Monthly economic indicators[385]

November 2003 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/sc_ecnmy/mera/engdoc/03.html. MONTHLY ECONOMIC INDICATORS November 2003 HIGHLIGHTS Real Gross Domestic Product (GDP) fell 0.7% in August as the power outage in Ontario hampered economic activity. Recent indicators, including employment, housing, exports, retail trade and shipments point to recovery in output in September. Employment surged 65,000 in October, almost all in full-time and in the service sector, following 46,000 job gains in September. The unemployment rate fell 0.4 percentage point to 7.6%. In the United States (U.S.), real GDP surged 7.2% in the third quarter. Recent indicators, including employment, point to continued growth. Long-term interest rates have risen by nearly 50 basis points since early October on better-than-expected economic news. The Canadian dollar strengthened further, reaching to nearly US¢77.0, its highest level in 10 years. 3-mth Corp. paper (%)* Long bond yield (%)* Canadian dollar (US¢)* Key Monthly Economic Indicators % Change since last last month year Real GDP ($97 B) Goods Services Composite Index Employment (000's) Full-time Part-time Unemployment* (%) Youth* Adult* 1,007.7 313.4 695.9 184.1 15,813 12,836 2,978 7.6 14.0 6.4 -0.7 -0.5 -0.8 0.7 0.4 0.5 0.1 8.0 14.6 6.7 2.0 0.3 2.2 5,338 4.7 4.5 1.6 0.8 -0.8 1.6 2.9 1.6 2.0 0.2 7.6 13.7 6.4 Aug Aug Aug Sep Oct Oct Oct Oct Oct Oct CPI inflation* 2.2 Retail Sales ($M) 26,722 Housing Starts (000's)** 237.2 Trade Balance* ($M) Exports Imports M&E 5,648 33,684 28,036 8,167 2.3 Sep 3.9 Aug 8.0 Oct 5,101 -4.9 -7.6 -8.6 Sep Sep Sep Sep October November 12*** 2003 2.81 4.99 76.68 2.71 4.85 75.84 2002 2.83 5.16 64.21 *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/sc_ecnmy/mera/engdoc/03.html. Industry Canada Industrie Canada Canada MONTHLY ECONOMIC INDICATORS November 2003 CONTENTS The Economy Page Real GDP by Industry ........................................................................................... 3 Consumer Spending and Attitudes ...................................................................... 4 Business Investment in Plant and Equipment ...................................................... 5 Housing ................................................................................................................ 6 Trade and Competitiveness .................................................................................. 7 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 The United States Economy U.S. Economic Trends ......................................................................................... 14 Coming Up... Key Future Data Releases/Planned Events ........................................................... 15 This report uses data available as of November 14, 2003. It has been prepared by Éric Chalifoux, Stéphane Crépeau, 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 Hossein Rostami. Translation has been provided by Lucie Larocque and Sue Hopf is responsible for production support. Sources of information include, primarily, 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. ISSN 1206-2588 THE ECONOMY Real GDP by Industry Economic activity suffers a setback in August... The power blackout in Ontario and subsequent request for reduced activity to conserve energy hampered economic activity in August, as real gross domestic product (GDP) fell 0.7%. This is the largest decline since September 2001, when GDP slid 0.6%. Production in all sectors of the economy posted losses except Construction and Accommodation & Food Services. However, more recent indicators, including employment and shipments, point to a recovery in output in September. Overall, real GDP is widely expected to show moderate growth in the third quarter, after stalling in the second. ...with widespread declines in the economy Goods output fell 0.5% in August, compared with a 0.9% gain in July. The declines in Mining & Oil & Gas Extraction and Utilities were the largest. A full-month shutdown by one of the major oil producers contributed to the lower oil and gas production. Construction, the only sector reporting a gain, was buoyed by the continuing demand for new housing. Economic activity of services-producing