other Consumer Goods MEI February 2004 7 LABOUR MARKET TRENDS Employment and Unemployment Employment increased further in January... Employment went up by 14,900 in January, bringing job gains over the past five months to 220,000. Full-time employment was up 46,800 while part-time employment dropped 31,900. Since January 2003, nearly all employment gains have been in full-time positions (268,800). Employment increased for adults (16,200), but declined (-1,300) for youth. On a year-over-year basis, adult employment rose by 276,200 while youth only gained 22,200 jobs. The participation rate and employment rate were down slightly to 67.6% and 62.6%, respectively. These levels remain close to December's levels, the highest recorded since the inception of the Labour Force Survey in 1976. The participation rate of adults aged 55 and over has increased steadily since mid-2001, reaching levels above 30% since September 2003, the highest participation rate since 1980. Employment 100 80 60 40 20 0 -20 -40 1998 Monthly change in thousands 1999 2000 2001 2002 2003 2004 Unemployment Rate 13.0 12.0 11.0 10.0 66.0 9.0 8.0 7.0 Participation Rate (Right) 6.0 1992 1994 1996 1998 2000 2002 64.0 2004 % Unemployment Rate (Left) 67.0 % 68.0 ...but the unemployment rate remained at 7.4% The unemployment rate was unchanged (7.4%) in January, as the increase in employment was offset by an increase in the labour force. The unemployment rate for adults stayed at 6.1% while the youth unemployment rate edged down 0.1 percentage point to 13.9%. 65.0 Labour Force Trends Levels (in thousands) Employment Full-time Part-time Youth 15-24 Adult 25+ Self-employed Unemployment Unemployment Rate Youth 15-24 Adult 25+ Labour Force Participation Rate Employment Rate 2003 January 15,637.1 12,695.2 2,942.0 2,395.3 13,241.8 2,371.7 1,263.2 7.5 13.7 6.3 16,900.3 67.3 62.3 Change since 2004 January 15,935.6 12,964.0 2,971.5 2,417.5 13,518.0 2,448.9 1,266.9 7.4 13.9 6.1 17,202.4 67.6 62.6 % Change since year-todate 14.9 46.8 -31.9 -1.3 16.2 11.5 0.1 0.0 -0.1 0.0 15.0 -0.1 -0.1 2003 December 15,920.7 12,917.2 3,003.4 2,418.8 13,501.8 2,437.4 1,266.8 7.4 14.0 6.1 17,187.4 67.7 62.7 last month 14.9 46.8 -31.9 -1.3 16.2 11.5 0.1 0.0 -0.1 0.0 15.0 -0.1 -0.1 last year 298.5 268.8 29.5 22.2 276.2 77.2 3.7 -0.1 0.2 -0.2 302.1 0.3 0.3 last month 0.1 0.4 -1.1 -0.1 0.1 0.5 0.0 last year 1.9 2.1 1.0 0.9 2.1 3.3 0.3 0.1 1.8 MEI February 2004 8 LABOUR MARKET TRENDS Industry Overview Employment decreased in the Goods sector... Employment in the Goods sector edged down 17,400 in January, following four consecutive monthly increases. Construction (-11,000) and Agriculture (-6,500) posted the largest declines. Manufacturing gained 4,800 jobs in January following a decline of 1,900 in December. On a year-over-year basis, manufacturing employment declined 36,000, due in part to a stronger Canadian dollar. Over the last year, manufacturing job losses have been concentrated in computer and electronic products and electrical equipment and appliance manufacturing. Employment by Major Sector 116 114 112 110 108 106 104 102 100 98 1998 1999 2000 2001 2002 2003 2004 January 1998 = 100 Total Goods Services Employment Growth by Worker Category ...but increased in the Services sector Employment in Services increased by 32,200 in January, the fifth consecutive monthly increase. On a year-over-year basis, the Services sector has gained 283,300 jobs, a 2.4% increase. The largest gains in January were in Health Care (25,300), Professional and Scientific (19,000) and Information, Culture and Recreation (10,900). Accommodation and Food, Public Administration, Other Services, Business and Building and Education Services posted job losses. January 2004 (thousands) Total 14.9 298.5 Private employees Selfemployed Public sector -2.8 6.2 128.9 11.5 77.2 92.4 month-over-month year-over-year Industrial Employment Trends 2003 January 3,982.8 Goods-producing