Canada’s economic growth doubles in 2002 despite losing steam in fourth quarter
Ottawa, ON -- Mar. 4, 2003 -- Economic activity in Canada slowed in the fourth quarter of 2002, as real gross domes...
Ottawa, ON — Mar. 4, 2003 — Economic activity in Canada slowed in the fourth quarter of 2002, as real gross domestic product (GDP) advanced 0.4%, less that one-half of the pace set in the third quarter. A drop in exports during the quarter was only partly offset by sustained strength in personal expenditures. The economy lost steam over the course of the quarter, with GDP up a modest 0.1% in November and December.
Although economic growth decelerated over the four quarters of 2002, the economy grew 3.4% for the year, more than double the rate for 2001. Prices, as measured by the implicit chain price index for GDP, advanced 1.2% in 2002.
The slower rate of growth in the fourth quarter resulted from decreased output in manufacturing and agriculture, and lower activity levels in the finance sector. The economy was buoyed by the services sector, in particular wholesale and retail trade, public administration, health care, real estate and business services.
The 2.1% drop in exports in the fourth quarter, which was concentrated in automotive products, came on the heels of three consecutive quarterly gains. Domestic demand picked up somewhat in the fourth quarter. Consumer spending, especially on durable goods such as furniture and automobiles, provided the main source of strength. Investment in residential construction, though slower than in the previous quarter, advanced a healthy 2.6%. Household borrowing also picked up, in line with these developments.
Business investment in plant and equipment declined, despite the continued growth in profits.
Businesses accumulated almost $10 billion in inventories in the fourth quarter, extending the large accumulations that began in the second quarter. Increases were evident across manufacturing and trade industries, with retail motor vehicle inventories accounting for more than 40% of this buildup.
Industrial machinery expenditure jumps 5.5%
Business investment in plant and equipment slipped 0.4% in the fourth quarter. Investment in buildings and expenditures on engineering construction were both off, and expenditure on machinery and equipment was flat.
Spending on industrial machinery jumped 5.5%, but was offset by falling investment in telecommunications equipment and lower purchases of automobiles by businesses.
Business plant and equipment spending slumped in the year (-3.9%) on the heels of a slowdown (-1.1%) in 2001. Telecommunications and other transportation equipment investment both suffered double digit drops. Business investment in non-residential structures fell sharply, after a trend to increased spending set over the previous nine years
Industrial production declined slightly in the fourth quarter, as gains in the mining and utilities industries were more than offset by a drop in the manufacturing sector. This was the first decline in industrial production since the fourth quarter of 2001.
A plunge in transportation equipment production was largely responsible for the weakness in the manufacturing sector, as motor vehicle manufacturers had scaled back production continuously since August in an attempt to reduce high inventory levels. Labour strife and continuing problems in the global air travel industry translated into further reductions in manufacturing output of new aircraft.
On an annual basis, output in manufacturing turned around in 2002, with strength in wood products, motor vehicles and parts and pharmaceuticals.
A full report can be found on the Internet at http://www.statcan.ca.