Following is the text of Canada’s National Economic and Financial Accounts for the second quarter as released by Statistics Canada.
Real gross domestic product (GDP) rose 0.5% in the second quarter, matching the pace of the two previous quarters. Business investment contributed the most to second-quarter GDP growth. Final domestic demand grew 0.4%. On a monthly basis, real GDP by industry advanced 0.2% in June.
Business investment in plant and equipment advanced 2.3%, the fastest pace since the second quarter of 2011. Non-farm business inventories also increased substantially.
Investment in housing rose 0.4%, following growth of 2.7% in the first quarter.
Exports slowed to 0.2% in the second quarter, after a gain of 1.0% in the previous quarter. In contrast, imports rose 1.6%, up from the first quarter increase of 1.3%.
Consumer spending on goods and services advanced 0.3% in the second quarter, following a similar increase in the previous quarter (+0.2%). However, this was down from the pace of 0.7% in the fourth quarter of 2011.
Final domestic demand advanced 0.4%, similar to the pace of the previous five quarters.
Goods production grew 0.9% and the output of service industries increased 0.3% in the second quarter. Mining and oil and gas extraction, and construction were the main contributors to overall growth. Gains were also recorded in manufacturing, agriculture, wholesale trade, the finance and insurance sector and professional services. In contrast, retail trade and utilities declined.
Oil and gas extraction increased 1.0% in the second quarter, as an increase in crude petroleum production was partly offset by a decrease in natural gas extraction. Mining excluding oil and gas extraction grew 2.7%, as increased output at potash as well as copper, nickel, lead and zinc mines outweighed declines at coal mines. Potash production rebounded from first quarter shutdowns, which were partly attributable to lower foreign demand. Construction grew on the strength of engineering construction and residential building construction. Manufacturing rose 0.5%, as a 1.1% increase in durable goods production, particularly machinery and transportation equipment, more than offset a 0.3% decline in non-durable goods manufacturing.
Expressed at an annualized rate, real GDP expanded 1.8% in the second quarter, matching the rate of the previous quarter. By comparison, real GDP in the United States grew 1.7% in the second quarter.
Business investment in plant and equipment continues upward trend
Business investment in plant and equipment rose 2.3%, continuing the string of consecutive increases that began in 2010.
Business investment in machinery and equipment grew 1.8%, following a 1.0% increase in the first quarter. This follows two consecutive quarterly declines in the last half of 2011. Machinery and equipment investment was led by purchases of other transportation equipment (+4.4%) and industrial machinery (+3.7%).
Investment in engineering projects advanced 2.8%, while investment in buildings expanded 2.5%.
Housing demand advances
Investment in housing advanced 0.4% in the second quarter, the sixth consecutive quarterly gain. However, this gain was below the 2.7% increase in the previous quarter.
New housing construction increased 4.0% following a 3.9% rise in the previous quarter. This second quarter increase was dampened by a 1.5% decline in renovation activity, as well as a 4.0% decline in ownership transfer costs as housing resale activity slowed.
Business inventories accumulate
Businesses increased inventories by $15.2 billion in the second quarter, $7 billion more than in the previous quarter. This increase was widespread across industry groups.
Farm inventories also accumulated in the second quarter as deliveries were down, especially canola.
Consumer spending rises
Consumer spending on goods and services rose 0.3% in the second quarter, similar to the previous quarter’s pace (+0.2%), but slower than the 0.7% increase in the fourth quarter of 2011.
Non-durable goods (+0.9%) and services (+0.7%) increased, whereas purchases of durable and semi-durable goods each declined 1.7%.
Purchases of new and used motor vehicles declined 3.2% in the quarter, following two consecutive quarters of growth. Spending on clothing, footwear and accessories decreased 1.1% after seven quarterly increases in a row.
These declines were partially offset by a 2.4% increase in spending on furniture, carpets and other floor coverings.
Consumer spending on purchased transportation rose 0.5%, the 13th consecutive quarterly increase.
Imports increase for the third quarter in a row
Imports of goods and services rose 1.6% in the second quarter, the third consecutive quarterly increase.