industries decreased 0.8% in August after rising 0.3% in the previous month. Reduced activity in Manufacturing hampered Wholesale Trade, which reported a sharp loss. Public Administration also contributed to the decline as most public servants in Ontario were asked to stay home to conserve energy. Real GDP at Basic Prices 1.5 % change Composite Leading Indicator Real GDP at Basic Prices (1997 chained dollars) August 2003 $ millions Total Economy Business Sector Goods-producing 1,007,694 853,543 313,350 monthly % Change since last month year change -6,813 -5,042 -1,598 -108 -393 -176 346 -1,111 -5,275 -2,092 -36 -487 -70 -114 -279 -197 -171 -33 -199 116 -221 -1,574 -0.7 -0.6 -0.5 -0.5 -1.1 -0.7 0.6 -0.6 -0.8 -3.4 -0.1 -1.0 -0.2 -0.1 -0.6 -0.9 -0.4 -0.1 -2.1 0.5 -0.9 -2.7 0.8 0.8 -0.8 2.5 3.5 -2.3 4.6 -3.9 1.6 0.3 3.4 -1.3 1.2 2.5 2.2 3.8 0.6 3.9 3.7 -3.0 0.3 -0.6 1.0 0.5 0.0 Agri., Forest, Fish, Hunt* 22,196 Mining & Oil & Gas Extraction 36,226 Utilities Construction Manufacturing 1998 1999 2000 2001 2002 2003 -0.5 25,970 55,071 172,827 -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 Service-producing 695,945 Wholesale Trade 60,291 Retail Trade 56,938 Transportation & Warehousing 46,154 Information & Cultural 42,105 FIRE** Professional*** Admin. & Waste Mgmt Education Health & Social Arts, Entertain. & Recreation Accommodation & Food Other Public Administration 205,739 44,599 22,402 45,951 60,957 9,268 22,524 23,877 55,956 *Agriculture, Forestry, Fishing & Hunting **Finance, Insurance & Real Estate ***Professional, Scientific & Technical services MEI November 2003 3 THE ECONOMY Consumer Spending and Attitudes Consumer spending remained strong in the third quarter Following three consecutive monthly increases leading to a record level in July, real retail sales declined slightly (0.1%) in August. Average real retail sales for the July-August period were 5.9% (annual rate) higher than their second quarter level, when they rose 2.4%. Despite declines of 1.4% and 1.9% in August and September, respectively, new motor vehicle sales were 22.1% (annual rate) higher in the third quarter than in the second quarter, when they were down 4.5%. Total Retail and Motor Vehicle Sales 30.0 28.0 Motor Vehicle Sales (Right) 26.0 24.0 22.0 20.0 18.0 Total Sales (Left) 6.5 6.0 5.5 5.0 4.5 4.0 $ Billions $ Billions 7.5 7.0 16.0 1996 1997 1998 1999 2000 2001 2002 2003 Consumer confidence rose further in October The consumer confidence index rose for the second consecutive month in October to 122.8, reflecting consumers' growing willingness to spend and rising optimism of job prospects in the next six months. This, together with low interest rates and further employment growth in October, bodes well for continued growth in income and consumption. Retail Sales and Consumer Credit August 2003 % Change since last last $ millions month year 0.3 0.5 -0.7 -1.8 2.3 0.1 0.9 0.1 0.9 0.6 3.9 4.4 3.9 -0.2 9.8 3.8 4.4 1.8 3.9 8.8 Total Retail Sales (S.A.) 26,722 Food Drug Stores Clothing Furniture Automotive General Merch. Stores All other Stores Total ex. motor vehicles Consumer Credit 5,879 1,356 1,344 1,677 10,729 2,954 2,783 19,617 240 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 Q1 615,288 4.4 95,186 -0.1 55,557 5.6 139,601 4.6 325,789 5.3 712,580 3.1 2.3 99.1 2003 Q2 619,394 2.7 96,100 3.9 55,910 2.6 139,623 0.1 328,715 3.6 717,216 2.6 2.4 100.1 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 12341234123412341234123412341234123 95 96 97 98 99 00 01 02 03 60 *Conference Board of Canada MEI November 2003 4 THE ECONOMY Business Investment While signals are mixed for third quarter investment... Business investment in non-residential construction should improve in the third quarter. On average, in July and August, non-residential construction GDP was 2.6% higher than in the second quarter. However, in the latest quarter, imports of machinery & equipment fell 6.2% in nominal terms and 2.0% in real terms. This points to a slowdown in M&E investment in the quarter. Investment in Plant and Equipment 235 215 195 175 155 135 115 95 75 60 1992 1994 1996 1998 2000 2002 1993 1995 1997 1999 2001 2003 70 80 Index (1992Q1=100) Machinery & Equipment (Left) Non-Residential Construction (Left) Capacity Utilization (Right) 90 % 100 ...business conditions and prospects appear to be improving The Business Conditions Survey showed improving balances of opinion in all areas for the fourth quarter. 