Canadian economic accounts

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Real gross domestic product (GDP) increased 0.3% in the third quarter, after remaining essentially flat over the first half of the year. Most of the third quarter gain occurred in July. Economic activity edged up 0.1% in September following a decline in August. A more detailed analysis and additional data tables are available in Canadian Economic Accounts Quarterly Review.

Canadian producers increased their output in the third quarter. The production of goods rebounded in the third quarter following four consecutive quarterly declines. The increase was led by the mining sector, notably support activities for oil and gas extraction, as well as construction. The manufacturing sector edged up while forestry continued its decline. Production in the services industries continued to grow, with notable gains in the public sector and, to a lesser extent, in retail trade and wholesale trade.

Chart 1
Final domestic demand slows

Economic growth has been weak since the beginning of the year, as foreign demand has weakened and growth of domestic demand has slowed. Exports declined for the fifth consecutive quarter and growth of final domestic demand decelerated to 0.1%, largely as a result of a slowdown in consumer expenditure.

The instability of world financial markets did not appear to have a significant impact on funds borrowed in domestic financial markets in the third quarter. Funds borrowed by the domestic non-financial sectors on financial markets slowed. The fluctuation was similar to that which has typically been observed in the past.

The reduction in funds borrowed by the household sector was partially offset by increased borrowing by non-financial corporations in the third quarter, which accounted for just over one-third of all funds raised, driven by an increase in bank loans.

Note to readers Percentage changes for expenditure-based and industry-based statistics (such as personal expenditures, investment, exports, imports and output) are calculated using volume measures that are adjusted for price variations. Percentage changes for income-based statistics (such as labour income, corporate profits and farm income), as well as for lending and borrowing statistics, are calculated using nominal values, that is, not adjusted for price variations. Articles on the two new data series introduced this quarter are "Gross national income at market prices" and "Debt service indicators, persons and unincorporated businesses" are available in the Canadian Economic Accounts Quarterly Review (13-010-XWE, free). Real gross national income is a measure of the volume of goods and services that can be purchased with the income a country receives. This differs from real gross domestic product, which measures the volume of goods and services produced in a given jurisdiction. The debt service ratio of the persons and unincorporated businesses sector represents the ratio of interest expenses to personal disposable income and represents an indicator of the overall financial well-being of the sector.

The Canadian economy grew at an annualized rate of 1.3% in the third quarter, compared with a 0.5% decline for the US economy.

A more detailed analysis of the financial flows account and additional data tables are available in the Canadian Economic Accounts Quarterly Review.

Chart 2
Contributions to percent change in GDP, third quarter 2008

Table 1
Real gross domestic product, chained (2002) dollars

Exports down again

Exports of goods and services fell 1.4% in the third quarter. This was the fifth consecutive quarterly decrease, leaving the volume of exports 5.8% lower than in the second quarter of 2007. Exports of primary goods, including agricultural and fish products, energy, and forestry products registered notable declines. Shipments of automotive products abroad recorded a fourth consecutive decline.

Chart 3
Exports continue to fall

Imports decline

Imports of goods and services declined 1.6% in the third quarter, and stood 3.2% lower than the peak reached in the fourth quarter of 2007. Services imports (-4.4%) recorded a third consecutive quarterly decline, as imports of financial services related to securities trading were down sharply. Canadian travel expenditures abroad were also down significantly for a third consecutive quarter.

Following two large quarterly gains, a large drop in energy imports led the imports of goods downward in the third quarter. Imports of industrial goods and materials declined for a third consecutive quarter.

Personal spending decelerates

Growth in the volume of personal spending slowed to 0.2% in the third quarter. This was the third consecutive quarter of deceleration, and was the weakest growth since the fourth quarter of 2003. Slower growth was registered for spending on both goods and services.

Transportation expenditures were particularly weak, as purchases of motor vehicles fell 2.5%, on the heels of a 0.8% decrease in the second quarter. Demand for consumer credit was lower in the third quarter, influenced by declining motor vehicle purchases.

The slowdown in spending on consumer services reflects decreased spending on travel abroad, on restaurants and accommodation services and on purchased transportation.

Housing investment remains unchanged

Residential construction remained virtually unchanged in the third quarter, following two consecutive quarterly declines. The value of new housing construction edged up as did renovation activity, helping sustain housing investment. Resale activity, as reflected in ownership transfer costs, posted its fifth consecutive quarterly decline, falling 1.5% in the quarter.

Business investment in plant and equipment edges up

Business investment in plant and equipment expanded 0.2% in the third quarter. In the first three quarters of 2008, investment growth has averaged 0.6% per quarter, about half the pace registered in the last two quarters of 2007.

Investment in engineering projects remained strong (+1.5%), growing for a third consecutive quarter. On the other hand, investment in building construction was down for the second quarter in a row.

Investment in machinery and equipment slipped 0.2% in the third quarter, following a 0.1% decline in the previous quarter.

Inventories build up again

Inventories accumulated again in the third quarter as stocks increased for non-farm businesses, on par with the previous quarter. Retail inventories, particularly of motor vehicles, increased as consumer spending softened. Wholesalers accumulated both durable and non-durable goods.

Overall farm inventories expanded, mostly as a result of the accumulation of grain inventories.

Profits grow strongly

Corporations recorded strong profit growth in the third quarter (+5.7%), on top of the robust pace set in the second quarter (+8.6%). This represents the largest back-to-back quarterly growth since 2004. Non-financial corporate profits posted strong growth for the second consecutive quarter. Financial corporation profits were also up after several quarters of weakness.

