MRO Magazine

Demand for machinery helps drive GDP growth

Ottawa, ON -- Canada's Gross Domestic Product (GDP) climbed 0.2% in November 2004 after stalling in October, Statis...


Industry

February 1, 2005
By MRO Magazine
MRO Magazine

Ottawa, ON — Canada’s Gross Domestic Product (GDP) climbed 0.2% in November 2004 after stalling in October, Statistics Canada reports. Increased demand for machinery and electronic equipment boosted wholesaling services, and high energy prices spurred oil and gas exploration.

Industrial production (the output of Canada’s factories, mines and utilities) moved ahead by 0.2% in November. Manufacturers recorded a flat performance and utilities increased their output by 0.3%.

The output of the mining sector advanced by 0.8% due to increased oil and gas extraction and exploration. Foreign demand for metals and potash also made a significant contribution to the growth of this sector. In the United States, the Index of industrial production rose 0.2%, with gains in manufacturing and mining, while utilities edged down.

STRENGTH IN THE MINING, OIL AND GAS SECTOR

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The recent increases in the price of crude oil on international markets fostered renewed interest in oil and gas exploration. The output of support activities for mines, oil and gas (mostly drilling and rigging) jumped for a second month in a row in November (+6.2%).

Output of metal ores grew 1.7% with many gains restrained by a decrease in the extraction of copper, nickel, lead and zinc ores (-4.0%). The extraction of potash bounced back 14% with increased demand from China. Activity in the miscellaneous non-metallic minerals industry, which includes diamond mines, receded further from its August peak, dropping by 27% in November.

NON-RESIDENTIAL BUILDING CONSTRUCTION

Non-residential building construction fell for an eighth consecutive month, dropping an additional 1.1% in November. Since December 2003, output of this industry has dropped by 9.4%. There were declines in the construction of institutional and industrial buildings in November, while construction of commercial buildings was flat. On a positive note, the value of building permits issued for all three types of non-residential buildings were up, and the total value was up for a third consecutive month.

Residential construction activity increased 0.3%. The gain was due to an expansion of multi-units residential buildings, while construction of single-detached dwellings was down. Housing starts in large urban centres increased in the West and Quebec, but declined in Ontario and the Atlantic provinces. Engineering, repair and other construction activities edged up 0.1%.

AUTOMOTIVE SECTOR RESTRAINS GROWTH IN MANUFACTURING

Growth in the manufacturing sector was flat in November after two months of decline. Output was higher in 13 of the 21 major groups. Motor vehicle manufacturing was down 3.5% due to the reduced demand for some Canadian-made car models. The output of motor vehicle parts was down by only 0.5% however as many parts manufacturers have gained market share across North America.

The production of pulp, paper, and paperboard mills decreased by 1.0% due to a reduction in foreign demand for these products. The chemical industries retreated a further 0.5%.

MACHINERY FABRICATION RISES ALMOST 2%

The fabrication of machinery increased 1.9% with almost all types reporting gains. Much of the gain was concentrated in other general-purpose machinery (+4.1%) such as biotech and material handling equipment.

Fabricated metal products were up 1.3% due to increased production in the machine shops and turned products industry (+3.1%), and of architectural and structural metal products (+1.2%) and other fabricated metal products (+3.0%).

Food manufacturing was up 0.6%, pushed by increased production of meat products. The clothing industry (+2.5%) recovered some of the ground lost in October.

BRISK WHOLESALE TRADE

Activity in the wholesale trade industry advanced 1.5% in November on the strength of the demand for machinery and electronic equipment including computers. A strong Canadian dollar resulted in lower prices for many of these products.

The average value of the Canadian dollar vis–vis the US currency rose 4.2% in November following a 3.3% increase in October. Wholesalers of personal and household goods, of food, beverage and tobacco products, and of automotive products also enjoyed increased activity.

Retailing activity decreased by 0.4%, pulled down by lower new car sales. Excluding new car dealerships, retailing activity edged up 0.1%. Increased sales at supermarkets were offset by decreases for department stores, beer, wine, and liquor stores, and furniture stores.

OTHER INDUSTRIES

The high value of the Canadian dollar in November contributed to a decrease in international trade and affected some tourism-related industries. Air transportation was down 1.6% partly because of a large decrease in overseas visitors to Canada. Support activities for transportation was dragged down, in part by lower port and harbour activities. Food and beverage services decreased 0.8% while accommodation services edged up 0.2%.

An increase in the volume of transactions on Canadian stock exchanges pushed up the output of the finance, real estate, rental and leasing sector by 0.5%. Output in the Federal public administration bounced back 1.2% in November after the end of strike activities in October. The arts and entertainment industry decreased by 3.3% as the lockout of the National Hockey League players continued.