12 point increase in the number of respondents anticipating higher production prospects. The number of respondents that felt they had a higher than normal backlog of unfilled orders posted an 8 point increase. 3 point increase in the number of respondents that anticipated increasing employment prospects. In autumn's Survey of Forecasters (conducted by the Conference Board), respondents were more optimistic than in the summer regarding the outlook for business investment in plant and equipment. A growth of 3.0% for 2003 is anticipated in the current survey, compared to 1.4% in the summer. 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 -6.3 854,361 5.5 146,312 5.6 113,379 10.2 32,934 -7.8 885,948 3.7 86,494 0.3 48,047 2.2 82.3 81.9 83,720 -3.2 43,044 -10.4 82.2 83.5 2002 Corporate Profits & Business Confidence 200 175 150 125 100 Index, 1991=100 Corporate Profits as % of GDP (Right) Business Confidence* (Left) % of GDP 14 12 10 8 6 75 4 1992 1994 1996 1998 2000 2002 1993 1995 1997 1999 2001 2003 *Conference Board of Canada 2002 Q3 84,340 -1.3 42,631 -5.4 82.8 84.4 2002 Q4 83,453 -4.1 41,920 -6.5 82.4 84.0 2003 Q1 85,199 8.6 42,289 3.6 82.5 83.7 2003 Q2 85,703 2.4 42,307 0.2 81.2 82.5 149,624 14.2 117,980 26.7 31,644 -20.8 888,139 1.9 155,212 15.8 120,892 10.2 34,320 38.4 892,421 1.9 174,380 59.3 136,872 64.3 37,508 42.7 900,906 3.9 161,700 -26.1 122,820 -35.2 38,880 15.5 904,935 1.8 MEI November 2003 5 THE ECONOMY Housing The housing market remains red-hot... Housing starts surged to 237,200 units in October from 232,200 in September. October is the second highest monthly level in 12 years. For the first ten months of the year, starts are 7.1% higher than the same period last year. Ontario and Manitoba posted the largest gains in October while starts fell back in the Atlantic and Prairie provinces. Urban starts rose 6,300 to 211,300 while rural starts edged down 1,300 to 25,900. Real residential construction output rose 1.2% in August and was up 6.1% from last year. Building permits also increased 11.2% in the third quarter compared to the second quarter. September's level of 2.9 billion was up 19.1% from last year. Housing Activity 25 23 20 18 16 14 11 Residential Construction (Left) 9 1996 1997 1998 1999 2000 2001 2002 2003 *Canada Mortgage and Housing Corporation Housing Starts* (Right) $ Billions Units (000s) 275 250 225 200 175 150 125 100 Monthly Housing Indicators Levels Residential Construction (1)* ($97M, basic prices) Change since Last Last month year 1.2% 10.0% 618 5,000 900 600 -900 -800 -2,900 9,200 2,000 500 -4,600 900 6.1% 19.1% 3,039 17,500 300 600 -1,700 -1,700 6,300 7,900 2,100 400 -7,600 10,800 19,748 2,896 27,580 237,200 3,400 1,200 3,600 3,500 53,400 95,600 6,300 3,700 33,700 32,700 Building Permits, $M (2)* ...and should stay healthy as fundamentals remain good The housing market is expected to remain strong in the short term as inventories of completed dwellings are low and mortgage rates remain favourable. However, housing is expected to cool in 2004 in line with declining pent-up demand and eroding affordability associated with higher mortgage rates and the rise in housing prices. On a year-over-year basis, the price index for new housing increased 5.1% in September, up from 4.7% in August. Sales of Existing Homes (2)** (# of units) Housing Starts, (3)*** (# of units, SAAR) Newfoundland & Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia 1 - August data; 2 - September data; 3 - October 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 Q1 60,427 3.8 30,082 -7.0 21,900 17.6 8,524 14.1 2003 Q2 60,952 3.5 29,785 -3.9 22,736 16.2 8,572 2.3 Growth in Real Residential Construction % change, SAAR 29.8 14.1 8.2 3.6 5.2 10.3 15.4 10.4 3.8 3.5 -3.6 97 98 99 00 01 02 1 -3.0 2 02 3 4 1 03 2 MEI November 2003 6 THE ECONOMY Trade Exports and imports rebounded in September... Merchandise exports rose 4.7% to $33.7 billion in September, following a 3.3% decline in August. The recovery was influenced largely by strong gains in exports of automotive products, which were adversely affected by the August power blackout. There were also significant gains elsewhere, particularly exports of energy products. Exports to both the U.S. (4.4%) and other countries (6.2%) rose. Imports rose 4.5%, after declining 5.5% in August. In addition to automotive products, notable gains were reported in energy products, industrial goods & materials, and machinery & equipment. While imports from the U.S. rose 4.0% in September, imports from other countries gained 5.5%. 