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Further declines in business investment in Canada

Staff writer |
Canadian real gross domestic product (GDP) grew 0.6% in the first quarter, following an increase of 0.1% in the fourth quarter of 2015.

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Exports were the largest contributor to real GDP growth in the first quarter, up 1.7% following a 0.4% decline in the previous quarter. The volume of exports of goods increased 1.9%, while that of services advanced 0.7%. Imports were up 0.3%.

Final domestic demand was up 0.3%, after edging down 0.1% in the previous quarter.

Business non-residential investment fell 2.5%, the fifth consecutive quarterly decline, driven by lower investment in engineering structures (-4.3%).

Housing investment was up 2.7% in the first quarter, with increases in new home construction, renovations and resale activity. Household final consumption expenditure rose 0.6%, with increased outlays on goods (+1.1%) and services (+0.2%).

Businesses drew down inventories by a further $7.0 billion, after a $5.6 billion withdrawal in the previous quarter. The stock-to-sales ratio edged down.

Government final consumption expenditure increased 0.4% in the first quarter.

Expressed at an annualized rate, real GDP rose 2.4% in the first quarter. By comparison, real GDP in the United States grew 0.8%.

Growth in business investment in residential structures accelerated to 2.7% in the first quarter, the fifth consecutive quarterly increase. Business investment in new housing construction increased 2.9%, after a 0.7% decrease in the fourth quarter of 2015. Ownership transfer costs (+5.8%), which reflect movement in the resale market, and renovations (+0.6%) were both up for the second consecutive quarter.

Household final consumption expenditure increased 0.6% in the first quarter, following a 0.5% gain in the fourth quarter of 2015. Outlays on goods grew 1.1%, as semi-durable goods (+1.9%), durable goods (+1.1%) and non-durable goods (+0.8%) all rose. Outlays on services increased 0.2%.

Investment in non-residential structures decreased 3.7%, continuing the downward trend seen over the previous five quarters. Lower investment in engineering structures (-4.3%) largely contributed to the decline in the first quarter, due to weakened investment activity in the oil and gas sector, which was affected by lower oil prices. Business investment in non-residential buildings (-1.9%) also continued to fall.

Business outlays on machinery and equipment fell 0.7%, in tandem with decreasing imports. This was the fifth consecutive quarterly decline, with aircraft and other transportation equipment (-13.7%) and industrial machinery and equipment (-1.9%) leading the decrease.

Business investment in intellectual property products was down 1.4%, as software fell 1.8% and research and development dropped 1.2%. Mineral exploration investment edged down 0.1%, following larger declines throughout 2015.

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