Agriculture 348.3 Natural Resources* 279.0 122.9 Utilities Construction 906.9 Manufacturing 2,325.8 Services-producing 11,654.3 Trade 2,459.2 Transportation* 773.2 916.5 FIRE* 999.8 Professional/Scientific 606.7 Business/Building 1,055.3 Educational Services Health Care/Social Assistance 1,653.0 Information/Culture/Recreation 695.7 1,000.5 Accommodation & Food 705.6 Other Services 788.7 Public Administration (in thousands) Levels 2003 December 4,015.3 346.5 296.0 130.7 957.1 2,285.0 11,905.4 2,477.4 782.2 956.7 984.5 637.6 1,061.1 1,732.2 717.0 1,029.5 699.6 827.6 2004 January 3,997.9 340.0 292.8 129.2 946.1 2,289.8 11,937.6 2,483.8 789.8 959.6 1,003.5 633.5 1,057.5 1,757.5 727.9 1,012.2 692.9 819.5 last month -17.4 -6.5 -3.2 -1.5 -11.0 4.8 32.2 6.4 7.6 2.9 19.0 -4.1 -3.6 25.3 10.9 -17.3 -6.7 -8.1 Change since last year-toyear date 15.1 -17.4 -8.3 -6.5 13.8 -3.2 6.3 -1.5 39.2 -11.0 -36.0 4.8 283.3 32.2 24.6 6.4 16.6 7.6 43.1 2.9 3.7 19.0 26.8 -4.1 2.2 -3.6 104.5 25.3 32.2 10.9 11.7 -17.3 -12.7 -6.7 30.8 -8.1 % Change since last last month year -0.4 0.4 -1.9 -2.4 -1.1 4.9 -1.1 5.1 -1.1 4.3 0.2 -1.5 0.3 2.4 0.3 1.0 1.0 2.1 0.3 4.7 1.9 0.4 -0.6 4.4 -0.3 0.2 1.5 6.3 1.5 4.6 -1.7 1.2 -1.0 -1.8 -1.0 3.9 *Natural Resources: Forestry, Fishing, Mining, Oil & Gas; Transportation includes warehousing; FIRE: Finance, Insurance, Real Estate & Leasing. MEI February 2004 9 LABOUR MARKET TRENDS Provincial Overview Job gains were concentrated in Ontario, Newfoundland and Labrador and New Brunswick... Ontario (18,000), Newfoundland and Labrador (4,500) and New Brunswick (3,600) posted the strongest job gains in January. The bulk of the increase in Ontario was in Professional, Scientific and Technical Services, Health Care and Social Assistance and Trade. The largest gains in Newfoundland and Labrador were posted in Food Processing Manufacturing while gains were spread across a number of industries in New Brunswick. Alberta experienced the largest decline (-8,200), all in goods-producing industries. O n a ye a r - o v e r - ye a r b a s i s , a l l p r o v i n c e s , e x c e p t Saskatchewan (-0.1%), have posted gains, notably British Columbia (4.1%), Alberta (2.9%) and Prince Edward Island (2.5%). Regional employment patterns 113 110 107 104 101 98 1998 1999 2000 2001 2002 2003 2004 January 1998 = 100 Atlantic Prairies B.C. 116 113 110 107 104 101 January 1998 = 100 Quebec Ontario ...and the unemployment rate varied in most provinces Unemployment rates increased in most provinces in January, notably in Prince Edward Island, Nova Scotia and British Columbia. The unemployment rate edged up in New Brunswick due to a labour force increase. Newfoundland and Labrador posted the largest decline (1.5 percentage point to 16.5%). Other provinces registered small changes in their unemployment rates. Since January 2003, the unemployment rate has gone down in most provinces, particularly in Newfoundland & Labrador, British Columbia, Alberta and Prince Edward Island, but has risen sharply in Quebec. 98 1998 1999 2000 2001 2002 2003 2004 Unemployment Rates -- January 2004 % 16.5 10.8 9.7 10.4 9.1 6.6 7.3 7.4 5.2 5.6 5.0 O nt M an Sa sk A lt a Provincial Employment and Unemployment Trends Employment (thousands) Levels 2004 January Canada 15,935.6 Unemployment Rate (%) Change since last year (000's) % 298.5 2.5 1.7 4.4 1.1 37.6 117.1 4.6 -0.3 48.8 80.9 1.9 1.1 2.5 1.0 0.3 1.0 1.9 0.8 -0.1 2.9 4.1 Change since last month (000's) 14.9 4.5 -0.9 -1.1 3.6 -1.5 18.0 0.5 -1.0 -8.2 1.0 % 0.1 2.1 -1.3 -0.3 1.0 -0.0 0.3 0.1 -0.2 -0.5 0.0 Levels 2004 January 7.4 16.5 10.8 9.7 10.4 9.1 6.6 5.2 5.6 5.0 7.3 Change since last last month year 0.0 -1.5 0.7 0.7 0.5 -0.3 -0.1 0.2 -0.1 0.2 0.5 -0.1 -1.2 -0.5 0.4 0.1 0.6 -0.2 0.3 -0.1 -0.5 -1.0 Newfoundland & Labrador 220.1 69.3 Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia 438.1 349.7 3,680.4 6,303.8 571.1 487.4 1,743.3 2,072.4 MEI February 2004 B C C an ad a N .