All major categories of goods imports increased in the second quarter, except for agriculture and fish products (-0.9%). Imports of industrial goods and materials and of machinery and equipment increased for the third quarter in a row.
Imports of automotive products rose 4.5%, following an increase of 10.2% in the first quarter. Automotive products contributed the most to quarterly growth in goods imports in the first and second quarters of 2012. In addition, the dollar value of imports of automotive products (in nominal terms) surpassed the $80 billion level reached in 2007.
On the other hand, imports of services fell 1.2% with declines in all major service categories.
Demand for exports slows
Exports of goods and services slowed to 0.2% in the second quarter. This was the slowest pace of growth since the rebound in exports in the third quarter of 2011.
Exports of goods fell 0.1%, led by declines in agriculture and fish products (-4.6%) and industrial goods and materials (- 1.8%). Increased exports of other consumer goods (+5.3%), machinery and equipment (+3.0%), and automotive products (+2.2%) partially offset these declines.
On the other hand, export of services (+2.0%) rebounded in the second quarter, reversing the trend of the previous two quarters. This rebound was led by a 4.5% gain in commercial services.
Economy-wide income slows
Nominal GDP increased 0.1% in the second quarter, after a 0.5% gain in the first quarter. The growth in incomes slowed considerably in the first half of 2012 to 0.3% on average, compared with 1.5% on average in the second half of 2011.
Corporate profits fell 4.7% in the second quarter, following a decline of 3.7% in the previous quarter.
Labour income rose 1.2%, up from the pace in the previous quarter of 0.7%. Wages in goods-producing industries advanced 1.8%, twice the pace of 0.9% in the first quarter.
Personal saving increased 18% in the second quarter, as growth in personal income far outpaced that of personal outlays. The personal saving rate moved up to 3.6% in the quarter. It has remained below 4.0% since the second quarter of 2011.
The national saving rate was 7.5%, similar to the 7.3% rate of the previous quarter. This was the highest national saving rate since 2008.
Canada’s real gross domestic income, a measure of purchasing power, declined 0.4% in the second quarter. Canada’s terms of trade, which measures export prices relative to import prices, declined 2.7%.
The price of goods and services produced in Canada edged down 0.3%, mostly reflecting a decline in energy prices. Export prices were down 2.5%, while import prices edged up 0.2%.
The price of final domestic demand rose 0.4%, following a 0.3% increase in the first quarter.
Financial flow accounts: Demand for funds up strongly
The demand for funds increased to $304 billion (seasonally adjusted at annual rates) in the second quarter, marking the largest increase since the fourth quarter of 2008. Higher borrowing activity in the government sector led the demand for funds, accounting for close to half of total funds raised.
Bonds and short-term paper were the principal financing instruments used by governments, with notable net issues of federal and other levels of government bonds, in particular provincial bonds. Total government bond net issuance was $76 billion in the second quarter, an increase of over 40% from the previous quarter. Total government short-term paper net issuance was $73 billion in the second quarter, reversing the previous quarter’s decline.
Growth in household borrowing (in the form of mortgages, consumer credit and loans) accelerated in the second quarter, after declining for three consecutive quarters. Total household borrowing increased to $93 billion, buoyed by increased consumer credit demand, following particularly weak demand in the first quarter. Mortgage borrowing slowed in the second quarter, as housing market resale activity waned.
The financing activity of non-financial private corporations expanded for the second consecutive quarter, reaching $60 billion. Bond issuance was the major source of financing, followed by bank loan borrowing.
On the supply side, the non-resident sector accounted for the bulk of Canadian debt securities acquisitions, with most purchases focused on government debt securities. In contrast, Canadian financial institutions decreased their bond and short-term paper holdings.
Gross domestic product by industry, June 2012
Real gross domestic product grew 0.2% in June after edging up 0.1% in May. Goods production rose 0.3%, while the output of service industries increased 0.1%. The largest contributing sector to growth was mining and oil and gas extraction. Increases were also recorded in the public sector, transportation, utilities, the finance and insurance sector, and construction. There were declines in wholesale and retail trade, manufacturing as well as accommodation and food services.
