Ottawa, ON — Statistics Canada reported Aug. 31, 2004, that Canada’s real gross domestic product (GDP) was up a solid 1.1% in the second quarter of 2004, boosted by a surge in exports that spurred manufacturing, wholesaling, and rail and truck transportation.
After a slow start in April, the economy picked up steam in May and June, up 0.3% in both months.
Final domestic demand made a lacklustre 0.4% showing in the second quarter, as consumer spending slowed to 0.3%. The housing boom continued, albeit at a slower pace, while business investment in plant and equipment advanced 1.0%. Both labour income and corporate profits made solid gains.
The Canadian dollar lost ground against the U.S. dollar, depreciating 3.1% for the quarter. Merchandise exports were up strongly across the board. Imports of goods also showed renewed strength.
Industrial production (the output of Canada’s factories, mines and utilities) advanced 1.5%. Exports boosted output in the manufacturing sector, while diamonds propelled the mining industry. Lower output in the utilities industry had a dampening effect. In the United States, the index of industrial production increased 1.2%, as higher manufacturing output offset declines in mining and utilities.
Economy-wide prices, as measured by the chain price index for GDP, were up 1.4%, the fastest pace in five quarters. Overall, the Canadian economy grew at an annualized 4.3% in the second quarter of 2004, compared with an annualized 2.8% for the US economy.
Exports drive the economy
Exports of goods and services advanced 5.0% in the second quarter, the strongest gain in over seven years.
Automotive products, machinery and equipment and industrial goods and materials, the three largest components of goods exports, were up strongly. Energy products picked up steam, while exports of agricultural and fish products rebounded. Forestry products exports posted the strongest gain (+5.5%) in nearly eight years, stimulated by the U.S. housing boom.
Exports of services edged up 0.4% in the second quarter, as transportation services slowed markedly and commercial services exports fell.
Imports of goods and services advanced 3.2% in the second quarter, with widespread gains among all the major goods categories. Imports of services declined 2.2%.
Manufacturing spurred by surge in exports
The surge in exports spurred a 1.6% increase in manufacturing in the second quarter. The gains were widespread as 17 of the 21 major manufacturing groups reported higher output.
Increased fabrication of machinery was concentrated in construction, mining and oil and gas machinery. Production of fabricated metal products was up a robust 3.4%, with strong export demand for most types of products. Manufacturing of wood products and logging operations were sharply higher.
Business investment in plant and equipment advanced 1.0% in the second quarter. Investment in non-residential structures rebounded 0.8%, as higher outlays for engineering projects offset lower outlays for non-residential building projects.
Machinery & Equipment investment up only 1.1%
Investment in machinery and equipment advanced 1.1%, less than half its pace in the first quarter. Growth was sustained by outlays on other transportation equipment (+26.3%), including a major investment related to Newfoundland and Labrador offshore oil. Computers and other office equipment and furniture were also up.
Outlays on agricultural and industrial machinery, automobiles and trucks, software and telecommunications equipment all declined.
Corporate profits post further gains
Corporate profits advanced 6.5% in the second quarter, following three quarters of gains averaging 5.4%. Manufacturers, oil and gas producers, and retailers all fared well.
The corporate surplus slipped from its first quarter record, as corporations paid out more dividends and increased their acquisition of fixed capital. This was the 18th straight quarter in which corporations racked up surpluses.
Labour income increased 1.3% in the second quarter, with notable gains in the mining, construction and trade industries. Employment advanced 0.4%. Personal disposable income increased 2.0%, after a 1.6% gain in the first quarter, and after averaging 0.7% throughout 2003.