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Gross domestic product, income and expenditure, second quarter 2016

Released: 2016-08-31

Real gross domestic product (GDP) decreased 0.4% in the second quarter, after increasing 0.6% in the first quarter. This was the largest decline in quarterly GDP since the second quarter of 2009.

Chart 1  Chart 1: Gross domestic product and final domestic demand
Gross domestic product and final domestic demand

Excluding the impact of the large decline in crude petroleum output, which was due to continued weakness in the energy sector and the wildfire in Fort McMurray, real GDP grew 0.1%.

Exports of goods and services largely contributed to the decline in real GDP, down 4.5% in the second quarter, following a 1.9% increase in the first quarter. The slowdown in the second quarter was mainly attributable to a 5.5% decrease in the exports of goods, while exports of services grew 0.6%.

Imports rose 0.3% in the second quarter, following a 0.4% gain in the first quarter. Imports of goods increased 0.3%, while imports of services were unchanged.

Final domestic demand advanced 0.5%, the same pace as in the previous quarter.

Household final consumption expenditure continued to rise, up 0.5%, virtually matching the pace in the previous four quarters. Growth in the second quarter was mostly attributable to increased outlays on services (+0.8%), while household spending on goods was up 0.2%.

Government final consumption expenditure rose 1.0%, partly as a result of government spending related to the wildfire in Fort McMurray. This was the sixth consecutive quarterly increase in government final consumption expenditure.

Business gross fixed capital formation edged down 0.1%, following a similar decline in the previous quarter. The decrease in the second quarter was led by lower investment in non-residential structures (-1.1%), which was partially offset by higher investment in housing (+0.3%) and machinery and equipment (+0.5%).

Businesses drew down inventories by $307 million to compensate for lower production and imports, following a withdrawal of $8.5 billion in the previous quarter. Non-farm inventories were reduced by $1.6 billion.

Expressed at an annualized rate, real GDP fell 1.6% in the second quarter. In comparison, real GDP in the United States grew 1.1%.

Chart 2  Chart 2: Contributions to percent change in real gross domestic product, second quarter
Contributions to percent change in real gross domestic product, second quarter

Exports decline significantly

Exports of goods and services fell 4.5% in the second quarter. Exports of goods were down 5.5%, with the decrease widespread throughout most export categories. This was the largest decline in exports since the first quarter of 2009 

Motor vehicles and parts were down 5.8%, mostly because of lower exports of passenger cars and light trucks (-6.6%). Exports of consumer goods (-6.8%) decreased across the board, resulting in the largest drop since the second quarter of 2003.

Lower exports of crude oil and crude bitumen (-9.6%) and refined petroleum energy products (-19.6%) pushed down exports of energy products (-7.5%). Exports of metal ores and non-metallic minerals were down 17.5%, the largest drop since the first quarter of 2009. The only major offset to the decline in exports was aircraft and other transportation equipment and parts, which rebounded 5.6% following two quarters of decrease.

Chart 3  Chart 3: Gross domestic product, exports and imports
Gross domestic product, exports and imports

Following a 1.9% increase in the first quarter, exports of services rose 0.6% in the second quarter, slightly moderating the large decline in exports of goods. A gain in commercial services (+1.5%) more than offset the decrease in transportation services (-2.7%).

Household spending increases

Household final consumption expenditure grew 0.5%, mostly as a result of higher spending on services (+0.8%). Outlays on goods rose 0.2%, as increased spending on non-durable goods (+0.7%) was partially offset by lower spending on durable (-0.5%) and semi-durable (-0.5%) goods.

Food, beverage and accommodation services (+0.7%), operation of transport equipment (+0.8%) and electricity, gas and other fuels (+1.9%) all contributed to the gain in household expenditures. However, vehicle purchases decreased 1.2%, following four consecutive quarterly increases.

Expenditures by Canadians abroad rose 2.1%, as a result of higher outbound travel and an appreciation of the Canadian dollar relative to the US dollar.

Business investment continues to decline

Business investment edged down 0.1% in the second quarter, the same pace as in the previous quarter. This was the sixth consecutive quarterly decline, although the pace of contraction has slowed considerably in the last two quarters.

Investment in non-residential structures fell 1.1%, because of lower investment in engineering structures, as weakness in the energy sector continued. Investment in non-residential buildings was flat in the second quarter.

Business investment in residential structures was up 0.3%, following a 2.7% gain the previous quarter. The increase in the second quarter was mostly attributable to a rise in ownership transfer costs (+2.7%), which reflect activity in the resale market, while investment in new construction (-0.5%) and renovations (-0.3%) declined.

Business investment in machinery and equipment grew 0.5%, following five consecutive quarters of contraction. The gains were led by investment in aircraft and other transportation equipment (+18.5%), while investment in industrial machinery and equipment fell 1.8%.

Business investment in intellectual property products held steady in the second quarter, following five consecutive quarters of decline. Increased outlays on mineral exploration and evaluation (+1.7%) and software (+1.4%) were offset by lower spending on research and development (-3.0%).

