Canadian Economic Overview - By: gifts

There were further indications that the economic upturn was gaining strength. Real GDP rose 0.4% in November, matching its average increases in the previous two months. Employment grew by 0.3% in January, its fourth advance in six months.

The gains in output and employment were consistent with other signs of a rebound in the economy. Trade flows continued to improve, with both exports and imports up over 10% from their lows in the spring.

The gain in exports accompanied a further acceleration in US GDP in the fourth quarter, which posted its largest gain in over six years.

Housing continued to strengthen at year end. Existing home sales in December set a new record, while housing starts hit their high for the year. Retail sales dipped in November for the first time in seven months, but auto sales rebounded in December.

The renewed signs of growth follow a steady improvement in the leading index. The composite index rose 1.5% in December, matching its largest gain in several decades. The index has posted average gains of over 1% over the last six months.

Labour markets

Employment in January rose by 0.3% to more than recoup a revised drop of 0.2% in December. However, the increase was dominated by part-time positions among youths.

With the labour force little changed for a second straight month, the unemployment rate edged down to 8.3%: unemployment hit a high of 8.7% in August 2009.

Services accounted for all of January’s job growth. Trade added to its December advance. Business services and finance rebounded from declines in December. More cuts in manufacturing pulled down employment in goods-producing industries.

Ontario and BC posted the largest job growth, up 0.5%. Trade employment rose in both provinces, supplemented in Ontario by business services. Alberta saw jobs soften after two months of growth, notably in factories.

The composite leading index rose 1.5% in December, its seventh straight increase and matching February 1983 for the largest monthly advance since September 1958.

For a second straight month, growth was widespread as none of the ten components fell. The largest gains continued to originate in household spending and the stock market.

The housing index rose 3.0%, its eighth consecutive increase. Existing home sales led the initial upturn, which has sent sales to a record high in December. The strength in sales was followed by a recovery in housing starts, which began slowly in July and continued to gather pace by year-end.

Consumers also stepped up their purchases of durable goods. Services employment turned up in the last two months, after lagging the rebound earlier in the year, with gains for both personal and business services.

The leading indicator for the United States increased 0.8%, matching Canada with a seventh straight advance. In response to rising US demand, Canada’s export volumes have risen 11% since their low in May 2009.

The upturn in export demand was reflected in higher new orders for manufactured goods in Canada. As well, manufacturing sales volume rose for a second straight month. Together with steadily declining inventories, this raised the ratio of sales to stocks for the fifth month in a row.

Real GDP rose 0.4% in November, after gains of 0.3% in October and 0.5% in September. This marks the fastest three months of growth since August 2005. The diffusion index (which measures the percent of industries expanding output) was above 60% for the third straight month for the first time since early 2006.

This index hit a low of 28% in April. Goods production continued to recover, as increases in mining and construction outweighed a slowdown in manufacturing, and this spilled over into higher demand for goods-handling services.

Primary industries raised output the most of any sector, led by mining. Oil and gas production over the last three months was buoyed by the end of shutdowns for maintenance and new oil projects coming on-line, while exploration and development began to recover gradually as natural gas prices firmed.

Forestry output also increased for the third month in a row. Construction rose 1.1%, as home-building accelerated in response to the steady recovery in housing starts. Utilities posted a large decline in response to unusually warm weather.

The summer rebound in manufacturing stalled in October and November. Resource-related manufacturers continued to boost output, notably those related to mining, forestry and petroleum. However, these gains were offset by a slowdown in auto assemblies and continued weakness for capital goods such as computers, machinery and aerospace.

Services expanded 0.4%, matching their largest increase of the year. With more goods circulating in the economy, wholesale trade increased by 2.4% and transportation by 0.5%.

Finance and real estate also continued to expand steadily. The consumer sector softened after several months of solid gains. Business services continued to languish.

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