& Q ue L. PE I N B N S 10 PRICES and FINANCIAL MARKETS Consumer and Commodity Prices Inflation eased to 1.2% in January... On a year-over-year basis, the Consumer Price Index (CPI) rose 1.2% in January, down from a rise of 2.0% in December. Energy prices were the main factor responsible for the fall in inflation. The CPI surged one year ago in January as Ontario's electricity index returned to normal levels after a rebate was paid to consumers in December 2002. This surge was not matched by an equivalent increase this year. Excluding energy, the CPI rose 1.5% compared to a rise of 1.7% in December. On a monthly basis (seasonally adjusted), the CPI rose 0.1% in January following an increase of 0.4% in December. Higher prices for transportation (1.0%) and alcohol and tobacco products (0.6%) contributed to the increase, while lower prices for food (-0.3%) and shelter (-0.2%) exerted some downward pressure. In January, the year-over-year increase in commodity prices moderated to 14.6% from 18.4% in December. On a monthly basis, commodity prices rose 2.7% following a 8.6% jump in December. Excluding energy prices, commodity prices increased 2.6% following a 1.7% rise in December. Commodity Prices ($US basis) 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total Energy Excluding energy Index, 1982-90=100 Consumer Prices January 2004 Index (1992=100) All items CPI Food Shelter Household operations Clothing & Footwear Transportation Health & Personal Care Recreation, Educ. & Reading Alcohol & Tobacco Energy 122.9 123.7 118.7 114.9 102.3 142.2 117.7 125.3 140.8 138.9 % Change since last last month year 0.1 0.2 -0.1 0.0 -0.2 1.0 0.1 -0.9 0.5 0.0 2.0 1.2 1.1 2.2 0.9 0.7 0.2 1.4 -0.1 6.7 1.5 -1.1 ...and the "core" rate fell to 1.5% The "core" rate of inflation, which excludes the eight most volatile components and indirect taxes, fell from 2.2% in December to 1.5% in January, well below the midpoint of the 1%-3% official target range. Excl. 8 Most Volatile/Indirect Taxes 123.1 Commodity Prices Index, 1982-90=100 135.2 114.9 169.0 2.7 2.6 2.9 14.6 21.2 7.6 Excluding Energy Energy Consumer Price Index 5.0 % change, year-over-year All items Excluding 8 most volatile components and indirect taxes 4.0 Provincial CPI Inflation -- January 2004 % 1.6 1.5 1.2 1.0 1.2 0.9 1.5 1.2 3.0 Official Target Range: 1%-3% 2.0 1.0 0.4 0.1 0.5 0.0 L. PE I N S -1.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 MEI February 2004 B C C an ad a Q ue N .& O nt M an Sa sk A lt a N B 11 PRICES and FINANCIAL MARKETS Short-term and Long-term Interest Rates North American central banks keep interest rates low Since last July, the Bank of Canada has cut its overnight rate by a total of 75 basis points (bps) to help support economic activity following a series of adverse shocks, such as the August blackout in Ontario, BSE scare, an inventory correction and the sharp appreciation of the dollar. The Bank of Canada is expected to cut rates further on March 2 as recent domestic demand indicators were on the soft side. On January 28, the U.S. Federal Reserve kept its federal funds rate unchanged at 1.0% and continued to perceive risks to growth to be evenly balanced. The next policy decision is scheduled for March 16. The rate on 3-month corporate paper in Canada was 2.3% on February 18, down from 2.7% last December. Its U.S. counterpart remained steady at 1.0% on February 18, leading to a narrowing of the interest rate differential by 35 bps to 127 bps since December. North American bond yields trended down in recent months Long-term yields continued to move downward reflecting expectations that Canada's central bank will keep interest rates low. Long-term yields exhibited some volatility after the Federal Open Market Committee meeting on January 28 when the Federal Reserve seemed to indicate that short-term interest rates may have to be raised sooner than expected. Yields on ten-year