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 ...raising the trade surplus The merchandise trade surplus rose by $0.3 billion to $5.6 billion in September, its highest level since March. This reflected an increase of $0.4 billion in the surplus with the U.S. and a rise of $95 million in the deficit with non-U.S. partners. For the January-September period, exports and imports were down 1.4% and 2.7%, respectively, from their levels of the same period in 2002. As a result, the trade surplus was up $2.7 billion to $46.9 billion. Merchandise Trade September 2003 Levels ($ millions) August 2003 Exports to United States 32,177 26,566 26,838 18,849 5,338 7,717 2,421 4,912 2,932 5,282 7,354 6,728 1,410 1,734 1,536 252 5,073 8,036 5,412 3,846 0.9 70 50 3 4 1 2 02 03 Source: Statistics Canada & U.S. Bureau of Labor Statistics 92 93 94 95 96 97 98 99 00 01 02 2 0.6 Year-to-date ($ millions) Jan.-Sep. 2002 309,724 259,649 265,501 190,790 44,223 68,859 23,242 34,859 28,064 52,781 73,040 73,743 13,195 16,327 11,762 2,341 51,472 79,263 60,595 34,453 Change ($M) % Change September 2003 33,684 27,728 28,036 19,606 5,648 8,122 2,512 5,140 3,085 5,513 7,439 7,425 1,505 1,783 1,698 251 5,198 8,167 6,029 3,827 Jan.-Sep. 2003 305,238 253,576 258,296 180,963 46,942 72,613 21,701 47,524 25,786 49,187 67,937 66,177 12,986 16,355 15,113 2,285 49,062 74,402 57,426 34,850 Aug. to Sep. Aug. to Sep. Jan.-Sep. 2002 to 2003 2003 Jan.-Sep. 2003 1,507 1,162 1,198 757 310 405 91 228 153 231 85 697 95 49 162 -1 125 131 617 -19 4.7 4.4 4.5 4.0 -1.4 -2.3 -2.7 -5.2 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 3.8 4.6 5.2 4.4 1.2 10.4 6.7 2.8 10.5 -0.4 2.5 1.6 11.4 -0.5 -6.6 36.3 -8.1 -6.8 -7.0 -10.3 -1.6 0.2 28.5 -2.4 -4.7 -6.1 -5.2 1.2 Imports by Commodity Agriculture/Fishing Products Energy Products Forestry Products Industrial Goods & Materials Machinery & Equipment Automotive Products Other Consumer Goods MEI November 2003 7 LABOUR MARKET TRENDS Employment and Unemployment Employment surged in October... Employment went up by 65,000 in October, following an increase of 46,000 jobs in September and slow employment growth earlier in the year. Since the beginning of the year, employment has grown 1.0% (164,000), much slower than the 3.1% (470,000) growth observed over the same period of 2002. Employment gains in October were almost all in full-time jobs (62,000). So far this year, nearly all employment gains have been in full-time positions (162,000). Employment increased for adults (68,000), but decreased for youths (3,000) in October. Adult women gained 41,000 jobs, all full-time. Adults have gained 172,000 jobs since December, while youths have lost 9,000 jobs. The employment rate rose to 62.4%, near the all-time record of 62.5% set in March 2003. Employment 100 80 60 40 20 0 -20 -40 1998 Monthly change in thousands 1999 2000 2001 2002 2003 Unemployment Rate 13.0 12.0 % Unemployment Rate (Left) 67.0 % 68.0 ...and the unemployment rate fell to 7.6% The unemployment rate fell 0.4 percentage points to 7.6% in October, as the large increase in employment more than offset a small increase in the labour force. The unemployment rate for adults declined 0.3 percentage points, but was unchanged from October 2002. Youth unemployment fell 0.6 percentage point to 14.0%, reflecting a sharp decline in the number of youths looking for jobs. 