Production grew faster in the first quarter of 2010 than in the fourth quarter of 2009, and inventory levels rose after being drawn down in all four quarters of 2009.
Residential investment increased for a fourth consecutive quarter, as did consumer spending on goods and services. Export and import volumes both rose for a third consecutive quarter, with growth in imports outpacing growth in exports in the first quarter.
Expressed at an annualized rate, real GDP grew 6.1% in the first quarter after advancing 4.9% in the fourth quarter of 2009. This compared with a 3.0% first quarter rate of increase in the US economy.
Note to readers
Effective the first quarter of 2010, the quarterly Financial Flow Accounts will be released concurrently with the estimate of quarterly gross domestic product (GDP) and its components.This not only improves the timeliness of the Financial Flow Accounts, it also permits the integration of the analysis of income generated from production and final expenditure on production with the financing of production and final expenditure found in the Financial Flow Accounts.
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 GDP and other time series found in this release:
Unless otherwise stated, the growth rates of all quarterly data in this article represent the percentage change in the series from one quarter to the next, such as from the fourth quarter of 2009 to the first quarter of 2010.
The 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 to 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.
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 first quarter of 2009 to the first quarter of 2010.
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 November to December 2009.
Table 1
Table 1
| Change | Annualized change | Year-over-year change | |
|---|---|---|---|
| % | |||
| First quarter 2009 | -1.8 | -7.0 | -2.5 |
| Second quarter 2009 | -0.7 | -2.8 | -3.2 |
| Third quarter 2009 | 0.2 | 0.9 | -3.1 |
| Fourth quarter 2009 | 1.2 | 4.9 | -1.1 |
| First quarter 2010 | 1.5 | 6.1 | 2.2 |
The change is the growth rate from one period to the next. The annualized change is the growth rate compounded annually. The year-over-year change is the growth rate of a given quarter compared with the same quarter in a previous year.
Consumer spending increases
Consumers increased their spending on goods and services by 1.1% in the first quarter of 2010, following a 1.0% gain in the fourth quarter. Household spending on semi-durable goods advanced, particularly for clothing, footwear, and accessories. Expenditure on new motor vehicles grew, but at a much slower pace than in the previous three quarters. Spending on services was up 0.7%, after advancing 1.0% in the fourth quarter.Government spending increases at a slower rate
The growth in government current expenditure on goods and services slowed to 0.5%, following increases of 1.6% in the third quarter of 2009 and 1.7% in the fourth. After five quarters in which growth averaged over 4%, government capital expenditure advanced 1.1% in the first quarter.Housing demand continues to advance
Investment in residential structures increased 5.4%, the fourth consecutive quarterly gain in this activity. New housing construction (+11%) pushed investment higher, while renovation activity was up 6.3%. February 1 was the deadline for expenditures to quality for the federal government's Home Renovation Tax Credit.Ownership transfer costs related to housing resale activity declined for the first time since the fourth quarter of 2008. Transfer costs grew 57% over the last three quarters of 2009.
Nominal mortgage borrowing by households was up sharply in the first quarter, recording its fourth consecutive quarterly advance.
Investment in machinery and equipment rises
Business investment in plant and equipment grew 0.2%. Expenditure on machinery and equipment advanced 1.8%, but was, nonetheless, 23% below the peak attained in the first quarter of 2008. Investment in industrial machinery was a major contributor to the first quarter gain.Business investment in non-residential structures fell 1.4%, the sixth consecutive quarterly contraction in this type of investment. Both building and engineering investment continued to decline, a trend that began in 2008.
Exports and imports up again
Exports of goods and services grew 2.9%, the third consecutive quarterly gain following five quarters of decline. Industrial goods and materials (+9.4%) as well as automotive products (+4.1%) had notable increases. Following six consecutive quarters of decline, exports of travel services rose 4.1%, partly as a result of the Vancouver 2010 Olympic and Paralympic Winter Games held in February and March.Imports of goods and services were up 3.4%, following a similar rise in the fourth quarter. Imports of industrial goods and materials, automotive products as well as machinery and equipment were the main contributors to the increase.
Inventories accumulate
Business inventories rose in the first quarter after being drawn down for four consecutive quarters. Retail inventories increased while manufacturers drew down their inventories.The economy-wide ratio of stock to sales was down for a third consecutive quarter, and has fallen to its lowest level since the third quarter of 2008. Businesses held inventories equivalent to 65 days of sales; this was down from 66 days in the previous quarter. Nevertheless, the stock to sales ratio in the first quarter was higher than in any quarter from the fourth quarter of 2001 through the third quarter of 2008.