Inventories drawn down

Businesses drew down inventories by $307 million in the second quarter, mainly because of a decrease in overall supply, which was due to a combination of lower production, manufacturing stocks and imports. This followed a reduction of $8.5 billion in the first quarter.

Businesses reduced their non-farm inventories by $1.6 billion in the second quarter, with manufacturing inventories down by $2.7 billion. An increase of $892 million in farm inventories offset some of the decline in non-farm inventories.

Retail inventories increased by $2.2 billion, with stocks up for both non-durable (+$1.5 billion) and durable (+$643 million) goods. Wholesale inventories were reduced by $1.1 billion, with the decrease mainly in durable goods (-$986 million).

Sales declined at a faster pace than stocks in the second quarter; as a result, the economy-wide stock-to-sales ratio increased to 0.762.

Income-based gross domestic product

Compensation of employees increased 0.4% in the second quarter, as both wages and salaries (+0.4%) and social contributions of employers (+0.5%) rose.

The gross operating surplus of corporations decreased 3.0%, as the gross operating surplus of financial corporations fell 28.5%. Insurance payouts due to the wildfire in Fort McMurray contributed to this sharp decline. The gross operating surplus of non-financial corporations declined 0.3%.

Terms of trade strengthen

Export prices rose 0.3% in the second quarter, while import prices fell 1.4%, resulting in strengthened terms of trade. The price of final domestic demand edged up 0.1%. The GDP implicit price index, representing the overall price of goods and services produced in Canada, increased 0.4% in the second quarter, following a 0.4% decline in the first quarter.

Real gross domestic income edged up 0.2%, the combined effect of an appreciation of the Canadian dollar relative to its US counterpart and stronger energy prices.

Household saving rate increases slightly

The household saving rate was 4.2% in the second quarter, up from 4.1% in the previous quarter, with household disposable income increasing at a faster pace than household final consumption expenditure (in nominal terms).

The household debt service ratio (defined as household mortgage and non-mortgage payments divided by disposable income) increased from 14.06% in the first quarter to 14.15% in the second quarter, as interest and obligated payments grew.

The national saving rate fell for the seventh consecutive quarter, reaching 0.8% in the second quarter, with national disposable income decreasing 0.4%.






  Note to readers

For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.

Percentage changes for expenditure-based statistics (such as personal expenditures, investment, exports and imports) are calculated from volume measures that are adjusted for price variations. Percentage changes for income-based and flow-of-funds statistics (such as labour income, corporate profits, mortgage borrowing and total funds raised) are calculated from nominal values; that is, they are not adjusted for price variations.

There are two ways of expressing growth rates for gross domestic product (GDP) and other time series found in this release.

  1. Unless otherwise stated, the growth rates in this release represent the percentage change in the series from one quarter to the next, such as from the first quarter to the second quarter of 2016.
  2. Quarterly growth can be expressed at an annual rate by using a compound growth formula, similar to the way in which a monthly interest rate can be expressed at an annual rate. Expressing growth at an annual rate facilitates comparisons with official GDP statistics from the United States. Both the quarterly growth rate and the annualized quarterly growth rate should be interpreted as an indication of the latest trend in GDP.

Revisions

Data on GDP for the second quarter of 2016 were released along with revised data for the first quarter of 2016. These data incorporate new and revised data, as well as updated data on seasonal trends.

Real-time CANSIM tables

Real-time CANSIM tables 380-8063 and 380-8064 will be updated on September 7. For more information, consult the document Real-time CANSIM tables.

Next release

Data on GDP by income and expenditure for the third quarter will be released on November 30.

Impact of the Fort McMurray wildfire and evacuation on measures of gross domestic product

Disasters—such as wildfires, floods, ice storms or other major catastrophes—have an impact on economic activity because 1) production is affected (for example, it can be disrupted due to lost capacity and hours worked), 2) structures, equipment, and other assets are damaged or destroyed and must later be repaired or replaced, and 3) transactions, such as payments of insurance benefits or government disaster relief, take place as a result of the damages incurred.

GDP is the total unduplicated value of the goods and services produced in the economic territory of a country or region during a given period. Disasters are reflected in GDP measures only insofar as they affect measures of income, expenditures, and production; GDP is not directly affected by the loss of property (structures and equipment) produced in previous periods. Some transactions that result in transfer payments between institutional sectors do not directly affect GDP.

While GDP may be affected by the actions that consumers, businesses, and governments take in response to a disaster, these actions are generally not separately identifiable, and they may be spread out over a long period of time. In the case of the May 2016 wildfire that affected the Fort McMurray region in Alberta, the Monthly Survey of Manufacturing, the Monthly Retail Trade Survey and the Monthly Wholesale Trade Survey collected information from a subset of their national samples to assess the impact of the wildfire for the May and June 2016 reference periods. While some respondents across all three surveys indicated that they had been affected by the wildfire, most were not able to quantify the impact of the fire.

Products

The System of Macroeconomic Accounts module, accessible from the Browse by key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available from the Browse by key resource module of our website, under Publications.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is available from the Browse by key resource module of our website, under Publications. This publication has been updated with a chapter on the history of Canada's macroeconomic accounts and a chapter on the income and expenditure accounts.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).

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