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 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 2002 October 15,559.4 12,587.5 2,971.8 2,386.1 13,173.3 2,412.2 1,278.7 7.6 13.7 6.4 16,838.1 67.2 62.1 Change since 2003 October 15,813.3 12,835.7 2,977.6 2,395.9 13,417.4 2,433.0 1,309.4 7.6 14.0 6.4 17,122.8 67.5 62.4 % Change since year-todate 163.6 162.3 1.3 -8.6 172.2 54.5 33.8 0.1 0.7 0.0 197.5 0.0 0.0 2003 September 15,747.9 12,773.6 2,974.4 2,398.8 13,349.1 2,428.4 1,369.6 8.0 14.6 6.7 17,117.6 67.6 62.2 last month 65.4 62.1 3.2 -2.9 68.3 4.6 -60.2 -0.4 -0.6 -0.3 5.2 -0.1 0.2 last year 253.9 248.2 5.8 9.8 244.1 20.8 30.7 0.0 0.3 0.0 284.7 0.3 0.3 last month 0.4 0.5 0.1 -0.1 0.5 0.2 -4.4 last year 1.6 2.0 0.2 0.4 1.9 0.9 2.4 0.0 1.7 MEI November 2003 8 LABOUR MARKET TRENDS Industry Overview Employment changed little in the Goods sector... Employment in the Goods sector saw virtually no gain (+600) in October, following an increase of 1,400 in September. Natural Resources posted the largest gain (7,000), while 10,000 jobs were lost in Construction, nearly offsetting small gains in all other major groupings. Despite an October loss, Construction has gained 34,000 jobs so far this year due to a strong housing market. Manufacturing gained 800 jobs in October, but has lost 77,000 since the beginning of 2003, due in part to a higher Canadian dollar and weakness in the U.S. early in the year. This contrasts to the first ten months of 2002, when Manufacturing created 98,000 jobs. Employment by Major Sector 116 114 112 110 108 106 104 102 100 98 1998 1999 2000 2001 2002 2003 January 1998 = 100 Total Goods Services Employment Growth by Worker Category ...but surged in the Services sector Employment in Services increased by 65,000 in October, following 45,000 job gains the previous month. The largest gains were in Health Care (20,000), Management (13,000) and Finance (13,000). Only three groups posted small job losses -- Other service category, Information, Culture & Recreation, and Public Administration. The Services sector has created 196,000 (1.7%) jobs so far this year, more than offsetting job losses in the Goods sector (32,000 or 0.8%). Industrial Employment Trends 2002 October Goods-producing 3,994.6 Agriculture 351.8 Natural Resources* 268.1 129.7 Utilities Construction 913.6 Manufacturing 2,331.4 Services-producing 11,564.8 Trade 2,429.5 Transportation* 772.0 905.1 FIRE* 1,008.9 Professional/Scientific 603.9 Management/Administrative 1,020.3 Educational Services Health Care/Social Assistance 1,645.3 Information/Culture/Recreation 683.6 1,017.1 Accommodation & Food 696.8 Other Services 782.4 Public Administration (in thousands) Levels 2003 September 3,977.0 332.8 292.7 131.8 955.2 2,264.5 11,770.9 2,464.9 764.5 940.9 996.4 599.9 1,040.0 1,690.7 718.5 1,018.9 700.8 835.3 2003 October 3,977.6 333.1 300.0 133.4 945.7 2,265.3 11,835.7 2,474.1 775.2 953.4 1,001.8 612.7 1,045.5 1,710.6 712.3 1,026.0 693.8 830.4 last month 0.6 0.3 7.3 1.6 -9.5 0.8 64.8 9.2 10.7 12.5 5.4 12.8 5.5 19.9 -6.2 7.1 -7.0 -4.9 October 2003 (thousands) Total 65.4 253.9 Private employees Selfemployed Public sector 4.6 33.7 146.5 20.8 27.0 86.6 month-over-month year-over-year Change since last year-toyear date -17.0 -32.4 -18.7 -22.1 31.9 29.7 3.7 2.3 32.1 34.4 -66.1 -76.9 270.9 196.1 44.6 27.6 3.2 9.4 48.3 49.8 -7.1 -19.0 8.8 0.4 25.2 -4.7 65.3 55.8 28.7 18.8 8.9 9.8 -3.0 -1.3 48.0 49.4 % Change since last last month year 0.0 -0.4 0.1 -5.3 2.5 11.9 1.2 2.9 -1.0 3.5 0.0 -2.8 0.6 2.3 0.4 1.8 1.4 0.4 1.3 5.3 0.5 -0.7 2.1 1.5 0.5 2.5 1.2 4.0 -0.9 4.2 0.7 0.9 -1.0 -0.4 -0.6 6.1 *Natural Resources: Forestry, Fishing, Mining, Oil & Gas; Transportation includes warehousing; FIRE: Finance, Insurance, Real Estate & Leasing. MEI November 2003 9 LABOUR MARKET TRENDS Provincial Overview Job gains were concentrated in British Columbia and Quebec... British Columbia posted the strongest job gains in October at 30,000, mostly full-time. Increases were concentrated in Public Administration, Finance and Professional Services. B.C. has gained 54,000 jobs (2.7%) so far this year. Quebec gained 26,000 jobs, all part-time. Quebec has now recouped job losses earlier in 2003. Ontario gained only 5,000 jobs in October, after creating 39,000 jobs in September and 91,000 jobs so far this year. Alberta has also been a major contributor to employment growth this year (31,000). In October, small job gains were posted by all other provinces, except Newfoundland & Labrador (-4,000) and Nova Scotia (-4,000). Regional employment patterns 113 110 107 104 101 98 1998 1999 2000 2001 2002 2003 January 1998 = 100 Atlantic Prairies B.C. 116 113 110 107 104 101 January 1998 = 100 Quebec Ontario ...and the unemployment rate fell in most provinces Job creation helped reduce the unemployment rates in B.C. (-1.3 percentage points to 7.8%), Manitoba (-0.5 to 5.3%), Quebec (-0.3 to 9.3%) and Ontario (-0.3 to 7.0%). Prince Edward Island posted the largest increase in the unemployment rate (0.3 to 10.6%), reflecting an increase in its labour force. Other provinces registered small changes in their unemployment rates. Compared to last October, the unemployment rate was down in most provinces, particularly Newfoundland & Labrador and P.E.I., but was up sharply in Quebec. 