Farm income was up substantially in the third quarter, spurred by high grain and oilseed prices. Farmers have been recording strong increases in net income since the beginning of 2008.

Personal income continues to advance

Labour income advanced 0.8%, decelerating for a third consecutive quarter. Employment was down 0.1% in the quarter, while hours worked were virtually unchanged.

Overall, personal income grew 0.7%, a slight acceleration from the second quarter. Personal outlays outpaced income, and the saving rate slipped to 3.0%. Price increases, notably for food and fuel, contributed to a 1.2% increase in nominal personal purchases of consumer goods and services; even though the growth in volume of these purchases was much lower (+0.2%).

Economy-wide price increases moderate

Prices rose at a slower rate in the third quarter than in the second quarter, largely due to a slower growth in energy prices. Although the price of crude petroleum averaged $123 Canadian per barrel during the three-month period from July to September, similar to the previous three months, the price trended down throughout the third quarter.

The price of goods and services produced in Canada advanced 0.9% compared with 2.6% in the second quarter. Export prices were up 3.9% but did not grow as quickly as in the second quarter (+8.4%).

The Canadian dollar depreciated 3.1% in the quarter relative to its US counterpart, but stayed well above 90 US cents.

GDP by industry, September 2008

Real GDP grew 0.1% in September. The increase in the output of the service industries outweighed the decrease in the production of goods. More than 40% of the gain in the service industries was attributable to wholesale trade. There were also increases in retail trade, the public sector, and manufacturing. Notable decreases were recorded in oil and gas extraction, construction, forestry and tourism-related industries.

Wholesaling activity went up 1.6% in September. There was a notable increase in the wholesaling of automotive products, grains, petroleum products and building supplies. Value added in retail trade grew 0.4% in September, the fifth increase in six months.

Chart 4
Main industrial sectors' contribution to total growth, September 2008

Output of the energy sector decreased 0.9% in September. Oil and gas extraction fell 1.6% as a result of declines in both components. Supply disruptions partly hampered oil production.

Manufacturing production advanced 0.3% in September, with 16 of the 21 major groups increasing. In particular, machinery, food, and petroleum and coal products increased, while primary metal and chemical manufacturing declined. Motor vehicle production continued its downward trend that started at the end of 2007.

The finance and insurance sector edged up 0.1% in September. The increase in activity resulting from the record volume of trading on the stock exchanges was virtually offset by the steep decline in mutual fund sales. Output of the non-depository credit intermediation and insurance industries declined, as the global devaluation of assets reduced the revenues from management of mortgages and other portfolio investments.

The construction sector fell 0.4% in September, with all types of construction decreasing. The output of real estate agents and brokers increased in September, reflecting a significant rise in sales of existing homes across the country.

Products, services and contact information

Detailed analysis and tables

The National economic accounts module, accessible from the home page of our website, features an up-to-date portrait of national and provincial economies and their structure.

In addition to the detailed analysis on today's releases, the third quarter 2008 issue of Canadian Economic Accounts Quarterly Review, Vol. 7, no. 3 (13-010-XWE, free) features articles on two new datasets: "Gross national income at market prices" (CANSIM table 380-0062) and "Debt service indicators, persons and unincorporated businesses" (CANSIM table 380-0061).

Gross domestic product by industry

Available on CANSIM: table 379-0027.

Definitions, data sources and methods: survey number, including related surveys, 1301.

The September 2008 issue of Gross Domestic Product by Industry, Vol. 22, no. 9 (15-001-XWE, free) is now available from the Publications module of our website.

For general information, or to order data, contact our dissemination officer (toll-free 1-800-887-4623; iad-info-dci@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Bernard Lefrançois (613-951-3622), Industry Accounts Division.

National economic and financial accounts

Available on CANSIM: tables 378-0001, 378-0002, 380-0001 to 380-0017, 380-0019 to 380-0035, 380-0056, 380-0059 to 380-0062 and 382-0006.

Definitions, data sources and methods: survey numbers, including related surveys, 1804, 1901 and 2602.

The third quarter 2008 issue of National Income and Expenditure Accounts, Quarterly Estimates (13-001-XIB, free) will soon be available.

Detailed printed tables of unadjusted and seasonally adjusted quarterly National Income and Expenditure Accounts (13-001-PPB, $54/$193), Financial Flow Accounts (13-014-PPB, $54/$193) and Estimates of Labour Income (13F0016XPB, $22/$70), including supplementary analytical tables and charts are now available. To purchase any of these products, contact Client Services (613-951-3810; iead-info-dcrd@statcan.gc.ca), Income and Expenditure Accounts Division.

The complete seasonally adjusted quarterly National Income and Expenditure Accounts: Data Tables (13-019-XWE, free), Financial Flow Accounts: Data Tables (13-020-XWE, free), and monthly Estimates of Labour Income: Data Tables (13-021-XWE, free) are also now available from the Publications module of our website.

For more information, or to enquire about the concepts, methods or data quality of this release, consult the Guide to the Income and Expenditure Accounts (13-017-XWE, free), or contact the information officer (613-951-3640, iead-info-dcrd@statcan.gc.ca), Income and Expenditure Accounts Division.

Table 2
Canadian economic accounts key indicators

Table 3
Gross domestic product, implicit chain price indexes

Table 4
Monthly gross domestic product by industry at basic prices, chained (2002) dollars