Canadian Q3 GDP up 0.6%, growth driven by international demand
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The quarterly growth was driven by increased international demand for Canadian goods and services as exports grew 2.3%.
Final domestic demand was flat after edging up 0.1% in the previous quarter. Household final consumption expenditure rose 0.4%, and residential investment increased 0.6% after a flat second quarter.
Exports of goods advanced 2.7% after increasing 0.5% in the second quarter. Exports of services edged up 0.1%. Imports of goods and services decreased 0.7%, in tandem with weak domestic demand.
Household final consumption expenditure on goods rose 0.8% in the third quarter, driven by outlays on durable goods (+2.3%). Expenditure on services edged up 0.1%.
Final consumption expenditure of the general governments sector decreased 0.4% in the third quarter, following a 0.4% increase in the second quarter. Declines occurred at all levels of government.
Business gross fixed capital formation fell 0.8%, the third consecutive quarterly decline. Investment in non-residential structures and machinery and equipment declined 1.5%.
Businesses reduced their inventory accumulation to $0.6 billion in the third quarter after adding $5.3 billion in the second quarter. Businesses added $3.9 billion to non-farm inventories, compared with $9.2 billion in the previous quarter. Farm inventories were drawn down by $2.1 billion, the seventh consecutive quarterly decrease, as grain holdings were sold off.
Expressed at an annualized rate, real GDP expanded 2.3% in the third quarter. By comparison, real GDP in the United States rose 2.1%.
Exports of goods and services increased 2.3%, following a 0.5% gain in the second quarter.
Exports of goods rose 2.7%, following a 0.5% increase in the second quarter. Exports of motor vehicles and parts grew 5.0%, led by passenger cars and light trucks (+6.0%). Exports of consumer goods (+8.7%) and crude oil and crude bitumen (+5.7%) also contributed to the overall gain.
Declines were recorded in metal and non-metallic mineral products (-1.8%) and basic and industrial chemical, plastic and rubber products (-2.4%).
Exports of services edged up 0.1%, following a 0.4% gain in the second quarter. Exports of commercial (+0.3%) and transportation (+0.3%) services contributed to the increase. These gains were mitigated by declines in travel services (-0.4%) and general governments services (-2.7%).
Imports of goods and services fell 0.7% in the third quarter, following a 0.5% decline in the previous quarter.
Imports of goods were down 0.7%, following a 0.5% decline in the second quarter. Lower imports of passenger cars and light trucks (-7.8%), food, beverage and tobacco products (-7.0%) and intermediate metal products (-7.4%) were the main contributors to the decrease.
These declines were offset by gains in imports of tires, motor vehicle engines and parts (+6.2%), communications and audio and video equipment (+11.9%) and basic chemicals and industrial chemical products (+8.3%).
Imports of services fell 1.0%, the largest decline since the second quarter of 2013. The decrease was driven by lower imports of travel services (-1.7%), transportation services (-1.1%) and commercial services (-0.5%). Imports of services by the general governments sector increased 0.4%.
Household final consumption expenditure increased 0.4% in the third quarter, following a 0.6% gain in the second quarter. Outlays on goods were up 0.8%, driven by durable goods (+2.3%). Semi-durable (+0.2%) and non-durable (+0.2%) goods also contributed to the increase. Outlays on services edged up 0.1%.
Expenditures on transport rose 2.2%, driven by purchases of vehicles (+3.5%) and operation of transport equipment (+1.2%). Recreation and culture (+1.1%) and food and beverage services (+0.4%) also contributed to the growth in household spending. Expenditures on clothing and footwear (-0.3%) were lower.
Business investment in residential structures grew 0.6% following a flat second quarter. The growth was driven by new construction (+3.2%), which offset declines in renovations (-1.6%) and ownership transfer costs (-0.7%).
Investment in non-residential structures decreased 1.7%, the fourth consecutive quarterly decline and the seventh in eight quarters. Engineering structures (-1.8%) and non-residential buildings (-1.0%) both decreased.
Investment in machinery and equipment fell 1.1%, a third consecutive quarterly decline. The decrease was led by industrial machinery and equipment (-3.3%). On the other hand, investment in communications and audio and video equipment grew 3.2%.
Investment in intellectual property products fell 2.1%, a third straight quarter of decline. Mineral exploration and evaluation (-9.3%) and software (-2.0%) were responsible for the decline. Investment in research and development increased 1.3%.
Businesses reduced non-farm inventory accumulation to $3.9 billion in the third quarter, down from $9.2 billion in the second quarter.
Manufacturing inventories were up by $1.8 billion, mainly in non-durable goods (+$1.5 billion). Retail inventories increased by $0.9 billion, also mainly in non-durable goods (+$0.8 billion).
Motor vehicle inventories fell by $0.4 billion, as vehicles were liquidated following a $2.6 billion accumulation in the second quarter. Wholesalers drew down $2.6 billion of inventory after three quarters of accumulation. Farm inventories were down by $2.1 billion, a seventh consecutive quarterly decline.
The stock-to-sales ratio edged down to 0.760 in the third quarter. This was the second highest stock-to-sales ratio since the second quarter of 2009.
The terms of trade fell for the fourth quarter in a row, as rising import prices outpaced increasing export prices. The Canadian dollar depreciated against its American counterpart in the third quarter. Real gross domestic income edged down 0.1%.
Export prices increased 0.9% while import prices rose 2.9%. The overall price level of goods and services produced in Canada edged up 0.1%, after increasing 0.4% in the second quarter.
The price of final domestic demand was up 0.8%, the largest gain since the second quarter of 2011.
Compensation of employees rose 0.2% in the third quarter following a 0.3% gain in the second quarter. Wages and salaries (+0.2%) and employers' social contributions (+0.3%) both increased. Wages and salaries in goods-producing industries declined by 1.2%, while wages and salaries in service-producing industries rose 0.7%.
The gross operating surplus of corporations increased 0.6% in the third quarter, following three straight quarterly declines. The gross operating surplus of non-financial corporations rose 0.4%, after three consecutive quarters of decline.
The growth in the gross operating surplus of financial corporations (+0.5%) slowed considerably from the 4.8% growth recorded in the second quarter.
Overall, nominal GDP rose 0.7% in the third quarter, following a 0.4% increase in the second quarter.
The household saving rate decreased from 4.9% in the second quarter to 4.2% in the third quarter, as growth in household expenditure outpaced the growth in disposable income. The household debt service ratio, defined as household mortgage and non-mortgage payments divided by disposable income, was 14.09%, up slightly from 14.08% in the second quarter.
The national saving rate moved down to 2.9% in the third quarter, as national net saving fell 11.1% from the previous quarter. National disposable income was up 0.5%, after a 0.6% increase in the second quarter. ■