Oil and gas extraction grew 1.1% in June, with increases in both crude petroleum and natural gas. Mining excluding oil and gas extraction rose 0.4%, as a gain in output at coal mines was partly offset by a decline at copper, nickel, lead and zinc mines. In contrast, support activities for mining and oil extraction declined 2.0% as a decrease in rigging services outweighed an increase in drilling services.
The public sector (education, health and public administration combined) increased 0.2% as a result of an increase in education services and, to a lesser extent, health services. Education services returned to more normal levels in June, following reduced volume of output from March to May due mainly to walkouts by some CEGEP and university students in Quebec.
Transportation and warehousing services rose 0.7%, mainly a result of an increase in rail services, which rebounded from a strike at the end of May.
Wholesale trade fell 0.8% in June as a result of declines in the wholesaling of petroleum products and in the activities of miscellaneous wholesalers (which include agricultural supplies). Retail trade also decreased in June (-0.2%), after increasing 0.7% in May. Retailing activity was notably down at general merchandise stores (which include department stores) and at building material and garden equipment and supplies dealers.
Manufacturing was down 0.2% in June after declining 0.5% in May. A 0.7% decline in non-durable-goods manufacturing in June, mainly due to petroleum and coal products, outweighed a 0.2% gain in durable goods manufacturing.
Utilities grew 0.8% as both electricity generation and natural gas distribution increased. The finance and insurance sector rose 0.3% on the increased output of banks, insurance carriers as well as security brokerages.
Construction edged up 0.1% in June as a result of increased engineering construction, which was mostly offset by declines in residential and non-residential building construction. The output of real estate agents and brokers fell for a second consecutive month, down 1.6% in June, as a result of a decrease in activity in the home resale market.
Note to readers
The historical revision to the Canadian National Accounts is scheduled for release beginning in October. A schedule of releases (http://www.statcan.gc.ca/nea-cen/hr2012-rh2012/csna_schedule-scnc_horaire-eng.htm) has been posted on the National economic accounts (http://www.statcan.gc.ca/nea-cen/index-eng.htm) website. Additional information will be posted as it becomes available.
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For more information on seasonal adjustment, see Seasonal adjustment and identifying economic trends (http://www.statcan.gc.ca/pub/11-010-x/2010003/part-partie3-eng.htm) .
Percentage changes for expenditure-based and industry-based statistics (such as personal expenditures, investment, exports, imports and output) are calculated from volume measures that are adjusted for price variations. Percentage changes for income-based and flow-of-funds statistics (such as labour income, corporate profits, mortgage borrowing and total funds raised) are calculated from nominal values; that is, they are not adjusted for price variations.
There are four ways of expressing growth rates for gross domestic product (GDP) and other time series found in this release.
1. Unless otherwise stated, the growth rates of all quarterly data in this release represent the percentage change in the series from one quarter to the next, such as from the first quarter to the second quarter of 2012.
2. Quarterly growth can be expressed at an annual rate by using a compound growth formula, similar to the way in which a monthly interest rate can be expressed at an annual rate. Expressing growth at an annual rate facilitates comparisons with official GDP statistics from the United States. Both the quarterly growth rate and the annualized quarterly growth rate should be interpreted as an indication of the latest trend in GDP.
3. The year-over-year growth rate is the percentage change in GDP from a given quarter in one year to the same quarter one year later, such as from the second quarter of 2011 to the second quarter of 2012.
4. The growth rates of all monthly data in this article represent the percentage change in the series from one month to the next, such as from May to June 2012.
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Detailed analysis and tables
The National economic accounts (http://www.statcan.gc.ca/nea-cen/index-eng.htm) module, accessible from the Key resource module of our website, features an up-to-date portrait of national and provincial economies and their structure.
Additional tables and links to other releases from the national accounts can be found in the second quarter 2012 issue of Canadian Economic Accounts Quarterly Review, Vol. 11, no. 2 (13-010-X, free). This publication is now available from the Key resource module of our website under Publications. This publication will be updated on September 7, at the time of the release of the Labour productivity, hourly compensation and unit labour cost. Revised estimates of the Income and Expenditure Accounts for the first quarter of 2012 have been released, along with those for the second quarter of 2012. These estimates incorporate new and revised source data and updated estimates of seasonal patterns.