98 1998 1999 2000 2001 2002 2003 Unemployment Rates -- October 2003 % 16.5 10.6 9.5 10.8 9.3 7.0 5.3 5.6 5.0 7.8 7.6 O nt M an Sa sk A lt a Provincial Employment and Unemployment Trends Employment (thousands) Levels 2003 October Canada 15,813.3 Unemployment Rate (%) Change since last year (000's) % 253.9 5.1 1.4 3.0 -3.7 34.9 114.9 -0.3 -5.8 54.2 50.2 1.6 2.4 2.1 0.7 -1.1 1.0 1.9 -0.1 -1.2 3.2 2.5 Change since last month (000's) 65.4 -4.0 0.1 -3.7 1.0 25.5 5.3 5.5 1.7 3.9 30.1 % 0.4 -1.8 0.1 -0.8 0.3 0.7 0.1 1.0 0.4 0.2 1.5 Levels 2003 October 7.6 16.5 10.6 9.5 10.8 9.3 7.0 5.3 5.6 5.0 7.8 Change since last last month year -0.4 0.1 0.3 -0.2 0.1 -0.3 -0.3 -0.5 -0.1 0.1 -1.3 0.0 -1.7 -1.0 0.1 0.0 1.2 -0.1 -0.1 -0.2 -0.7 -0.5 Newfoundland & Labrador 216.4 69.0 Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia 432.5 343.7 3,654.1 6,257.0 569.2 484.4 1,738.9 2,048.1 MEI November 2003 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 rose to 2.2% in September... The year-over-year increase in the Consumer Price Index (CPI) rose from 2.0% in August to 2.2% in September. The increase reflected a larger rise in household furnishing costs and in tuition fees compared to August, and a smaller decline in clothing prices. Energy prices had a dampening effect, rising 6.5% compared with 7.6% in August. Excluding the energy sub-index, inflation rose from 1.6% to 1.9% in September. On a monthly basis, the CPI was up 0.2%, as in August. Clothing prices jumped 3.1% following a series of small changes, while transportation costs fell 0.4% after rising 1.8% in August. In October, the year-over-year increase in commodity prices moderated to 11.6% from 12.7% in September. On a monthly basis, commodity prices rose 1.0%, partly offsetting the decline of 1.8% in September. Since their lows of late 2001, commodity prices were up by 34% in $U.S. terms, which corresponds to an increase of about 14% in $C terms. Commodity Prices ($US basis) 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 1996 1997 1998 1999 Total Energy Excluding energy Index, 1982-90=100 2000 2001 2002 2003 Consumer Prices September 2003 Index (1992=100) All items CPI Food Shelter Household operations Clothing & Footwear Transportation Health & Personal Care Recreation, Educ. & Reading Alcohol & Tobacco Energy 122.7 121.3 117.9 115.1 105.0 141.9 117.6 128.9 137.1 143.4 % Change since last last month year 0.2 -0.7 0.2 0.3 3.1 -0.4 0.2 0.7 0.0 0.3 -0.1 2.2 1.8 2.9 1.1 -2.1 3.7 1.6 0.2 5.5 1.7 6.5 ...while the "core" rate rose to 1.7% The "core" rate of inflation, which excludes the eight most volatile components and indirect taxes, increased from 1.5% in August to 1.7% in September. This remains below the midpoint of the 1%-3% target range. Excl. 8 Most Volatile/Indirect Taxes 122.8 Commodity Prices (October 2003) Index, 1982-90=100 119.6 107.4 139.9 1.0 -0.8 3.6 11.6 14.5 8.0 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 -- September 2003 % 3.3 3.0 Official Target Range: 1%-3% 2.0 1.6 1.0 2.8 2.5 2.4 2.4 2.2 1.6 1.8 2.0 2.2 0.0 B C C an ad a Q ue O nt M an Sa sk A lt a L. PE I N B N S -1.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 MEI November 2003 N .