government bonds have fallen by about 33 bps in Canada and 20 bps in the U.S. since November, to 4.5% in Canada and 4.1% in the U.S. One-year mortgage rates were at 4.3% on February 18, down from 4.75% in December of 2003. Five-year mortgage rates have also continued to fall to 5.8% on February 18, from 6.45% in December. Key Market Rates 3.00 Short-term Interest Rates 10 8 6 4 2 0 -2 Spread 2.00 19 Ja n 7 Ja n 21 Fe b 4 Fe b 18 D ec 5 D ec 90-day Corporate Paper Canada (daily) (end of period) 2002 90-day spread Corporate against Paper U.S. Long Bond Yield spread against U.S. 2.83 2.66 2.80 2.64 2.71 2.73 2.66 2.37 2.30 1.50 1.62 1.78 1.60 1.65 1.65 1.62 1.35 1.27 4.88 4.66 4.96 4.64 4.85 4.79 4.66 4.61 4.46 0.93 0.39 0.42 0.48 0.54 0.54 0.39 0.39 0.41 United States 2.75 2003 August September October November December January Feb. 18* Canada 2.50 2.25 -4 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Long-term Bond Yields 10 8 6 United States 4 2 0 4.55 Canada 4.75 4.95 A positive spread indicates that Canadian rates are above their U.S. counterparts. * Bank of Canada's Weekly Financial Statistics Canada (daily) Key Lending Rates (end of period) 2002 2003 August September October November December January Prime Overnight Lending Mortgage Rate 1 year 5 year Rate Rate 2.75 2.75 3.00 2.75 2.75 2.75 2.75 2.50 2.50 4.50 4.50 4.75 4.50 4.50 4.50 4.50 4.25 4.25 4.90 4.75 4.55 4.55 4.55 4.75 4.75 4.30 4.30 6.70 6.45 6.35 6.30 6.40 6.50 6.45 6.05 5.80 4.35 Spread 4.15 19 Ja n 7 Ja n 21 5 Fe b 4 Fe b 18 D ec D ec -2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Feb. 18* * Bank of Canada's Weekly Financial Statistics MEI February 2004 12 PRICES and FINANCIAL MARKETS Exchange Rates and Stock Prices The Canadian dollar falls somewhat in February After hitting a ten-year high of US¢78.8 in early January, the Canadian dollar fell sharply and has been trading at around US¢75 in recent weeks. This recent slide reflects the view that the Bank will likely reduce interest rates further to help accelerate the pace of economic growth, while interest rates in the U.S. are expected to remain steady. On February 19, the dollar closed at US¢75.16. Since the start of 2003, the Canadian dollar has risen by about US12 cents (19%). Since the start of this year, the Canadian loonie has lost some ground against other major currencies, depreciating 3% against the Japanese yen and the euro. North American stock indices continue to rise Stock markets continued to gain strength into 2004 on optimism about a sustained recovery in corporate profits and some good news in the technology sector. The S&P/TSX closed at 8,699 on February 19, up 6% so far this year and up 53% from the low of October 9, 2002, but still down 24% from its peak on September 1, 2000. Information technology and telecommunication sub-indexes are the main drivers pushing up the index . The Dow Jones closed at 10,664 on February 19, up 2% since the start of the year and up 46% from the low of October 2002, but still down 9% from its peak on January 14, 2000. Canadian Dollar 0.85 0.80 0.75 86 0.70 0.65 $US/$CAN 1992=100 versus US dollar (Left) versus C6 index (Right) 98 0.80 94 0.79 90 0.78 0.77 0.76 The Canadian Dollar Canada (daily) (close) $US vs. $CAN index vs. C-6 (92=100) $CAN vs. EURO yen vs. $CAN 2002 2003 August September October November December January Feb. 18 0.6339 0.7713 0.7217 0.7408 0.7584 0.7698 0.7713 0.7548 0.7548 78.80 91.65 87.40 89.23 91.48 92.09 91.65 92.54 *90.81 1.483 1.583 1.556 1.536 1.549 1.558 1.628 1.652 1.678 78.20 82.08 84.95 84.18 82.83 84.38 82.86 79.83 80.66 82 0.75 78 0.74 0.73 D ec D 5 ec 19 Ja n 7 Ja n 21 Fe b 4 Fe b 18 0.60 74 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 * Bank of Canada's Weekly Financial Statistics Stock Market Indices 12,500 Dow Jones Industrial Average 8,500 9,000 Key Stock Market Indexes S&P/TSX (daily) January Close 8,521 S&P/TSX 154 Energy 214 Metals & Mining Utilities 150 146 Materials 77 Industrial 139 Financial 203 Gold Telecommunication 69 Information Technology 34 Consumer Discretionary 89 Consumer Staples 173 S&P 500 Dow Jones 1,131.1 10,488 % change from last last month year 3.7 -0.8 -6.9 -2.3 -7.1 0.2 4.8 -10.8 8.3 34.1 2.6 -2.1 1.7 0.3 29.7 22.2 60.2 16.3 19.1 25.7 32.7 4.0 37.8 102.1 24.8 17.9 32.2 30.2 10,000 7,500 S&P/TSX 5,000 8,000 7,500 D ec MEI February 2004 D ec 24 Ja n 7 Ja n 21 Fe b 4 Fe b 18 2,500 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 7,000 10 13 THE UNITED STATES ECONOMY U.S. Economic Trends The U.S. economy maintained a healthy pace in the fourth quarter... Real GDP is estimated to have grown at 4.0% (annual rate) in the fourth quarter of 2003, after soaring by 8.2% in the third quarter, the highest rate in 20 years. The moderation at year-end was driven by a reduction in spending on consumer durables (motor vehicles and household equipment). Exports accelerated further, reducing the trade deficit. Inventories contributed to the growth for the first time in more than one year. ...and this trend seems to have persisted in early 2004 In January, manufacturing activity continued to improve, as the Institute of Supply Management index (ISM) rose for the fourth straight month to 63.6 on better production, orders, and employment conditions. The ISM non-manufacturing index (mainly a measure of activity in services) increased for the 10th month in a row to 65.7, its highest level since the survey was launched in July 1997. Measures on consumer sentiment and car sales showed continued strength in December and January. Employment increased in January Nonfarm employment increased by 112, 000 in January bringing total gains since August to 366,000. Manufacturing losses continued, albeit at a slower pace, with employment falling by 11,000. Job gains were recorded in durable goods industries, however, including in fabricated metal products and communications equipment. The unemployment rate edged down to 5.6% from 5.7% in December and a recent high of 6.3% in June 2003. Nonfarm business productivity rose by 2.7% (annual rate) in the fourth quarter following a surge of 9.5% in the third quarter. This reflected a moderation in output growth and an acceleration in hours worked. The year-over-year change in total CPI and CPI excluding food and energy were 1.9% and 1.1%, respectively, in January. U.S. Real GDP Growth % change, SAAR 8.2 U.S. Non-Farm Payrolls Monthly change in thousands 600 400 4.2 4.4 3.7 2.2 1.3 0.5 3.1 2.0 3.1 4.1 200 0 -200 -400 1998 1999 2000 2001 2002 2003 2004 98 99 00 01 02 03 4 2002 1 2 3 2003 4 U.S. Consumer Price Inflation 4.0 % change, year-over-year U.S. Unemployment & Participation Rates 8.0 % % 3.0 Unemployment Rate (Left) Participation Rate (Right) 69 6.0 68 2.0 4.0 67 1.0 Excluding Food & Energy Total 2.0 66 0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: U.S. Bureau of Economic Analysis & U.S. Bureau of Labor Statistics 0.0 65 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 MEI February 2004 14 COMING UP Key Future Data Releases and Planned Events CANADA Canadian International Merchandise Trade - January Labour Force Survey - February Monthly Survey of Manufacturing - January Consumer Price Index - February Real GDP by Industry - January Key Policy Interest Rate Announcement Balance of International Payments - 1st Quarter 2004 National Economic and Financial Accounts - 1st Quarter 2004 Financial Statistics for Enterprises - 1st Quarter 2004 March 10 March 12 March 16 March 18 March 31 April 13 May 28 May 31 June 3 UNITED STATES The Employment Situation - February International Trade in Goods and Services - January Federal Open Market Committee Meeting Consumer Price Index - February GDP - 4th Quarter 2003 (final) March 5 March 10 March 16 March 17 March 25 Note: The February 2004 MEI uses data available as of February 20, 2004 MEI February 2004 15