Gross domestic product by industry

Economic activity contracted sharply in August, largely the result of the blackout in Ontario. Gross domestic product (GDP) plummeted 0.7%. The last time the economy experienced such a large setback was in September 2001, when GDP fell 0.6%. Ontario represents about 42% of the total Canadian economy.

The weakness in the economy was widespread, with most industries reporting slight to sharp declines in output. Much of the downturn can be attributed to the power blackout in Ontario and the subsequent request for reduced consumption. It is not possible to isolate and quantify the exact impact of the blackout on August's GDP, although there were very few areas of the economy that were not affected. Reduced electricity generation hampered manufacturing plants and service producing establishments, hindering production, transportation and distribution of goods as well as the sales and delivery of a wide range of business, personal and government services. The public administration sector was highly impacted, since most government offices operated at minimal capacity to conserve electricity needed to fuel the private sector economy. Unlike manufacturers, most service producing industries were unable to recuperate their time lost.

Electricity generation dropped 0.9%, as increased production in the rest of Canada was not enough to make up for the decline that occurred in Ontario. Oil and gas extraction was also down significantly in August. With reduced output in the manufacturing, mining and utility sectors, industrial production slid 0.7% after posting a strong gain in July in all three components. Meanwhile, industrial production in the United States was flat in August, as higher utility and mining output was offset by lower manufacturing output.

Public sector conserves energy in Ontario

The decline in the public administration sector was one of the largest contributors to the decline in GDP in August. The output of the federal government industry fell 5.1%, reflecting the fact that most of the 71,000 federal public servants in the Ottawa area were ordered to stay home for six working days in order to conserve energy. Forty-five percent of the federal government workforce works in the province of Ontario. Provincial and territorial government output fell 2.7%, as Ontario provincial employees were also asked to stay home. Ontario provincial employees account for about 23% of total provincial and territorial government employees. Output of the municipal public administration industry edged down a slight 0.1%. Some municipal employees worked large amounts of overtime to keep city services running, offsetting those who were ordered to stay home to conserve electricity.

July gains wiped out in manufacturing

The manufacturing sector fell 0.6% in August, completely reversing gains made in July. Large setbacks were recorded for the producers of chemicals, clothing, wood products and primary and fabricated metal products. Large industrial users of electricity in Ontario were asked to conserve power. Manufacturers shut some plants and ran only those where product demand was highest. Some manufacturers reduced the number of production lines while others operated only on non-peak hours. Meanwhile, a number of manufacturers used auxiliary generators to maintain normal production levels. The impact of the blackout was muted by the fact that many manufacturers ramped up production levels in the post-blackout period to try to recuperate lost output.

Lower levels of manufacturing output had a negative impact on wholesaling activities. Wholesaling output dropped 3.4%, returning to levels not seen since the third quarter of 2002. Wholesalers of automotive equipment were down sharply, reflecting lower imports and exports of motor vehicles and parts. Computer wholesalers retreated 8.8%, following a gain of 8.4% in July. Wholesalers of machinery, including farm machinery also recorded large declines. Lower production levels and the slump in wholesaling activities caused negative consequences for the transportation sector. The rail transportation industry posted a decline of 1.7% and the trucking industry registered an even larger decline of 3.0%.

Oil and gas production falters

Lower oil and natural gas production was another large contributor to the decline in GDP in August. A full-month shutdown by one of the major oil producers contributed to the 2.0% decline in the output of the oil and natural gas extraction industry. Meanwhile, higher oil and gas prices were behind the latest surge in drilling and rigging activity, which advanced a further 3.9% in August, the tenth increase in the last year. The traditional summer slowdown in drilling activity didn't happen this year and the industry is on track for a record year. Higher metal ore output, despite shutdowns due to the blackout, was offset somewhat by lower diamond production.

Travel sector results mixed

Industries in the travel sector posted a wide range of results, from a drop of 3.8% for travel agents to a gain of 1.9% in the accommodations industry. The occupancy rate for Toronto hotels continued to increase over the lows reached in April as a result of the SARS outbreak; however, occupancy rates were still below August 2002 levels. The number of international tourists to Canada increased 0.8% in August. Activity levels in the scenic and sightseeing industry advanced 1.4%. Air transportation edged down 0.2%, partly reflecting the fact that air traffic was brought to a standstill in Ontario during the blackout. Losses were also posted by the arts and entertainment sector, restaurants, and industries offering taxi, limousine and car rental services.

Fewer car sales reduces retailing activity

The retail trade sector edged down a slight 0.1% in August, as motor vehicle dealers were unable to match the fast pace of sales seen in July. Sales of new cars and trucks slipped 1.1% after having jumped 12.4% in July. Increasing sales incentives by the motor vehicle manufacturers failed to lure customers into new car showrooms. Retail sales excluding motor vehicles advanced 0.3%. Furniture stores, grocery stores and department stores all registered stronger sales.

Housing boom continues

Construction was one of the bright spots in August. Residential construction was boosted by a 4.7% increase in housing starts, the fourth consecutive monthly increase and their second-highest level in the past 13 years. Multiple housing starts were responsible for the strength. Single-family home starts declined in August as Ontario registered the largest decrease in single-family home new construction. Retailers of furniture continued to benefit from the strength in the housing market, as sales increased for the sixth consecutive month. Lower demand for existing housing across Canada resulted in a significant drop in activity levels for real estate agents.

Available on CANSIM: tables 379-0017 to 379-0022.

Definitions, data sources and methods: survey numbers, including related surveys, 1301 and 1302.

The August 2003 issue of Gross domestic product by industry (15-001-XIE, $12/$118) will be available soon. A print-on-demand version is available at a different price.

Data for September 2003 on GDP by industry will be released on November 28.

For general information or to order data, contact Yolande Chantigny (1-800-887-IMAD; imad@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Jo Ann MacMillan (613-951-7248), Industry Measures and Analysis Division.