& 11 PRICES and FINANCIAL MARKETS Short-term and Long-term Interest Rates Short-term interest rates remain low The Bank of Canada kept its lending rate unchanged at 2.75% on October 15 and is widely expected to remain on the sidelines on December 2. In October's Monetary Policy Report, economic growth was expected to recover in the third quarter and to strengthen in the fourth. Economic growth was projected to be above potential in 2004, albeit with significant uncertainty surrounding the sustainability of the U.S. growth and the effects of exchange rate movements. In the U.S., the Federal Reserve is expected to keep its federal funds rate unchanged at 1.0% on December 9. Rates on 3-month corporate paper in Canada were at 2.8% on November 12, up from 2.6% at the end of September, but the same as in August. Their U.S. counterparts were at 1.1%, only slightly above the low of 0.9% in mid-June. The short-term rate differential was 172 basis points (bps), well below June's 222 bps level. North American bond yields rebound on improving economic conditions North American long-term yields have recovered sharply from the lows of early October on better-than-expected labour and output market conditions and easing concerns about deflation in the U.S. On November 12, Canadian and U.S. long-term yields were at 5.0% and 4.4%, respectively; both up nearly 50 bps from their levels in early October. Canadian one-year mortgage rates have remained at a low of 4.55% since mid-July. Reflecting the recent rise in bond yields, five-year mortgage rates have risen from 6.15% in early October to 6.65% on November 12. Short-term Interest Rates 10 8 6 4 2 0 -2 Spread 2.25 2 Se 9 p 15 Se p 29 O ct 14 O ct 2 N 8 ov 12 A ug Key Market Rates 3.25 90-day Corporate Paper Canada (daily) (end of period) 2001 90-day spread Corporate against Paper U.S. Long Bond Yield spread against U.S. 2.08 2.83 3.27 3.11 2.89 2.80 2.64 2.71 2.81 0.19 1.50 2.07 2.22 1.83 1.78 1.60 1.65 1.73 5.44 4.88 4.50 4.37 4.78 4.96 4.64 4.85 4.99 0.22 0.93 1.06 0.99 0.44 0.42 0.48 0.54 0.55 United States 3.00 2002 May June July August September October Nov. 12* Canada 2.75 2.50 -4 1995 1996 1997 1998 1999 2000 2001 2002 2003 Long-term Bond Yields 10 8 6 United States 4 4.55 2 4.35 0 Spread 4.15 29 2 N 8 ov 12 15 29 14 A ug Se p Se p ct O O ct A positive spread indicates that Canadian rates are above their U.S. counterparts. * Bank of Canada's Weekly Financial Statistics 5.15 Canada 4.95 4.75 Canada (daily) Key Lending Rates (end of period) 2001 2002 May June July August September October Nov. 12* Prime Overnight Lending Mortgage Rate 1 year 5 year Rate Rate 2.25 2.75 3.25 3.25 3.00 3.00 2.75 2.75 2.75 4.00 4.50 5.00 5.00 4.75 4.75 4.50 4.50 4.50 4.60 4.90 5.05 4.85 4.55 4.55 4.55 4.55 4.75 6.85 6.70 6.15 5.80 6.20 6.35 6.30 6.40 6.65 -2 1995 1996 1997 1998 1999 2000 2001 2002 2003 * Bank of Canada's Weekly Financial Statistics MEI November 2003 12 PRICES and FINANCIAL MARKETS Exchange Rates and Stock Prices The Canadian dollar trends up further The Canadian dollar trended up from a low of US¢71.1 in mid-August to a high of US¢76.7 in mid-October before coming under downward pressures on stronger-than-expected U.S. data, which helped the greenback recover against major currencies. More recently, the loonie has regained strength, benefiting from strong data on domestic activity and trade. The Canadian dollar closed at US¢77.0 on November 13. Between the beginning of the year to November 12, the value of the Canadian currency has increased against all the major currencies, including: the U.S. dollar (+21%); the euro (+7%); the Japanese yen (+10%); and the U.K. pound (+15%). North American stock indices retain earlier gains The stock markets, which had recovered significantly since mid-March in anticipation of improving economic and profit conditions, have been moving in a narrow trading range in recent weeks as strong data confirmed earlier expectations. The S&P/TSX has increased by 23% from the lows of March 2003 to 7,768 on November 13, with the information technology and metals & mining sub-indexes rising at more than twice this pace. All the sub-indexes have increased between March and October. The Dow Jones has also risen by 31% from the lows of March to 9,838 on November 13. Canadian Dollar 0.85 0.80 0.75 86 0.70 0.65 0.60 1995 1996 1997 1998 1999 2000 2001 2002 2003 $US/$CAN 1992=100 versus US dollar (Left) versus C6 index (Right) 98 0.78 94 0.77 90 0.76 0.75 0.74 The Canadian Dollar Canada (daily) (close) $US vs. $CAN index vs. C-6 (92=100) $CAN vs. EURO yen vs. $CAN 2001 2002 May June July Aug Sep Oct Nov. 12* 0.6278 0.6339 0.7307 0.7421 0.7118 0.7217 0.7408 0.7584 0.7668 78.95 78.80 87.81 89.83 88.16 87.40 89.23 91.48 92.98 1.387 1.483 1.601 1.579 1.570 1.556 1.536 1.549 1.515 80.76 78.20 84.77 87.50 85.87 84.95 84.18 82.83 83.47 82 0.73 78 0.72 2 