Prices rise
The price of goods and services produced in Canada rose 1.1% in the first quarter. Prices for exported energy products and exported industrial goods and materials registered notable gains, while the overall price of imports declined 0.6%.The price of final domestic demand was up 0.4%. This was the fourth consecutive quarter in which the growth of the final domestic demand price was lower than that of the price of goods and services produced in Canada.
The price of consumer goods and services in Canada rose 0.3%, following a 0.8% increase in the fourth quarter.
The price of both residential and non-residential structures increased in the first quarter, while the price of business machinery and equipment declined for a fourth consecutive quarter.
Gross domestic income rises
Real gross domestic income (GDI), a measure of the purchasing power Canada acquires from its production of goods and services, grew 2.1% in the first quarter, a third consecutive gain. Canada's terms of trade, a measure of export prices relative to import prices, improved for a fourth consecutive quarter.Whereas real GDP measures the volume of production, real GDI accounts for both the volume of production as well as changes in relative prices. When export prices rise relative to import prices, Canada's ability to purchase goods and services (real GDI) increases more than the rise in real GDP.
Table 2
| Change | Annualized change | Year-over-year change | |
|---|---|---|---|
| % | |||
| First quarter 2009 | -3.5 | -13.1 | -6.6 |
| Second quarter 2009 | -0.2 | -1.0 | -8.3 |
| Third quarter 2009 | 1.1 | 4.4 | -7.1 |
| Fourth quarter 2009 | 2.1 | 8.7 | -0.6 |
| First quarter 2010 | 2.1 | 8.7 | 5.1 |
The change is the growth rate from one period to the next. The annualized change is the growth rate compounded annually. The year-over-year change is the growth rate of a given quarter compared with the same quarter in a previous year.
Incomes up again
Nominal GDP expanded 2.5% following a 2.4% gain in the fourth quarter of 2009. Labour income advanced 1.2%, slightly less than it did in the fourth quarter. Wages and salaries increased 2.7% in the goods-producing industries and were up 0.7% in the service-producing industries.Corporate profits advanced 8.6%, the third consecutive quarterly gain. Likewise, government business enterprise profits were up 12%, following an 18% increase in the fourth quarter.
Personal disposable income rose 0.6%, a slower pace than in the previous quarter. Current transfers from government to the household sector declined for the first time since the second quarter of 2008, as Employment Insurance payments fell 9.5%.
The personal saving rate was 2.8%, its lowest level since the third quarter of 2008. The national saving rate, however, increased from 3.8% in the fourth quarter of 2009 to 5.5% in the first quarter, as corporate profits moved upward and government income increased more than government outlays.
Financing activity increases
Total funds raised by domestic non-financial sectors increased in the first quarter of 2010. The increase in financing was widespread among the various sectors of the Canadian economy.Borrowing by the household sector grew. Higher mortgage borrowing was partially offset by lower borrowing by way of consumer credit.
The household sector debt-service ratio increased slightly, reaching 7.44%. The debt-service ratio is a measure of household interest payments as a percentage of personal disposable income.
Borrowing by all levels of government was up as bond issuance rose, particularly for the federal government.
Funds raised by non-financial private corporations increased, largely due to higher debt financing.
The non-resident sector continued to be a net lender to the Canadian economy. This reflects the quarterly current account deficit recorded by Canada since the fourth quarter of 2008.
Gross domestic product by industry, March 2010
Real GDP grew 0.6% in March, with most major industrial sectors increasing their production. Output of goods-producing industries advanced 1.4% while the service sector rose 0.3%. Manufacturing, mining and oil and gas extraction, wholesale and retail trade, as well as residential construction were the main sources of growth.Conversely, output in performing arts and spectator sports, accommodation services, and radio and television broadcasting declined, as it returned to more normal levels following the Vancouver 2010 Winter Olympic Games in February. The utilities sector also retreated, as unseasonably warm weather throughout most of Canada lowered the demand for both electricity and natural gas.
Manufacturing rose 1.8% in March with 20 of the 21 major groups advancing. Manufacturers of machinery, primary and fabricated metal products, as well as non-metallic mineral and food products recorded significant production increases.
Mining and oil and gas extraction rose 2.7%, mainly as a result of a significant increase in oil extraction. Increased activity at copper, nickel, lead and zinc mines, as well as at gold and silver ore mines also contributed to the growth. Support activities for mining and oil and gas extraction retreated after seven consecutive monthly increases.
Retail trade grew 1.8% in March. New and used car dealers recorded a significant increase in their volume of activity. Wholesale trade advanced 2.0%, with most types of wholesalers increasing. In both retail and wholesale trade, there was a significant increase in the demand for building and outdoor home supplies, mirroring increased activity in construction.
Construction rose 0.9%, largely on the strength of residential building construction (+2.5%). Engineering construction retreated while non-residential construction edged up.
The finance and insurance sector rose 0.3%, as the volume of trading on the stock exchanges went up.
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