Se 9 p 15 Se p 29 O ct 14 O ct 2 N 8 ov 12 74 0.71 A ug * Bank of Canada's Weekly Financial Statistics Stock Market Indices 12,500 Dow Jones Industrial Average 8,000 8,500 Key Stock Market Indexes S&P/TSX (daily) October Close 7,773 S&P/TSX 136 Energy 193 Metals & Mining Utilities 149 138 Materials 75 Industrial 129 Financial 208 Gold Telecommunication 61 Information Technology 25 Consumer Discretionary 85 Consumer Staples 170 S&P 500 Dow Jones 1,050.7 9,801 % change from last last month year 4.7 0.3 20.3 5.7 7.2 5.6 6.9 7.5 5.3 2.2 6.1 5.2 4.4 5.7 24.4 15.3 58.3 11.7 20.3 16.3 32.0 26.9 41.5 70.2 16.8 12.6 18.6 16.7 10,000 7,500 S&P/TSX 5,000 7,500 7,000 MEI November 2003 O ct 2 N 9 ov 12 Se p Se p O 2,500 1995 1996 1997 1998 1999 2000 2001 2002 2003 6,500 2 16 30 Se p ct 15 13 THE UNITED STATES ECONOMY U.S. Economic Trends The economy expanded at a rapid pace in the third quarter... Advance estimates show real GDP grew 7.2% (annual rate) in the third quarter of 2003, following 3.3% growth in the second. Growth was widespread. Consumer spending grew 6.6%, with expenditures on durable goods advancing 26.9%, and investment in equipment and software increasing 15.4%. Exports recovered in the third quarter after three quarters of decline and imports slowed, adding 0.8 percentage point to overall growth. ...and robust growth is expected to continue Recent indicators point to continued strength in the U.S. economy. In October, industrial production rose 0.2% as manufacturers began to replenish depleted inventories. The Institute of Supply Management manufacturing index rose to 57.0 in October, the fourth consecutive month the index registered above the 50-point mark (an index value greater than 50 indicates an expanding sector). However, total retail sales fell back 0.3%, mostly due to weaker auto sales after the summer. Ex-auto sales rose 0.2% in October. Labour market conditions are improving Non-farm employment rose 126,000 in October, the third consecutive monthly increase. Employment gains were concentrated in services while the goods-producing sector shed 17,000 jobs including 24,000 in manufacturing. Since July, 286,000 jobs have been created, an improvement from over 500,000 job losses recorded in the first half of the year. The unemployment rate edged down slightly to 6% in October. Productivity in the non-farm sector rose 8.1% (annual rate, advance estimate) in the third quarter following a rise of 7.0% in the second quarter. High productivity has helped keep inflation low during periods of rising energy prices and the exchange rate-induced rise in import prices. CPI inflation edged up slightly in September to 2.3% (year-over-year), while core inflation fell further to 1.2%. U.S. Real GDP Growth % change, SAAR 600 7.2 400 4.4 4.3 200 3.3 2.4 1.4 0.3 -400 97 98 99 00 01 02 3 4 2002 1 2 2003 3 1998 1999 2000 2001 2002 2003 1.4 0 -200 U.S. Non-Farm Payrolls Monthly change in thousands 4.1 3.8 4.0 U.S. Consumer Price Inflation 4.0 % change, year-over-year U.S. Unemployment & Participation Rates 8.0 % % 69 3.0 6.0 68 2.0 4.0 67 1.0 Excluding Food & Energy Total 2.0 Unemployment Rate (Left) Participation Rate (Right) 66 0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: U.S. Bureau of Economic Analysis & U.S. Bureau of Labor Statistics 0.0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 65 MEI November 2003 14 COMING UP Key Future Data Releases and Planned Events CANADA Financial Statistics for Enterprises - 3rd Quarter Balance of International Payments - 3rd Quarter Real GDP by industry - September National Economic and Financial Accounts - 3rd Quarter Key Policy Interest Rate Announcement Labour Force Survey - November Canadian International Merchandise Trade - October Monthly Survey of Manufacturing - October Consumer Price Index - November November 27 November 27 November 28 November 28 December 2 December 5 December 12 December 16 December 19 UNITED STATES GDP - 3rd Quarter 2003 (preliminary) The Employment Situation - November Federal Open Market Committee Meeting International Trade in Goods and Services - October Consumer Price Index - November November 25 December 5 December 9 December 12 December 16 Note: The November 2003 MEI uses data available as of November 14, 2003 MEI November 2003 15